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CIPS L4M2 Exam Questions
- Topic 1: Defining Business Need:This section of the exam measures skills of Supply Chain Analysts and focuses on how to build a strong business case for externally sourced goods or services. It guides learners through estimating costs, understanding financial models, analyzing market conditions, and defining clear specifications. The section also covers various market forces and how specifications influence procurement success.
- Topic 2: Commercial Contracting: This section of the exam measures skills of Procurement Officers and explains how to develop solid commercial agreements with suppliers. It outlines the legal framework of contracts, the use of specifications and performance indicators, and key clauses that should be included in formal contracts. It ensures candidates understand how contracts support procurement strategy and legal compliance.
- Topic 3: Ethical and Responsible Sourcing: This section of the exam measures skills of Supply Chain Analysts and emphasizes responsible decision-making when selecting suppliers. It covers sourcing options, analysis methods, and the ethical, environmental, and social standards required in procurement. Candidates will learn to align sourcing decisions with sustainability and governance frameworks.
- Topic 4: Commercial Negotiation: This section of the exam measures skills of Procurement Officers and focuses on negotiation strategies that lead to effective agreements. It covers negotiation types, stages, team dynamics, and communication techniques. Learners will also assess the economic and pricing factors that impact negotiation and apply practical frameworks for reaching favorable outcomes.
- Topic 5: Supplier Relationships: This section of the exam measures skills of Supply Chain Analysts and explores how to manage and strengthen supplier and stakeholder relationships. It looks at the types of relationships across the supply chain, competitive forces, and ways to create added value. The section includes methods for managing partnerships, resolving conflicts, and measuring relationship performance.
- Topic 6: Whole-Life Asset Management: This section of the exam measures skills of Procurement Officers and examines how to manage assets from acquisition through disposal. It includes inventory management, cost modeling, storage methods, and key technologies used in managing assets over their full lifecycle. Candidates also learn to consider sustainability, risk, and value for money in asset management decisions.
- Topic 7: Procurement and Supply in Practice: This section of the exam measures skills of Supply Chain Analysts and integrates all concepts from previous modules into real-world applications. It focuses on applying the full procurement cycle, analyzing supplier performance, managing whole-life costs, and implementing ESG principles. Learners will practice applying strategies across various sectors and industries to demonstrate holistic understanding and problem-solving in procurement.
Free CIPS L4M2 Exam Actual Questions
Note: Premium Questions for L4M2 were last updated On Jul. 03, 2025 (see below)
Which of the following are likely to be disadvantages of using outcome-based specifications? Select THREE that apply
An Outcome Based Specification (OBS) focuses on the desired outcome of a service in business terms, rather than a detailed technical specification of how the service is to be provided; this allows providers scope to propose innovative solutions that might not have occurred to the procurement team. Outcome should be distinguished from output, which is the measurable results of a set of inputs. The example of difference between outcome and output is written at the bottom of page 123 in the study guide.
Outcomes should be the starting point in making new specification. However, using outcome-based specification has some setbacks:
- First, it is not easy to measure the outcomes. Usually, outcome of a project is a statement like 'increase customer satisfaction', 'maintain ambient temperature' or 'provide a convenient way to do something'. They are not easy to measure as output.
- Second, sometimes the desired outcomes require time to be materialised
- Third, outcomes can be ambiguous
LO3, AC 3.1
Which of the following will help the bargaining strength of a buyer?
The buyer has the option to make the product in-house
There are a limited number of suppliers available to the buyer
The buyer's switching costs are high
The buyer's spend is a high proportion of the supplier's revenue
1 (Make in-house): The ability to produce in-house reduces dependency on suppliers, strengthening buyer power.
4 (High spend proportion): A high proportion of spend gives buyers leverage over suppliers who are reliant on their revenue.
Limited suppliers (2) and high switching costs (3) reduce buyer bargaining power. Reference: CIPS Level 4, Market Power Analysis.
A manufacturing organisation has initiated a project focusing on costs, with a view to making significant savings. A procurement manager is leading the project. The initial data sources have focused on the cost of raw materials. Which of the following describes this cost?
After a project, the procurement team at CLK Ltd meets up and summarises on the performance. They see that they actually spent $5,000 less than planned budget. The team tries to identifies why there is such difference. This activity is known as...?
The procurement team in the scenario is analysing the difference between the plan and actual spend. This activity is known as variance analysis. The sum of all variances gives a picture of the overall over-performance or under-performance for a particular reporting period. For each item, companies assess their favorability by comparing actual costs to standard costs in the industry.
For example, if the actual cost is lower than the standard cost for raw materials, assuming the same volume of materials, it would lead to a favorable price variance (i.e., cost savings). However, if the standard quantity was 10,000 pieces of material and 15,000 pieces were required in production, this would be an unfavorable quantity variance because more materials were used than anticipated.
- CIPS study guide page 57-58
- Variance Analysis - Learn How to Calculate and Analyze Variances (corporatefinanceinsti-tute.com)
LO 1, AC 1.4
Which of the following will help the bargaining strength of a buyer?
The buyer has the option to make the product in-house
There are a limited number of suppliers available to the buyer
The buyer's switching costs are high
The buyer's spend is a high proportion of the supplier's revenue
1 (Make in-house): The ability to produce in-house reduces dependency on suppliers, strengthening buyer power.
4 (High spend proportion): A high proportion of spend gives buyers leverage over suppliers who are reliant on their revenue.
Limited suppliers (2) and high switching costs (3) reduce buyer bargaining power. Reference: CIPS Level 4, Market Power Analysis.
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