CIPS L5M6 Category Management Exam Practice Test

A Technology Roadmap is a planning tool used to align technological investments with business strategy. It enables organisations to evaluate current capabilities, identify emerging challenges, and plan for future technology adoption. The purpose is not just to decide between existing options but to forecast which innovations will be most valuable over time.

For instance, a company may use a roadmap to determine whether to invest in automation, artificial intelligence, or renewable energy solutions, based on expected business growth and industry trends. This ensures resources are allocated to technologies that offer long-term competitiveness.

Other options are less accurate:

Option A oversimplifies; technology roadmaps are not for one-off decisions.

Option B is incorrect as tenders require specifications, not long-term roadmaps.

Option D relates to risk management, not strategic technology planning.

Therefore, the roadmap helps businesses stay adaptive and forward-thinking, ensuring that investments made today remain relevant tomorrow.

[Ref: CIPS L5M6 Study Guide, pp.126–127 – Technology Roadmaps in category management]

Leverage items [low supply risk, high financial impact] are best suited for e-auctions. Buyers can use competitive bidding to drive down prices when multiple suppliers exist.

By contrast:

Bottleneck items [low value, high supply risk] are not suited as choice is limited.

Strategic items require partnership and collaboration, not price-only competition.

Non-critical items don’t justify the effort of auctions.

[Ref: CIPS L5M6 Study Guide, p.97 – Kraljic Portfolio Matrix]

The correct terminology is bargaining power of buyers, not "threat of buyers". Porter’s Five Forces are:

Threat of new entrants

Bargaining power of suppliers

Bargaining power of buyers

Threat of substitutes

The correct score is 25, which is the highest possible risk score on a 1–5 scale. This reflects a major risk with both severity [5] and likelihood [5] rated as high. The risk assessment methodology multiplies these two factors [5 × 5 = 25] to produce a risk rating.

This scoring system enables supply chain managers to rank risks and prioritise mitigation strategies. A risk scored at 25 requires urgent attention, such as developing contingency plans, dual sourcing, increasing safety stock, or renegotiating terms with suppliers.

Lower scores such as 1, 5, or 10 indicate lower overall risk exposure, but in this case, the combination of long geographical distance, reliance on a low-cost country supplier, and criticality of the order elevates the risk to the maximum score.

Risk assessment tools like this are central to category management because they support proactive risk mitigation rather than reactive crisis management.

[Ref: CIPS L5M6 Study Guide, p.56 – Risk assessment scoring and protocols]

The Adaptor competency reflects resilience and flexibility, particularly the ability to remain calm under pressure and handle criticism constructively. CEB Research identifies six key competencies for high-performing procurement teams: functional expert, influencer, results seeker, innovator, adaptor, and complier. Each competency contributes to overall effectiveness. Adaptors are especially important in procurement because markets are dynamic and supplier relationships can be complex. Their ability to adjust strategies in the face of change ensures procurement remains resilient. For category managers, adaptability supports risk management, stakeholder engagement, and effective negotiation. Without this competency, procurement risks being rigid and unresponsive to changing circumstances.

A General Ledger [GL] is the central accounting record used by businesses to prepare financial reports. It categorises all financial transactions into cost codes, allowing managers to track expenditure, revenue, assets, and liabilities.

For category managers, the General Ledger provides visibility into spend categories. This information supports spend analysis and helps in mapping organisational costs against suppliers, categories, and business functions. It differs from line item detail by offering a higher-level financial view.

Other options are misleading:

Option A [tenders] relates to e-procurement platforms, not financial records.

Option C [catalogue] refers to item listings, not ledgers.

Option D [supplier lists] relates to approved supplier databases.

By using GL data, procurement can ensure alignment with finance, strengthening compliance, budgeting, and strategic sourcing decisions.

[Ref: CIPS L5M6 Study Guide, p.135 – Use of General Ledger in procurement analysis]

The International Association for ContractCommercial Management [IACCM], now known as WorldCC, provides frameworks to help organisations select the most suitable sourcing and contracting models. For category managers, this is particularly valuable when deciding whether a transactional, relational, or investment-based model best fits the organisation’s needs.

It does not directly choose suppliers or perform market analysis; rather, it guides decision-makers on the structural relationship with suppliers. For example, IACCM provides tools to decide whether to adopt outcome-based contracts, performance partnerships, or traditional transactional agreements.

Benchmarking may be a separate exercise, but sourcing models determine the governance and risk-sharing approach that underpins supplier relationships.

CIPS encourages procurement professionals to be familiar with IACCM’s role, as it reinforces the need for strategic selection of sourcing models rather than a one-size-fits-all approach.

[Ref: CIPS L5M6 Study Guide, p.31 – IACCM and sourcing model selection]

The most appropriate relationship type is a Strategic Alliance. The Cost-Out approach involves working closely with suppliers at the design and pre-production stages to eliminate unnecessary costs before they arise. This requires high levels of trust, transparency, and collaboration.

A strategic alliance provides the framework for this partnership, allowing both buyer and supplier to share information, align objectives, and jointly innovate to reduce costs and increase value. For example, suppliers may suggest alternative materials or design modifications that lower costs without compromising quality.

By contrast:

Arm’s length and transactional relationships are too shallow to support cost-out collaboration.

Closer tactical relationships allow more interaction but lack the depth of trust and shared strategy found in alliances.

Strategic alliances are therefore essential where the buyer needs suppliers to contribute their expertise, innovation, and commitment to achieving mutual cost savings and long-term value.

[Ref: CIPS L5M6 Study Guide, p.80 – Cost-out strategies and supplier relationships]

The most effective approaches are:

Limiting dependence on one supplier [B]: CIPS suggests no more than 30% of spend should be concentrated with a single supplier. This reduces exposure if that supplier becomes insolvent or fails to deliver.

Having contingency plans [D]: Preparing alternative suppliers, safety stock, or emergency logistics ensures continuity in case of failure.

Options A and C are poor practices:

Using fewer suppliers [A]: Increases dependency, making the business more vulnerable.

Using small start-ups exclusively [C]: Increases risk because these firms often lack financial stability.

These strategies align with broader supply risk management principles, which focus on diversification, resilience, and proactive planning. Effective category managers must balance efficiency with risk reduction, ensuring supply continuity without over-consolidating.

[Ref: CIPS L5M6 Study Guide, p.57 – Supplier risk mitigation strategies]

CIPS highlights that the review stage of the Procurement Cycle offers the greatest opportunity to add value. This is because it involves assessing whether objectives have been met, identifying lessons learned, and capturing continuous improvement opportunities. While specifying requirements and supplier selection are critical, the review stage ensures that outcomes are measured against expectations and future strategies are refined. For example, reviewing contract performance may reveal contract leakage or highlight areas where better supplier engagement could drive innovation. This feedback loop transforms procurement from a transactional process into a learning system. By institutionalising review mechanisms, organisations improve their resilience and ensure that procurement strategies evolve with business needs and market changes.

Peak pricing is another term for dynamic pricing, where the cost of a product or service changes in response to fluctuations in demand and market conditions. A common example is airline ticket pricing, where fares increase during peak travel periods and drop during off-peak times.

Dynamic pricing relies on market data, technology, and sometimes artificial intelligence to adjust prices in real-time. It maximises revenue by capturing higher margins during periods of strong demand while stimulating sales when demand weakens.

Other options are different strategies:

Penetration pricing involves initially low prices to gain market entry.

Limit pricing aims to deter new entrants by setting prices low enough to discourage competition.

Price skimming involves launching at a high price, then gradually lowering it as demand declines.

In category management, understanding pricing models like dynamic pricing helps procurement anticipate supplier pricing strategies and develop negotiation tactics.

[Ref: CIPS L5M6 Study Guide, pp.180–182 – Pricing models and procurement]

A black swan event is an unexpected and rare occurrence with significant impact. Examples include the 2013 horse meat scandal in the food industry, which was unforeseen and highly disruptive.

The three correct legal aspects are:

Liabilities [C]: Define responsibility for damages, breaches, or non-performance.

Intellectual Property [D]: Protects innovations, designs, and brand assets in supplier agreements.

TUPE [E]: Transfer of Undertakings [Protection of Employment], a UK law ensuring employees retain rights when transferred between companies.

While sustainability and relationship management are important procurement considerations, they are not specifically legal aspects of contracts. Legal knowledge ensures procurement professionals protect their organisations from financial, reputational, and operational risks.

TUPE is particularly relevant in outsourcing agreements, where staff may move from one employer to another. Procurement managers must ensure compliance with local employment laws to avoid legal disputes.

CIPS stresses that category managers should not act as lawyers but must have sufficient legal awareness to identify risks and escalate issues to legal specialists.

[Ref: CIPS L5M6 Study Guide, p.57 – Legal aspects in procurement contracts]

Francis is not correct. Spend alone does not determine the importance of a category. For example, a high-spend category may include non-critical items, while a lower-spend category may include bottleneck or strategic items essential to operations. The importance of a category is determined by its impact on organisational goals and supply risk, not just spend.

The correct response is No – rivalry between existing suppliers is high. Exit barriers refer to the difficulty suppliers face when attempting to leave a market or industry. These barriers may include high investment in specialised assets, contractual obligations, redundancy costs, or reputational damage. When suppliers are unable or unwilling to exit, they remain within the industry regardless of declining profitability. This forces them to compete aggressively to retain market share, which increases rivalry among existing firms.

Options A and B are incorrect because the question relates to rivalry, not directly to buyer or supplier power. Option D is also incorrect because exit barriers do not influence new suppliers entering; they affect current suppliers trying to leave.

A practical example is the oil and energy industry, where huge capital investments make it very costly to exit. Companies stay even during downturns, resulting in fierce rivalry.

[Ref: CIPS L5M6 Study Guide, p.114 – Porter’s Five Forces: Exit Barriers and Rivalry]

In category management, forecasting is a critical tool for anticipating future requirements and managing supply markets. The three types of recognised forecasting are: demand forecasting (predicting organisational needs), supply forecasting (assessing availability and supplier capabilities), and price forecasting (estimating future price movements based on trends and market conditions). “Quantity forecasting” is not recognised as a distinct type, because quantity requirements are inherently part of demand forecasting. By separating demand, supply, and price forecasts, procurement professionals gain a holistic view of market conditions, ensuring they can secure the right goods at the right time and price. Effective forecasting also reduces risk by ensuring that category strategies account for volatility, seasonality, and inflation. Organisations that fail to forecast accurately may face supply shortages, overstocking, or missed opportunities for cost savings.

In category management, grouping is most effective when based on similar usage characteristics. This means materials or services are categorised by how they are used within the organisation, rather than simply by spend or supplier. For example, in healthcare, personal protective equipment (PPE) forms one category, while surgical instruments or bedding may be separate categories. This approach ensures that category managers have a clear understanding of functional requirements, demand patterns, and value drivers. Grouping only by spend might overlook strategic importance, while grouping by supplier or geography can miss opportunities for cross-functional efficiencies. Usage-based categorisation allows for tailored procurement strategies that align with business objectives and ensure effective stakeholder engagement. It also enables organisations to identify synergies across business units and improve supplier management. By aligning categories to organisational needs rather than just financial or structural dimensions, procurement creates more value and achieves better alignment with corporate strategy.

Cialdini’s 7 Principles of Persuasion are key behavioural insights relevant to procurement negotiations and stakeholder management. They are:

Reciprocity

Commitment/consistency

Social proof/consent

Authority

Liking

Scarcity

Unity

Options social proof, commitment, and liking are directly part of this framework. These principles are used to influence supplier behaviour, build stakeholder alignment, and negotiate effectively. For example, demonstrating that other organisations have adopted a strategy (social proof) can increase acceptance, while establishing rapport (liking) improves cooperation. Procurement professionals who understand these principles can navigate complex stakeholder environments more effectively.

The services industry does not have a specific SIC code because it is highly diverse, spanning multiple activities that do not fit neatly into a single classification.

[Ref: CIPS L5M6 Study Guide, p.88 – SIC classification limitations]

Category Management delivers multiple benefits for organisations, including:

Fewer supplier contracts, achieved by consolidating spend and reducing fragmentation.

Improved supplier relations, as suppliers are engaged strategically rather than transactionally, enabling stronger collaboration.

Increased innovation, which arises when procurement works closely with suppliers to develop new solutions and efficiencies.

Other benefits highlighted by CIPS include better pricing, improved terms and conditions, stakeholder satisfaction, enhanced risk management, and improved spend visibility. The incorrect options—“less staff required” and “better use of IT systems”—may result indirectly from streamlined procurement, but they are not primary benefits recognised in the category management framework. The true value of category management lies in shifting procurement from a transactional function to a strategic enabler of value. By grouping spend into categories and applying tailored strategies, organisations achieve economies of scale, better market intelligence, and stronger alignment with business objectives.

Risk assessments in procurement often use a likelihood × severity matrix. Risks are scored on scales from 1–5, and the scores are multiplied. A score of 2 indicates a minor risk with low impact and/or low probability. For comparison, risks with scores in the upper range (e.g., 20–25) are considered major risks that demand immediate mitigation. Minor risks, although not ignored, are often monitored rather than heavily resourced. This structured approach ensures procurement teams focus resources on the most significant threats while still maintaining oversight of low-level risks. By categorising risks this way, category managers create clarity for decision-makers and align procurement risk management with enterprise-wide frameworks.

Inflation is directly linked to the Economic factor within STEEPLED. It affects costs, purchasing power, and business profitability.

[Ref: CIPS L5M6 Study Guide, p.109 – STEEPLED analysis factors]

Category Management is a strategic approach to procurement. According to CIPS, it is defined as “a rigorous fact-based, end-to-end process for proactively collaborating with stakeholders to develop and implement sourcing strategies that deliver significant value from an organisation’s external spend.”

Unlike tactical or reactive procurement, which focuses on immediate needs or firefighting, category management emphasises long-term planning, data analysis, supplier relationships, and alignment with business objectives. It goes beyond simply planning purchases in advance [which could apply to “planned procurement”] by integrating market intelligence, risk assessment, and value optimisation.

Being strategic means that category management seeks not only cost savings but also innovation, sustainability, and resilience. It requires cross-functional collaboration and the use of analytical tools like Kraljic matrices, total cost of ownership, and supplier segmentation.

Therefore, the most accurate categorisation is strategic procurement, not merely tactical or planned.

[Ref: CIPS L5M6 Study Guide, p.2 – Category Management as a strategic approach]

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Category 1: Highly innovative, many suppliers with similar products at similar price points

Porter’s Force: Competitive Rivalry – High

STEEPLE Factor: Technological

Explanation (150–200 words):

Category 1 operates in a market that is highly innovative and subject to rapid technological change. Innovation means suppliers are constantly developing new features or solutions, making technology the primary STEEPLE factor. Additionally, because there are many suppliers offering similar products at similar price points, competitive rivalry is intense. Buyers can switch easily, and suppliers must compete aggressively on features, pricing, and differentiation.

This combination of high rivalry and technological change creates both opportunity and risk for Randoxx. On one hand, innovation drives new solutions that can be leveraged; on the other hand, it increases pressure to manage supplier relationships strategically. Randoxx must monitor technological trends closely while maintaining competitive sourcing strategies to manage this highly dynamic category.

(Ref: CIPS L5M6 Study Guide – Porter’s Five Forces, p.112–116; STEEPLED Analysis, p.109)

This item is classified as a Bottleneck item in the Kraljic Portfolio Matrix. Bottleneck items are low-value in terms of spend but carry high supply risk, often because there are very few suppliers or a monopoly situation.

In this case, Frankie Burgers faces a monopoly supplier, meaning supply risk is high. Even though the item is low cost, its unavailability could disrupt operations, creating significant vulnerability.

By contrast:

Leverage items are high-value but low risk, suited for competitive sourcing.

Strategic items are high-value and high-risk, requiring partnerships.

Routine items are low-value and low-risk, suitable for automated procurement.

Category managers facing bottleneck items often mitigate risk through strategies such as developing alternative suppliers, stockpiling, or long-term contracts to secure continuity of supply.

[Ref: CIPS L5M6 Study Guide, p.157 – Kraljic Matrix applications]

A SWOT Analysis distinguishes between internal factors (strengths and weaknesses) and external factors (opportunities and threats). Strengths are internal capabilities, resources, or skills that give the organisation an advantage in the market—such as strong supplier relationships, unique expertise, or cost leadership. Weaknesses are internal limitations, such as lack of investment, poor technology, or inadequate processes. These are factors the organisation has direct control over and can improve. On the other hand, opportunities and threats are external influences outside the business’s direct control, such as market trends, legislation, or competitor actions. For category management, applying SWOT allows managers to assess the current position of categories and design strategies that build on strengths and address weaknesses. This analysis also ensures that procurement strategies remain aligned with organisational goals and competitive environments. The correct recognition of internal versus external factors is essential to avoid misdiagnosis and wasted effort.

In deciding the correct Sourcing Business Model, stakeholders must clarify two fundamental issues:

The most appropriate contractual relationship [C]: This could be transactional [short-term, cost-focused], relational [long-term collaboration], or investment-based [joint ventures, alliances]. The choice defines how risks and rewards are shared with suppliers.

The most appropriate economic model [D]: This determines the pricing and performance framework, e.g., transactional [pay-per-unit], output-based, or outcome-based [pay-for-results].

Options A and B are important but secondary considerations. Risk appetite and TCO factors are inputs to decision-making, but the contractual and economic models define the overall sourcing structure.

This reflects the study guide’s emphasis that sourcing models should be tailored to category complexity and business objectives. Using the wrong model can undermine supplier relationships and value delivery.

[Ref: CIPS L5M6 Study Guide, p.32 – Key questions in Sourcing Business Models]