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Free CIPS Level 6 Professional Diploma L6M9 Ultimate Study Guide (Updated 86 Questions)
NEW QUESTION # 46
Of the following, which areexamples of disintermediation?Select ALL that apply.
- A. A company relocates its call centre to another country to save on costs
- B. A furniture manufacturer buys a forest to produce the wood which it will chop down to make the furniture
- C. A business sells a property to a buyer without the use of an estate agent or broker
- D. A farm sells its products directly to the public
- E. A factory hires an external organisation to provide cleaning and security services
Answer: C,D
Explanation:
* Disintermediationrefers toremoving intermediariesfrom a supply chain, meaning companies deal directly with consumers or suppliers.
* Option B (selling without an estate agent)removes thereal estate broker.
* Option C (farm selling directly to the public)removes theretailer/middleman.
* Option A is incorrectbecausebuying a forestisbackward vertical integration.
* Option D is incorrectbecause relocating a call centre isoffshoring.
* Option E is incorrectbecause hiring an external company for services isoutsourcing, not disintermediation.
(LO 1.2, See p.23)
NEW QUESTION # 47
XYZ Ltd is aretail organisationselling various hair care products. Themarketing teamis reviewingsales figuresfrom the past year and wants to determinewhich products should receive extra marketing.
One product haslow market sharebut exists in ahigh-growth market.
According to theBoston Consultancy Group (BCG) Matrix, which category does this product fall under?
- A. Cash Cow
- B. Dog
- C. Problem Child
- D. Star
Answer: C
Explanation:
#Problem Child(also calledQuestion Mark) refers to a product withlow market sharein ahigh-growth market.
#BCG Matrix Categories:
* Dog##Low market share, low market growth
* Cash Cow##High market share, low market growth
* Star##High market share, high market growth
* Problem Child (Question Mark)##Low market share, high market growth
#Exam Tip:The BCG Matrix is frequently tested. Be aware that "Problem Child" is sometimes called
"Question Mark"in other versions of the matrix!
(See LO 2.3, p.130)
NEW QUESTION # 48
In amanufacturing organisationthat produces cupcakes, which of the following categories ofcapacitytakes into accountstaff absencesandunplanned lossessuch as a late delivery of raw materials?
- A. Actual capacity
- B. Design capacity
- C. Effective capacity
- D. Available capacity
Answer: A
Explanation:
* Actual capacityaccounts forreal-life factors, includingstaff absences, supply chain delays, and other disruptions.
* Design capacity (A)is themaximumproduction level in an ideal scenario (no disruptions).
* Effective capacity (B) and available capacity (C) are the same, accounting forplanned stoppages, butnot unplanned losses.
(LO 2.2, See p.115)
NEW QUESTION # 49
Which of the following are disadvantages of thesmall-capacity strategyin capacity planning? SelectALLthat apply.
- A. Weaker ability to compete on price
- B. Higher production costs
- C. Less responsive to changes in market demands
- D. Unable to personalise requirements from customers
Answer: A,B
Explanation:
Thesmall-capacity strategymeans a company deliberately produces below optimal capacity. This provides agility and flexibilityto respond to market changes and allows forcustomer personalisation. However,the disadvantagesinclude:
* Higher production costs(lack of economies of scale)
* Weaker ability to compete on price(since larger-capacity businesses have lowerproduction costs) Options C and Dare disadvantages oflarge-capacity strategy, not small-capacity. (See LO 1.3)
NEW QUESTION # 50
Which of the following describes aProprietary Network?
- A. A network that has both horizontal and vertical structures
- B. The sharing of materials in an informal setting
- C. A relationship that is one-sided
- D. A privately owned and controlled group
Answer: D
Explanation:
AProprietary Networkis aprivately owned and controlled group.
* Option Brefers to aSocial Network
* Option Cdescribes aBureaucratic Network
* Option Drefers to anAsymmetric Network
Tip:Learn these definitions well, as they frequently appear in exam questions! (See LO 1.1)
NEW QUESTION # 51
Scenario:
Blue Bear Ltd is amultifunctional manufacturing organisationwith aglobal supply chainand customers in over30 different countries. Each function within the company hasdifferent supply networksand relationships.
For eachfunction, select the correctValue Chain ActivityandSupply Network Typefrom the given options.
Answer:
Explanation:
Explanation:
Function 1:This function is asupport activityresponsible for ensuring other functions have the right resources to complete work. It has acomplex structurewithhorizontal and verticalreporting lines, and each employee has clear objectives.#Correct answer:HR|Bureaucratic Function 2:This function ensures that theFive Rightsare achieved. It makeskey strategic decisionsthat other departments follow.Power is centralised, and staff support other business areas as needed.#Correct Answer:
Procurement|Centralised
Function 3:Staff describe themselves as the"people that get stuff done". This is aPrimary Activityin the Value Chain, responsible for turning raw materials intofinished products. The function has ahighly valued supply network, bothupstream and downstream, withjoint decision-making.#Correct answer:Operations| Symmetrical Function 4:Although aPrimary Activity, this function isnot well-organised. It relies ontrust-based relationshipsrather than formal contracts. Information is shared informally. It is responsible forwarehousing and transportation.#Correct Answer:Outbound Logistics|Social Function 5:This function has aone-sided supply network. It is aPrimary Activityanddeals directly with customers.#Correct Answer:Marketing and Sales|Asymmetrical A screenshot of a white sheet AI-generated content may be incorrect.
NEW QUESTION # 52
The Improvement Gap Analysis can be utilised to manage trade-offs in operational strategy. Which of the following is measured by the IGA? Select ALL that apply.
- A. Customer return rate
- B. Customer dissatisfaction levels
- C. Profit margin
- D. Churn rate
- E. Return on investment
Answer: B
Explanation:
The Improvement Gap Analysis measures customer dissatisfaction levels. It describes the current state of an organisation and what needs to be done to reach the desired state. The gap between these states represents customer dissatisfaction. The IPA matrix by Piccolo et al categorises dissatisfaction into four quadrants, helping organisations determine whether action is needed. (See p. 137)
NEW QUESTION # 53
Which of the followingcapacity planning strategiesis theleast conservative?
- A. Lead strategy
- B. Incremental strategy
- C. Lag strategy
- D. Demand smoothing
Answer: A
Explanation:
* Lead strategyis theleast conservativeas itincreases capacity before demand is proven, making it risky but proactive.
* Lag strategy (B)waits for demand toexceed capacitybefore expanding.
* Incremental strategy (C)expandsgradually over time.
* Demand smoothing (D)focuses onmanaging demand fluctuations, not increasing capacity.
(LO 1.3, See p.54-55)
NEW QUESTION # 54
Andrea is the Chief Financial Officer at Big Corporation and is completing aVariance Analysis. She has reviewed the production costs of creating item B, and this month's costs show avariance to budget of £-200.
What does this mean?
- A. The organisation has gained £200
- B. More money was spent than expected
- C. Less money was spent than expected
- D. The organisation has lost £200
Answer: C
Explanation:
Anegative varianceto budget means that the companyspent £200 less than expected, which is apositive outcome. While it may seem counterintuitive, a negative variance inthis context indicates cost savings rather than overspending.Option D is incorrectbecause the organisation has saved £200, not gained it. (See p.198)
NEW QUESTION # 55
What is the purpose ofsupplier development?
- A. To ensure that there are no logistics or delivery issues within the supply chain
- B. To add value to the supply chain
- C. To lower prices, which will increase the profit margin
- D. To reduce the number of suppliers upon which a business would become dependent
Answer: B
Explanation:
The primary goal ofsupplier developmentis toadd valueto the supply chain, not just to reduce costs.
* Option A is incorrectbecause supplier development is not solely about cost reduction-it also focuses onquality and efficiency.
* Option B is incorrectbecause reducing suppliers is not always the goal; sometimes businesses want a widersupplier base.
* Option D is incorrectbecause no system caneliminatelogistics risks entirely-there will always be uncertainties.
(See LO 1.1, p.2)
NEW QUESTION # 56
Giant Gymsis a fitness chain where clientspay a monthly subscriptionfor full access to gym facilities. The company typically experiences ahuge spike in new memberships in Januarydue to New Year's fitness resolutions. However, toreduce this seasonal surge, Giant Gyms introduces apricing structure that makes it cheaper to sign up in November, which is typically itsslowest month.
What is this strategy called?
- A. Lead Strategy
- B. Capacity Expansion
- C. Optimal Capacity
- D. Demand Smoothing
Answer: D
Explanation:
Demand smoothingattempts toinfluence customer behaviorto balancedemand fluctuations. Giant Gyms wants more customers inNovemberrather than inJanuary, preventingseasonal peaks and troughs.
#Note:
* Lead Strategy= expanding capacitybefore demand increases
* Capacity Expansion= increasing production ability
* Optimal Capacity= achieving thebest cost-to-production ratio
(See LO 1.3, p.55)
NEW QUESTION # 57
A cupcake manufacturing organisation uses a 'management by exception' technique when it comes to planning and control. What does this mean?
- A. Plans and control activities are created based on historical performance
- B. Reporting only takes place when non-compliance occurs
- C. Exceptional performance is rewarded, for example through staff bonus schemes
- D. Audits and other control activities are completed by an outsourced company to ensure there is no bias in the investigations
Answer: B
Explanation:
Management by exception means that reporting only occurs when non-compliance happens or when results are outside the norm. In the case of a cupcake factory, there might be no quality control measures in place, but if an issue arises (e.g., food poisoning complaint), an investigation would be conducted. This is a risky strategy for such an organisation. (See p. 189)
NEW QUESTION # 58
Which of the following is considered aprimary activityin theValue Chain?
- A. Marketing and sales
- B. Technology development
- C. HR
- D. Procurement
Answer: A
Explanation:
* Marketing and Salesis aprimary activityinPorter's Value Chain, directly contributing to delivering value to customers.
* Procurement (A), HR (B), and Technology Development (C) are support activities.
(LO 1.2, See p.29)
NEW QUESTION # 59
Company A manufactures wheels for Company B, which manufactures cars. Traditionally, Company A would complete the wheels and conduct quality assessments before sending them to Company B, which would then begin assembling cars. However, a new CEO at Company B has introduced atechnology system that enablessimultaneous production, meaning Company B starts manufacturing cars at the same time Company A begins producing wheels.
What is this new system known as?
- A. Start to start
- B. Finish to finish
- C. Start to finish
- D. Finish to start
Answer: A
Explanation:
Start to startmeans two different organisations at different levels of the supply chainbegin their work simultaneouslyrather than sequentially. This is the opposite of astart to finishsystem, where the next process starts only when the previous one is completed. (See LO 1.2, p.19)
NEW QUESTION # 60
Which of the following are examples of investment appraisal techniques? Select ALL that apply.
- A. Gearing
- B. Cash flow impact
- C. Liquidity
- D. Payback period
- E. Return on investment
Answer: B,D,E
Explanation:
Investment appraisal techniques help assess whether an investment, such as purchasing new machinery, is financially viable.Return on investment, cash flow impact, and payback periodare all investment appraisal methods.Liquidity and gearingassess financial health but do not determine whether to make an investment.
(See p.160)
NEW QUESTION # 61
LTL Ltd is a manufacturing organisation producing made-to-order equipment for the construction industry, such as bespoke windows and doors. The Head of Operations has received four large orders and is considering the sequencing of production. Which of the following should the company do?
- A. Start manufacturing the order that has the longest completion time first so all orders are ready at the same time
- B. Sequence the orders in the way that will be the cheapest to produce, creating the highest profit margin
- C. Create the orders in the most logical, economic, and fastest pattern. This may mean that the first order received is the last to be produced
- D. Use a First Come, First Serve system to prioritise the orders that were made first, ensuring customer satisfaction
Answer: C
Explanation:
Sequencinginvolves balancinglogic, cost, and speedto optimise production. Prioritising orders purely by arrival time (Option A) or cost efficiency (Option B) might not be practical. Similarly, making sure all orders finish at the same time (Option D) isn't always necessary. (See p.183)
NEW QUESTION # 62
XYZ Ltd is a perfume manufacturer based in France. They have created a new perfume and research has shown that demand for the perfume will outstrip supply. The Chief Operating Officer (COO) and the Chief Financial Officer (CFO) are meeting to discuss this. The COO believes that the organisation needs to reallocate resources in order to meet demand. Are there any exceptions to when this may be the case?
- A. Yes - there are occasions when an organisation would choose not to fulfil customer demand
- B. Yes - there are exceptions, but these are always outside of the organisation's control
- C. No - this would negatively affect the profit the organisation could make
- D. No - organisations should always aim to meet customer demand or resources will be underutilised
Answer: A
Explanation:
While organisations generally try to fulfil customer demand, there are times when theystrategicallychoose not to. A common reason is maintaining a premium image-limiting supply can increase desirability and justify a higher price. For example, luxury brands often limit product availability. (See p.169)
NEW QUESTION # 63
For which activity would a Gantt chart be used?
- A. Capacity planning
- B. Customer expectation management
- C. Scheduling
- D. Resource loading
Answer: C
Explanation:
A Gantt chart is used for scheduling. It's a visual way of showing what activities are completed and when.
(See p.175)
NEW QUESTION # 64
Which of the following are Porter's strategies that can help an organisation create competitive advantage in the marketplace?Select ALL that apply
- A. Ensure a large product range
- B. Become an organisation that is meaningfully different from competitors
- C. Provide exceptional customer service
- D. Be a low-cost provider
- E. Become a specialised provider
Answer: B,D,E
Explanation:
Porter's three strategies are low-cost, differentiation, and niche. These options are just worded slightly differently but align with Porter's competitive strategies. (See p.151)
NEW QUESTION # 65
When designing a supply network, which of the following stages should be completedfirst?
- A. Determine the approach for managing material flow
- B. Confirm the network scope
- C. Analyse potential risks
- D. Track information flow
Answer: B
Explanation:
The correct sequence fordesigning a supply networkis:
* Determine strategic objectives
* Confirm the network scope
* Analyse potential risks
* Determine the approach for managing material and information flow
* Track material and information flow
Sincenetwork scopedefines theboundaries, scale, and overall structureof the network, it must be confirmed first. (LO 1.1, See p.3)
NEW QUESTION # 66
When would an organisation use aVRIO analysis?
- A. To create a vision and mission statement for the organisation
- B. To monitor performance of the operations department against predetermined criteria
- C. To benchmark the organisation against similar organisations in the market
- D. To identify internal resources that provide competitive advantage
Answer: D
Explanation:
* VRIO analysishelps an organisationidentify internal resourcesthat give it acompetitive advantage.
* VRIO stands forValue, Rarity, Imitability, Organisation-factors that determine whether a resource can sustain a competitive edge.
* Itdoes notfocus on benchmarking (C) or performance monitoring (B).
(LO 2.2, See p.103)
NEW QUESTION # 67
Maxi Ltd is a medium-sized manufacturing organisation in the automotive industry that creates engines for cars. It has traditionally worked well with its suppliers, with strong relationships and regular meetings. There are currently around 15 suppliers who provide parts to Maxi Ltd.
Due to changing customer demands, Maxi Ltd will, from next month, modify the manufacturing of some of its products. Product X is being made more environmentally friendly, with output of CO2 being reduced by 32%. The product will take longer to produce, but there will be no additional cost to customers for this.
Maxi ltd are considering outsourcing the manufacturing of Product Y as it is not a product which is routinely ordered by customers. This will allow Maxi Ltd to focus on other products which generate higher revenues for the company. The concern within the Board of Directors is that if demand increases for this product, an outsourced company may not be able to cope with higher numbers of orders.
Product Z is an extremely popular item and oftentimes Maxi Ltd does not have the capacity to fulfil all orders. Consideration has been given to increasing the size of the factory, but this has been discarded as risky as demand is not guaranteed. The product has been available on the marketplace for a short amount of time and sales are continuing to increase, but the company believes this will soon plateau. To deal with current demand, the marketing team is working on campaigns to invite customers to make orders for this product at certain times of the year when product X is not being created in the factory.
This means resources can be reallocated to the creation of product Z.
Which of the following is thetrade-offin the modification of product X?
- A. Quality
- B. Flexibility
- C. Environment
- D. Speed
Answer: D
Explanation:
The modification ofproduct Xis aimed at making itmore environmentally friendlybut results ina longer production time. This means that thetrade-offisspeed-production takes longer. (LO 1.2)
NEW QUESTION # 68
Which of the following arenotcharacteristics of good information?
- A. Relevant
- B. Interpreted
- C. Analysed
- D. Timely
- E. Accurate
Answer: B,C
Explanation:
Analysed and interpreted arenotcharacteristics of good information. The key characteristics of good information are accuracy, reliability, timeliness, relevance, and completeness. (See p.178)
NEW QUESTION # 69
Who are thefour business playersin theValue Net? SelectALLthat apply.
- A. Customer
- B. Distributor
- C. Buyer
- D. Complementor
- E. Supplier
- F. Competitor
Answer: A,D,E,F
Explanation:
TheValue Netconsists ofsuppliers, customers, competitors, and complementors. Unlike asupply chain, which focuses on material and information flow, theValue Netis about creatingbusiness value.
* Supplier:Provides goods/services
* Customer:Purchases goods/services
* Competitor:Competes in the same market
* Complementor:A business that enhances your product/service offering
Buyer and distributorare not primary players in the Value Net. (See LO 1.2, p.31)
NEW QUESTION # 70
Manuel has created an Efficient Frontier diagram mapping six options his organisation can take. Is it possible for there to be two curves on this diagram?
- A. No - only one curve is needed as this plots the trade-offs and level of risk
- B. Yes - there should always be at least two curves on the graph to demonstrate different timescales for the options
- C. Yes - the second curve can represent what is achievable should the organisation engage in continuous improvement
- D. No - the diagram should only have straight lines, not curves
Answer: C
Explanation:
AnEfficient Frontier diagramcan have multiple curves. The first curve shows potential return on investment under current conditions, while the second curve models improvements if the organisation engages in continuous improvement. A third curve may represent a long-term vision, but this is less common. (See p.
136)
NEW QUESTION # 71
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