L4M5 Exam Dumps - CIPS Level 4 Diploma in Procurement and Supply Questions and Answers

There are four types of questions that can be used in a commercial negotiation:

Hypothetical questions, where you ask about a possible situation or abstract concept, are very useful at the testing and proposal phases. Hypothetical question does not state any commitment as it is only about 'if something happens, then ...'. This type of question can be useful at giving suggestion.

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LO 3, AC 3.3

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Trust is the expectation that the other party will behave in a predictable and mutually acceptable way. In inter-firm relationships, the presence and absence of trust can affect the level of cost in a relationship. The existence of trust is taught to lower the transaction cost in a relationship. Dr. Mari Sako identified taxonomy of 3 types of trust in commercial relationship, whichis very useful from the perspective of procurement.

Contractual trust: Trust based on the contract with TOP. This is potentially the weakest source of trust if there is nothing else to base the trust on, but it is the quickest to establish.

Competence trust: Trust based on TOP's professional qualifications or proven or certified technical capability or experience.

Goodwill trust: Trust based on knowing TOP has your interest at heart and will not behave opportunistically. This is potentially the strongest type of trust, but it takes the longest time to build.

Otherwise, trust also has legal meaning. A trust is a legal document that can be created during a person's lifetime and survive the person's death. A trust can also be created by a will and formed afterdeath. Charitable trusts are trusts which benefit a particular charity or the public in general.

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Activity-based costing is an alternative approach to traditional absorption costing. The characteristics of these two methods are illustrated in the graph below:

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The agency (buyer) has made a concession about the price. Possibly the supplier will request another concession (the salami tactics). To avoid this to be happened, the agency should only allow a concession as an exception, make sure that the concession is documented and only permitted against some exceptional circumstances, and seek agreement to this from the supplier.

LO 3, AC 3.2

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Essentially, for trained negotiators under most circumstances, the physical locations of negotiations and the room layout should not make much difference to the outcomes of the meeting. It is reasonable to assume that most commercial negotiations are based at least initially on a principled- or pragmatic-type approach. It is arguable also that any advantage gained through intentionally creating an uncomfortable environment to put short-term pressure on TOP is likely to be short-lived as TOP will likely reflect on this later and seek means to get even.

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In the opening phase, parties should confirm understanding and get the issues on the table.

The testing phase is an information gathering stage where the hypothesis and assumption you have made in the planning stage can be tested or confirmed or disproved.

Opening questions (those that start with 'what', 'how', 'why') are used at the opening and testing stages to uncover needs and underlying motives, and to allow the buyer to get a feel of what is in store in the negotiation.

Probing questions are also useful to check that the supplier fully understand their offering, as well as your needs, and can also be used to communicate to the supplier that you know this category well. These questions are typically useful at the opening andtesting stages.

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Dynamic pricing is the practice of dynamically calculating the price of a product or service in order to incorporate real-time market conditions, input costs, and/or competitive perspectives. Dynamic pricing which is based on marginal costing, is used by airlines and many other organisations.

Marginal cost is the cost of producing an additional unit of output. Marginal Costing is a costing technique wherein the marginal cost, i.e. variable cost is charged to units of cost, while the fixed cost for the period is completely written off against the contribution.

Many commercial negotiations could be considered routine or just not worth the investment for buyers, and using the phone can make more sense and can be more immediate.

LO 2, AC 2.4

QUESTIONNO: 109

Leitax is a consumer electronics firm with headquarters in the US and with a global sales presence. The company maintains seven to nine models in its product portfolio, each of which has multiple SKUs. Product life ranges from fifteen to nine months and is getting shorter. The demand planning and master planning processes at the company were ill-defined. Data relevant to forecasting were usually inaccurate, incomplete, or unavailable and the lack of objectives and monitoring mechanisms for the demand planning process meant that process improvement could not be managed. Support for supply management was equally ill-defined, as master production schedules were sporadic and unreliable and suppliers had learned to mistrust them. Leitax's newly appointedSupply chain director, Jessica realises that the “buy-in” of different functional groups was critical to the improvement of demand planning. She invites relevant stakeholders to a meeting so that they can express their opinions openly. What tactic is Jessica using?

A. Coalition

B. Pressure

C. Consultation

D. Persuasion

Answer: A

There are nine commonly used influence tactic:

1. Rational persuasion includes using facts, data, and logical arguments to try to convince others that your point ofview is the best alternative. This is the most commonly applied influence tactic.

2. Legitimating

3. Personal appeals

4. Exchange

5. Ingratiation

6. Pressure refers to exerting undue influence on someone to do what you want or else something undesirable will occur.

7. Coalitions refer to a group of individuals working together toward a common goal to influence others.

8. Inspirational appeals

9. Consultation refers to the influence agent’s asking others for help in directly influencing or planning to influence another person or group.

In the scenario, there is a problem with demand forecasting and supply chain planning in Leitax. The new Supply chain director invites the stakeholders to a meeting to find the solution. She is using coalition tactics.

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In the scenario, the manager propose to 'split the difference', which means each party will accept some of their demands and concede some. This is known as 'Compromise'.

A supply curve will slope upward from left to right showing more supply at higher prices, as illustrated in the graph below:

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A movement along the supply curve will be brought about by a change in price, but a shift of the whole curve will be caused by a determinant other than price:

- The physical feasibility and time and energy required to produce the products

- Technology and innovation

- The objectives of the producers and their future expectations

- Prices of other goodsand services

- Government's policies

LO 2, AC 2.2