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Category Management
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[ Total Questions: 10]
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Category Breakdown
Category Number of Questions
Strategic impact and implementation of category management 4
Concepts, tools and techniques for managing expenditure 3
Approaches used to develop category management strategies 3
TOTAL 10
Question #:1 - [Strategic impact and implementation of category management]
At which stage in the Procurement Cycle can most value be added?
Specify requirements
Supplier selection
Negotiate and award contract
Review
Answer: D
Explanation
CIPS highlights that the of the Procurement Cycle offers the greatest opportunity to add value. review stage
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 or highlight areas where contract leakage
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.
Reference: CIPS L5M6 Study Guide, p.42
Question #:2 - [Concepts, tools and techniques for managing expenditure]
Trydo Ltd is an industrial engineering company and is currently assessing its supplier base. Below are 
descriptions of four of its major suppliers:
Supplier 1: This supplier has a large share of the market and the market in which it operates is 
growing. However, the supplier’s own costs have increased by 36% over the past 12 months due to raw 
material price increases.
Supplier 2: The market is fast growing but as a new supplier to the marketplace, Supplier 2’s market 
share is still relatively low. Trydo is concerned about this supplier’s long-term financial situation as the 
company has taken out many loans and a large mortgage.
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Supplier 3: This supplier operates in a small marketplace, but is a strong player with a sizable market 
share. Although this isn’t of concern to Trydo, having recently run an Acid Test, it is believed that 
Supplier 3’s current liabilities are four times greater than its assets.
Supplier 4: The market Supplier 4 operates in is shrinking and Supplier 4 already has a low market 
share. The main issue is Capital Management as stock turnover, debtor days and are becoming 
prolonged. There have been several complaints about performance.
Task:
Complete the table below. You are required, for each supplier, to determine the product category on the BCG 
 and to identify the main area of . Each response should only be used once.Matrix financial concern
Answer:
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Explanation
Output image
Supplier 1 # Star Category + Profitability Concern
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Supplier 1 holds a in a , which places it in the of the large market share growing market Star category
BCG Matrix. Stars are typically leaders in expanding markets and require continuous investment to maintain 
their dominance. The concern here is not competitive weakness but . Although revenue potential profitability
is strong, Supplier 1’s costs have increased by . This erodes margins 36% due to rising raw material prices
and threatens profitability despite growth. Stars often generate high cash inflows, but if costs spiral out of 
control, their ability to sustain investment weakens. Profitability management (e.g., through cost reduction, 
supplier negotiations, or efficiency gains) is critical to ensuring Supplier 1 continues its growth trajectory and 
avoids slipping into the “Cash Cow” or “Dog” quadrants in the future.
(Ref: CIPS L5M6 Study Guide, p.117 – BCG Matrix application)
Supplier 2 # Question Mark Category + Gearing Concern
Supplier 2 operates in a but has only a , making it a in the fast-growing market small share Question Mark
BCG Matrix. Question Marks are high-risk: they may grow into Stars or fail and become Dogs, depending on 
how they perform and whether investment supports expansion. The major financial concern here is —gearing
Supplier 2 has taken out significant loans and a large mortgage, meaning it is heavily leveraged. High gearing 
increases financial risk, as debt repayments must be met regardless of market conditions. In rapidly growing 
markets, high gearing can restrict reinvestment and leave firms vulnerable to interest rate fluctuations or 
downturns. For Trydo, this means Supplier 2 could face difficulties sustaining its growth, posing supply chain 
risk. Monitoring debt levels and financial stability is essential before committing to long-term contracts.
(Ref: CIPS L5M6 Study Guide, pp.117–118 – Question Marks and financial analysis)
Supplier 3 # Cash Cow Category + Liquidity Concern
Supplier 3 operates in a but commands a . This places it firmly as small, stable market strong market share
a —a business that generates consistent revenue without requiring major investment. Cash Cows Cash Cow
fund other areas of a portfolio but face limited growth prospects. The concern here is . An Acid Test liquidity
reveals that Supplier 3’s , suggesting it lacks current liabilities are four times greater than its assets
sufficient short-term liquidity to meet obligations. This imbalance can result in cash flow problems, even if 
long-term profitability remains sound. For Trydo, the risk is that Supplier 3 may fail to pay debts or manage 
day-to-day operations, creating supply disruption. Procurement managers must ensure financial health checks 
are conducted regularly and consider diversification strategies if reliance on Supplier 3 is high.
(Ref: CIPS L5M6 Study Guide, p.117 – Cash Cows and liquidity issues)
Supplier 4 # Dog Category + Efficiency Concern
Supplier 4 operates in a and already holds a , placing it in the shrinking market low market share Dog 
 of the BCG Matrix. Dogs are generally unattractive, offering little growth and limited returns. The category
key concern here is . Supplier 4 is struggling with , such as poor stock efficiency capital management issues
turnover and prolonged debtor days. These inefficiencies damage competitiveness and further weaken 
financial stability. For Trydo, relying on Supplier 4 poses significant risk because inefficiency can lead to 
delays, reduced quality, and increased total cost of ownership. Unless Supplier 4 improves performance, it 
may eventually exit the market, leaving Trydo vulnerable. In procurement terms, buyers should avoid long-
term commitments with such suppliers and instead focus on exit strategies or alternatives.
(Ref: CIPS L5M6 Study Guide, pp.117–118 – Dogs and efficiency management)
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Question #:3 - [Approaches used to develop category management strategies]
In Category Management, which is the best way to group materials and/or services?
Usage characteristic
Spend category
Geography of supply
Supplier relationship
Answer: A
Explanation
In category management, grouping is most effective when based on . This similar usage characteristics
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, forms one category, personal protective equipment (PPE)
while or may be separate categories. This approach ensures that category surgical instruments bedding
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 
 that align with business objectives and ensure effective stakeholder engagement. It procurement strategies
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.
Reference: CIPS L5M6 Study Guide, p.48
Question #:4 - [Approaches used to develop category management strategies]
Category Strategy Development is composed of 4 key stages. Which of the following is the correct order?
Develop progress tracking plan, define resources needed, roadshow, create strategic plan
Roadshow, create strategic plan, define resources needed, develop progress tracking plan
Develop progress tracking plan, define resources needed, create strategic plan, roadshow
Create strategic plan, develop progress tracking plan, define resources needed, roadshow
Answer: D
Explanation
The correct sequence of is:Category Strategy Development
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Create the strategic plan – outlining objectives, tactics, and desired outcomes.
Develop a progress tracking plan – defining performance measures and milestones.
Define resources needed – identifying staff, skills, and financial support required.
Conduct a roadshow – presenting the strategy to stakeholders and gaining buy-in.
This order ensures strategies are clearly defined before resources are committed and that tracking mechanisms 
are in place to measure success. The is critical to gain organisational support and alignment, roadshow
ensuring all stakeholders understand the plan and contribute to its implementation. Mis-sequencing these steps 
can result in wasted resources, poor engagement, or ineffective execution. Category managers must follow 
this structured approach to maintain accountability, transparency, and long-term success in strategy 
implementation.
Reference: CIPS L5M6 Study Guide, p.12
Question #:5 - [Strategic impact and implementation of category management]
“Survival of the fittest” is a concept in supplier relationships. Which of the following does it describe?
Low focus on pricing, low focus on relationships
Low focus on pricing, high focus on relationships
High focus on pricing, high focus on relationships
High focus on pricing, low focus on relationships
Answer: D
Explanation
Survival of the fittest in supplier management means driving competition by focusing heavily on price 
, with . This approach treats suppliers as reduction minimal emphasis on building long-term relationships
interchangeable, encouraging them to compete aggressively for contracts.
It can yield short-term cost savings but risks damaging supplier collaboration, innovation, and resilience. It is 
suitable for commodities or non-strategic items where price is the dominant factor.
Other approaches differ:
Trust-based or partnership models balance price with collaboration.
No-cost modelling focuses on process transparency.
Strategic alliances prioritise innovation and value creation.
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Category Managers must carefully choose when to apply “survival of the fittest” as it may undermine long-
term supplier stability if used indiscriminately.
[Ref: CIPS L5M6 Study Guide, p.160 – Supplier relationship models]
Question #:6 - [Strategic impact and implementation of category management]
Peak Pricing is also known as which other type of pricing model?
Penetration pricing
Dynamic pricing
Limit pricing
Price skimming
Answer: B
Explanation
Peak pricing is another term for , where the cost of a product or service changes in response dynamic pricing
to fluctuations in demand and market conditions. A common example is , where fares airline ticket pricing
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]
Question #:7 - [Concepts, tools and techniques for managing expenditure]
The process of designing a product with a trusted supplier in order to eliminate costs that may appear at the 
delivery stage is known as which cost management strategy?
Cost acceptance
CIPS - L5M6Pass Exam
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Cost engineering
Cost down
Cost out
Answer: D
Explanation
The correct term is , a proactive cost management approach where the buyer collaborates with the Cost Out
supplier during the to eliminate unnecessary costs before they arise. This ensures efficiency and design phase
value creation throughout the product lifecycle. For example, designing packaging to minimise waste or using 
standardised components to avoid expensive customisation.
This differs from:
Cost acceptance, where the buyer accepts the supplier’s price without analysis.
Cost engineering, a broader process of optimising costs through design and process evaluation.
Cost down, which typically involves reducing costs after production by analysing processes, 
renegotiating contracts, or improving efficiency.
Cost Out is especially relevant for strategic or high-value categories where innovation and collaboration with 
suppliers can generate long-term savings. It is consistent with category management’s emphasis on strategic 
supplier partnerships.
[Ref: CIPS L5M6 Study Guide, p.80 – Cost Out vs Cost Down strategies]
Question #:8 - [Strategic impact and implementation of category management]
Which of the following are key components to the success of a CFT (cross-functional team)? Select TWO.
Members from at least 4 different functions are brought together
All members have technical expertise in the area
The CFT has an articulated purpose
The team has endorsement from company leadership
Answer: C D
Explanation
Cross-Functional Teams (CFTs) are essential in category management, as they bring together expertise 
from different areas of the organisation. Their success depends on having a and clear, articulated purpose
 to ensure authority and resource allocation. It is not necessary to have exactly endorsementfrom leadership
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four functions (the guidance suggests three or more), nor for all members to have technical expertise—CFTs 
should balance technical, procurement, legal, and operational knowledge. Strong leadership support ensures 
the team’s recommendations are implemented, while a clear purpose ensures alignment and focus. Without 
these, CFTs risk becoming unfocused discussion groups with limited impact.
Reference: CIPS L5M6 Study Guide, p.63
Question #:9 - [Concepts, tools and techniques for managing expenditure]
Which category of spend item would be most suitable to purchase through an e-auction?
Bottleneck
Leverage
Strategic
Non-critical
Answer: B
Explanation
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]
Question #:10 - [Approaches used to develop category management strategies]
Of the following 4 types of industries, which has the lowest barriers to entry?
Airline
Pharmaceuticals
Restaurant
Soft drink manufacturing
Answer: C
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Explanation
Industries differ in terms of barriers to entry, which are obstacles that make it difficult for new competitors to 
enter a market. The has relatively —it requires less upfront capital, fewer restaurant industry low barriers
regulatory approvals, and allows easier entry compared to industries such as or . In airlines pharmaceuticals
contrast, pharmaceuticals involve stringent legal regulations, high R&D costs, and patents, while airlines 
require massive capital investment and regulatory compliance. The , while not as capital-soft drinks industry
intensive, has strong barriers due to . For brand loyalty, global supply chains, and marketing costs
procurement, recognising barriers to entry is important because it affects . In supply market competitiveness
industries with low barriers like restaurants, buyer power is generally higher because new suppliers can enter 
easily. In high-barrier industries, suppliers hold greater power due to limited alternatives. This ties directly 
into , which procurement professionals use to evaluate market attractiveness and Porter’s Five Forces
develop category strategies.
Reference: CIPS L5M6 Study Guide, p.179
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