Exam L4M4 Topic 1 Question 101 Discussion

Actual exam question for CIPS's L4M4 exam
Question #: 101
Topic #: 1
In which circumstances would it be relevant to apply the Pareto principle (80/20 rule) to supplier expenditure analysis? (Select TWO)

Suggested Answer: D,E Vote an answer

The Pareto principle (80/20) shows that around 80% of spend is often concentrated with 20% of suppliers. It is relevant for identifying strategic suppliers (D) that require close management and opportunities to improve or change relationships (E) for greater value. Contract expiry dates (B) and payment frequency (A) are administrative details, not Pareto analysis outputs. Cost variation (C) relates to performance analysis, not spend concentration. Responsible sourcing uses Pareto analysis to allocate resources effectively, focusing attention on the most impactful supplier relationships.
Reference: CIPS L4M4 Study Guide (v2), LO: "Implementation" - spend analysis and supplier relationship management.

by Jeff at May 13, 2026, 10:17 PM

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