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  1. Home
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Free CIPS L6M1 Exam Dumps Questions & Answers

Exam Code/Number:L6M1Join the discussion
Exam Name:Strategic Ethical Leadership
Certification:CIPS
Question Number:44
Publish Date:Jul 21, 2026
Rating
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Page: 1 / 9
Total 44 questions
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Question 1

SIMULATION
Discuss 5 different sources of power an individual can have in the working environment. Explain who in an organisation may have this type of power and the pros and cons to each (25 points)

Correct Answer:
See the Answer is the explanation
Explanation:
Sources of Power in the Workplace: Types, Organizational Roles, and Their Pros & Cons Power in the workplace influences decision-making, leadership effectiveness, and team dynamics. French and Raven's five sources of power-legitimate, reward, coercive, expert, and referent power-are commonly found in organizational settings. Each type of power has advantages and disadvantages, depending on how it is used. This essay explores these five sources of power, their typical holders within an organization, and their pros and cons.
1. Legitimate Power
Definition:
Legitimate power is derived from a formal position or authority within an organization. It comes from the structure of the company rather than an individual's personal qualities.
Who Holds This Power?
CEOs, Directors, Managers, Supervisors, Team Leaders
Example: A Procurement Director has legitimate power to approve supplier contracts.
Pros:
✔ Provides clear authority and structure in decision-making.
✔ Helps maintain order and accountability in an organization.
✔ Employees respect and follow official leaders.
Cons:
✘ Can lead to resistance if employees feel decisions are made without consultation.
✘ Overuse of authority can create a rigid, bureaucratic environment.
✘ Power is temporary-losing the title means losing authority.
2. Reward Power
Definition:
Reward power is the ability to influence behavior by offering incentives such as bonuses, promotions, pay raises, or recognition.
Who Holds This Power?
HR Managers, CEOs, Procurement Heads, Line Managers
Example: A Procurement Manager offers performance bonuses to encourage supplier cost reductions.
Pros:
✔ Motivates employees to achieve goals.
✔ Encourages high performance and engagement.
✔ Helps reinforce positive behaviors in the workplace.
Cons:
✘ Can create entitlement issues-employees may expect rewards for all tasks.
✘ If rewards are inconsistent, it can lead to demotivation.
✘ Over-reliance on rewards may reduce intrinsic motivation (employees only work for rewards, not passion).
3. Coercive Power
Definition:
Coercive power comes from the ability to punish or enforce negative consequences for poor performance, non-compliance, or misconduct.
Who Holds This Power?
Supervisors, Compliance Officers, HR Managers, Security Heads
Example: A Chief Compliance Officer enforces penalties for unethical procurement practices.
Pros:
✔ Ensures discipline and adherence to company policies.
✔ Helps prevent unethical behavior (e.g., fraud in procurement).
✔ Encourages employees to meet deadlines and expectations.
Cons:
✘ Creates fear and resentment among employees.
✘ Can lead to low morale and high turnover.
✘ Not effective long-term-employees may comply out of fear, not respect.
4. Expert Power
Definition:
Expert power comes from specialized knowledge, skills, or expertise that make an individual valuable in the workplace.
Who Holds This Power?
Subject Matter Experts (SMEs), Senior Engineers, IT Specialists, Procurement Analysts Example: A Procurement Data Analyst has expert power by using big data analytics to improve supply chain efficiency.
Pros:
✔ Encourages trust and credibility among employees.
✔ Expertise is highly valuable-companies rely on knowledgeable individuals.
✔ Individuals with expert power often gain influence without formal authority.
Cons:
✘ Power is limited to specific expertise-not useful outside their domain.
✘ If not shared, expertise can lead to knowledge hoarding (lack of collaboration).
✘ Overconfidence in expertise can make individuals resistant to learning new approaches.
5. Referent Power
Definition:
Referent power is based on charisma, respect, and personal influence rather than authority or knowledge.
Who Holds This Power?
Charismatic Leaders, Mentors, Senior Employees with Strong Relationships Example: A Senior Procurement Executive with strong leadership qualities inspires the team to embrace change.
Pros:
✔ Creates loyalty and trust among employees.
✔ Can be used to influence without authority.
✔ Helps in mentoring and developing future leaders.
Cons:
✘ Can be subjective-depends on personality and relationships.
✘ Overuse can lead to favoritism and bias in decision-making.
✘ Can be ineffective if employees do not personally respect the leader.
Conclusion
In any workplace, different individuals hold different types of power based on their role, expertise, and relationships. While legitimate, reward, coercive, expert, and referent power all contribute to leadership and decision-making, each has its own advantages and drawbacks. Effective leaders and procurement professionals must balance these power sources strategically, ensuring that authority is respected, motivation is sustained, discipline is enforced fairly, expertise is valued, and personal influence is used ethically.

Question 2

SIMULATION
Discuss the role that independent organisations in the third sector can play with regards to ethical business practices. Your answer may make reference to one or more of the following: United Nations, Tradecraft UK, Walk Free Foundation, IMF, ILO. (25 points)

Correct Answer:
See the Answer is the explanation
Explanation:
Overall explanation
Below you will find how you can plan and draft the essay. Remember this is an example of one way you could approach the question. At Level 6 the questions are much more open so your response may be completely different and that's okay.
Essay Plan
Introduction - what is the 3rd sector?
P1 - role of advocate - promoting ethical business practices
P2 - role of watchdog
P3 - role of researcher - example of UNICEF and Cocoa
P4 - role of influencing global policies e.g. ILO Decent Work Agenda
P5 - Decent Work Agenda - explanation
Conclusion - work of third sector is critical to support advances in ethical business practices Example Essay Independent organizations in the third sector, also known as non-governmental organizations (NGOs) and civil society groups, play a crucial role in promoting ethical business practices on a global scale. This essay explores the multifaceted role of independent organizations in advancing ethical business practices and will focus on the work of the United Nations and the International Labour Organization (ILO).
Independent organizations in the third sector serve as advocates for ethical business practices. They raise awareness about ethical issues, such as fair labour practices, environmental sustainability, and responsible supply chain management. By conducting research, publishing reports, and engaging in public discourse, these organizations bring attention to areas where ethical improvements are needed.
Moreover, independent organizations often act as watchdogs, monitoring the actions of businesses and governments to ensure adherence to ethical standards. They use tools like corporate social responsibility (CSR) evaluations and human rights impact assessments to hold organizations accountable for their practices. For instance, NGOs may investigate and expose cases of labour exploitation or environmental violations in global supply chains.
For example, the International Labour Organization (ILO), a specialized agency of the United Nations, initiated efforts to combat child labour and forced labour in the cocoa industry. Children, often working in hazardous conditions, were involved in harvesting cocoa beans, which raised serious ethical and human rights concerns . The ILO along with UNICEF (United Nations Children's Fund) conducted studies, surveys, and assessments to gather data on child labour and forced labour. This resulted in the creation of the Harkin-Engel Protocol. Under the protocol, the chocolate and cocoa industry committed to taking specific actions to eliminate the worst forms of child labour and forced labour from cocoa production, encouraging businesses to adopt responsible sourcing practices, implement traceability measures, and invest in community development programs. While challenges persist, ILO/ UNICEF's efforts have contributed to significant improvements in labour conditions and a greater emphasis on ethical practices in the cocoa supply chain.
Furthermore, the United Nations, particularly the Economic and Social Council (ECOSOC), provides a platform for independent organizations to engage with governments and international institutions on ethical business practices. ECOSOC consults with NGOs, enabling them to contribute to discussions on sustainable development goals, human rights, and economic policies. This engagement ensures that ethical considerations are integrated into global policymaking.
Another example of how third sector organisations contribute to ethical business practices is the International Labour Organization (ILO) conventions, such as the 2018 Decent Work Agend a. This framework encompasses four main pillars
1) Employment: creating jobs and expanding opportunities for all. The goal is to promote full and productive employment, ensure equal pay for equal work, and reduce informal employment. It also emphasizes the importance of addressing unemployment, underemployment, and vulnerable employment, particularly in developing countries.
2) Social Protection: it highlights the need for comprehensive social protection systems. This includes access to essential health services, maternity protection, unemployment benefits, disability benefits, and pensions. Social protection helps individuals and families cope with various economic and social risks.
3) Social Dialogue: the active participation of workers, employers, and governments in decision-making processes related to labour policies and regulations. Social dialogue is essential for achieving fair and equitable labour practices, including collective bargaining and labour rights.
4) Rights at Work: the right to freedom of association, the right to collective bargaining, the elimination of forced labour and child labour, and the elimination of discrimination in the workplace. Ensuring these rights helps create a fair and just work environment.
The Decent Work Agenda represents a comprehensive and integrated approach to labour and employment issues, aiming to improve the well-being of workers and their families while fostering economic growth and development. It addresses the challenges and opportunities arising from changes in the world of work, such as globalization, technological advancements, and demographic shifts.
In conclusion, independent organizations in the third sector are instrumental in advancing ethical business practices globally. Their roles as advocates, monitors, collaborators, and educators are essential in holding businesses and governments accountable for their actions. Through engagement with institutions like the United Nations and initiatives like the ILO's Decent Work Agenda, these organizations contribute to the promotion of ethical practices in business, fostering a more just and sustainable global economy. Their efforts complement the broader goals of achieving social responsibility, human rights, and environmental sustainability in the business world.
Tutor Notes
- Out of those listed, you could get a lot of content out of the UN and ILO (remember the ILO is part of the UN). These would be my personal choice to pick and learn about because there are lots of examples you could talk about. I chose Cocoa and Child Labour. Other things you could have wrote about include:
- ILO Convention No. 29 (Forced Labour Convention, 1930): This convention requires member states to suppress the use of forced labour in all its forms, including slavery, debt bondage, and forced or compulsory labour.
- ILO Convention No. 105 (Abolition of Forced Labour Convention, 1957): This convention complements Convention No. 29 and aims to abolish forced labour through measures such as effective enforcement of laws and policies.
- Goal 8 of the United Nations Sustainable Development Goals (SDGs) specifically targets decent work and economic growth. Target 8.7 within this goal calls for the "immediate and effective measures to eradicate forced labour, end modern slavery and human trafficking and secure the prohibition and elimination of the worst forms of child labour." The UN promotes the SDGs as a framework for addressing forced labour and related issues.
- The UN provides technical assistance to countries, helping them develop and implement legislation and policies to combat forced labour. This assistance includes capacity building, training, and sharing best practices.
- Tradecraft UK, Walk Free and IMF are also mentioned in the study guide. Here's some info you could have included if you wished to talk about them in your essay:
- Tradecraft = IMPORTANT - as of 2023 this organisation is in Administration. The study guide and exam questions were written before this happened, so may refer to it in the present tense. Your response should mention it in the past tense. Tradecraft was a UK-based Fair Trade Organisation that sold products that were traded fairly in the UK. Their mission was to fight poverty through promoting approaches to trade that will help people in developing countries change their lives. It developed programmes working with poor producers in Africa and Asia. E.g. helped small Indian tea producers negotiate higher prices and get representation on the Tea Board of India. Also helped African Framers negotiate for better PPE and provided training to them so they're more confident to negotiate contract terms such as not allowing late changes to quantities. Traidcraft goes into Administration - One World Shop
- Walk Free Foundation = Aim is to eliminate modern slavery- publishes the Global Slavery Index. They engage in research, advocacy, and awareness-raising activities. Walk Free Foundation Official Website

Question 3

SIMULATION
Describe four reasons a person may resist change and four ways a leader can overcome resistance to change (25 points).

Correct Answer:
See the Answer is the explanation
Explanation:
Overall explanation
Below you will find how you can plan and draft the essay. Remember this is an example of one way you could approach the question. At Level 6 the questions are much more open so your response may be completely different and that's okay.
Essay Plan
Intro: what is change?
P1: fear
P2: poor communication and misunderstanding
P3: economic conditions change (e.g. impact on working conditions or pay) P4: perception (because they believe the change won't be beneficial) P5: leader can overcome resistance through: providing compelling rationale for the change P6: leader can overcome resistance through: Employee involvement (participative management style) P7: leader can overcome resistance through: providing training P8: leader can overcome resistance through: being honest and using timely communication Conclusion: change management is complex and requires overcoming many obstacles. Need to plan. Use tools such as Kotter's Change Management Principles, Lewin's Forcefield Analysis and RACI Example Essay Change, in the context of organizations, refers to a departure from the existing state or processes toward a new and often better state. Change can encompass various aspects, such as altering processes, introducing new technologies, or modifying company culture. However, individuals within the organization often resist change for a variety of reasons. This essay will explore four common reasons for resistance to change and four effective strategies leaders can employ to overcome this resistance.
Four Reasons for Resistance to Change:
Fear: People tend to resist change when they fear the unknown. Change often brings uncertainty about the future, job security, and one's ability to adapt. An example of this is an older employee resisting a change to using a new e-procurement system, because they are mistrustful of technology.
Poor Communication and Misunderstanding: Inadequate or unclear communication about the change can lead to misunderstandings and misinterpretations. Lack of information can result in resistance due to confusion or distrust. For example an employee may hear of a change accidently in the hallway and pass this on, without knowing the full story, they may make a decision to resist the change.
Economic Conditions Change: If people believe that the change will negatively impact them, for example increasing their workload, stress levels or financial take homes, they may resist change. An example of this is during a company restructure when people believe that merging of job roles will result in them having to do more work.
Perception: Individuals may resist change when they perceive it as unnecessary, or detrimental to their interests. This resistance often stems from a belief that the change won't be beneficial. For example a manager may wish to introduce a new way to categorise inventory, but warehouse staff believe that this change will make counting inventory take longer.
Four Ways a Leader Can Overcome Resistance to Change:
Providing Compelling Rationale for the Change: Leaders can overcome resistance by clearly and convincingly explaining the reasons behind the change. Demonstrating how the change aligns with the organization's goals and how it will benefit employees can help mitigate fear and uncertainty.
Employee Involvement (Participative Management Style): Inviting employees to participate in the change process can reduce resistance. When individuals feel they have a say in the change, they are more likely to embrace it. Leaders can solicit input, involve employees in decision-making, and create a sense of ownership in the change.
Providing Training: Resistance often stems from a lack of knowledge or skills required for the change. Leaders can provide training and resources to equip employees with the necessary tools to adapt successfully. This not only reduces resistance but also enhances employee confidence and competence. This would be particularly helpful for changes involving new systems and ways of working.
Being Honest and Using Timely Communication: Effective communication is critical in overcoming resistance. Leaders should be honest about the reasons for the change, acknowledge potential challenges, and provide regular updates. Timely and transparent communication builds trust and reduces uncertainty.
In conclusion, change management is a complex process that requires leaders to address and overcome various sources of resistance. Understanding the reasons behind resistance is essential for effective change leadership. As Atkinson (2005) notes: resistance to change should not be viewed negatively, it is a positive and healthy response. Employing strategies like providing a compelling rationale, involving employees, offering training, and maintaining open and honest communication can help leaders navigate the complexities of change successfully. Moreover, change management tools such as Kotter's Change Management Principles, Lewin's Forcefield Analysis, and RACI (Responsible, Accountable, Consulted, Informed) matrices can further aid leaders in planning and executing change initiatives efficiently and with the least possible resistance.
Tutor Notes
- With this type of question try to give as many examples as you can.
- Other things you could have mentioned in your essay include:
- Reasons to resist change: out of habit, because other people are resisting it (sheep mentality), loss of freedom, scepticism, impact the change may have on their personal life (e.g. effect on work life balance).
- Dealing with resistance to change; Top management sponsorship and HR involvement, Understanding of human behavour and why people may resist change, Corporate culture supports change, Adjustment to performance mechanisms, KPIs, Efficient organisational structure, Rewards (monetary and otherwise)

Question 4

SIMULATION
Sarah is the manager of a small cake shop. She employs 8 staff members and has several local suppliers. Her approach to leadership is the Contingency approach. Explain what is meant by this approach (5 points) and discuss how Sarah could use this approach to ensure her business is successful. (25 points)

Correct Answer:
See the Answer is the explanation
Explanation:
Introduction
Effective leadership plays a crucial role in the success of a business, especially in small enterprises where employee motivation, supplier management, and operational efficiency directly impact profitability. Leadership styles should be adaptable to different situations, team dynamics, and external challenges.
Sarah, the manager of a small cake shop, adopts the Contingency Approach to Leadership, which means she adjusts her leadership style based on the specific circumstances her business faces. This essay will first explain what the Contingency Approach is and then discuss how Sarah can apply it to ensure her cake shop thrives.
1. What is the Contingency Approach to Leadership? (5 Points)
Definition
The Contingency Approach to Leadership suggests that there is no single best way to lead-instead, the best leadership style depends on the situation. A leader must evaluate environmental factors, team capabilities, business challenges, and supplier relationships to determine the most effective leadership style.
Key Principles of the Contingency Approach
Situational Adaptability - Leaders must adjust their behavior based on the context, team skills, and challenges.
Flexibility in Decision-Making - Some situations require authoritative leadership, while others benefit from a collaborative approach.
Focus on Environmental Factors - External factors such as market trends, customer demand, and supplier reliability influence leadership decisions.
Influence of Team Maturity - The leadership approach changes depending on whether employees are highly skilled and independent or require supervision and guidance.
Example of the Contingency Approach
If Sarah's cake shop faces a sudden staff shortage, she may need to adopt a directive leadership style, giving clear instructions to manage the crisis.
If she is introducing a new product line, she might collaborate with her team, encouraging creativity and innovation.
2. How Sarah Can Use the Contingency Approach to Ensure Business Success (20 Points) Sarah's cake shop operates in a highly customer-focused industry where quality, efficiency, and customer service are essential. Applying the Contingency Approach effectively can help her improve operations, manage staff effectively, and strengthen supplier relationships.
(A) Adjusting Leadership Style for Employee Management
Sarah employs 8 staff members with varying skill levels, meaning she must tailor her leadership style to each employee's capabilities.

By adapting her approach to different staff members, Sarah ensures high productivity, job satisfaction, and skill development within her team.
(B) Supplier Relationship Management
Sarah's cake shop depends on local suppliers for ingredients such as flour, sugar, and dairy. A contingency approach helps her manage these relationships effectively:
Handling Reliable Suppliers (Low-Risk Situations)
Uses a collaborative leadership style, fostering strong long-term relationships.
Works closely with suppliers to negotiate bulk discounts and ensure high-quality ingredients.
Dealing with Supplier Disruptions (High-Risk Situations)
Uses directive leadership to make quick alternative sourcing decisions.
If a supplier fails to deliver ingredients on time, Sarah must quickly find replacements to keep operations running smoothly.
By adapting her approach based on supplier reliability, Sarah ensures consistent ingredient supply, cost efficiency, and business continuity.
(C) Responding to Business Challenges and Market Changes
The food industry is highly competitive, and Sarah must adjust her leadership approach to respond effectively to external challenges such as:
Seasonal Demand Fluctuations (Christmas, Weddings, Special Events)
Uses a participative approach, involving her team in planning for high-demand periods.
Encourages staff to suggest new cake designs, flavors, and promotional offers.
Handling Customer Complaints and Service Issues
Uses a customer-focused leadership approach, ensuring that employees prioritize customer satisfaction and feedback resolution.
Trains employees in effective communication and problem-solving.
Implementing New Technologies (e.g., Online Ordering System)
Uses a coaching approach, training staff step-by-step on the new system while gathering their feedback.
By staying flexible and responsive, Sarah ensures that her cake shop remains competitive, innovative, and customer-focused.
(D) Managing Workload and Crisis Situations
In any small business, unexpected crises can arise, such as staff shortages, equipment breakdowns, or raw material shortages. Sarah can use different leadership styles based on urgency:
Crisis Situations (e.g., Oven Malfunction, Sudden Staff Absences)
Uses a directive approach, giving clear instructions to ensure quick problem resolution.
Example: If a baker calls in sick on a busy day, Sarah reallocates tasks immediately to keep up with orders.
Daily Operations (Stable Work Conditions)
Uses a participative approach, allowing employees to contribute ideas for improving workflows and efficiency.
By using contingency-based leadership, Sarah ensures her cake shop runs smoothly under different circumstances.
(E) Encouraging Teamwork and Employee Motivation
A successful cake shop requires a motivated, engaged team. Sarah can use different leadership techniques to build a strong team culture:
Team Meetings and Brainstorming
Uses a democratic approach, encouraging employees to share creative cake designs and customer engagement strategies.
Recognizing Employee Achievements
Uses a supportive approach, rewarding employees for exceptional performance and customer service.
By adapting to different employee needs, Sarah builds a motivated, skilled, and loyal team, reducing turnover and improving overall performance.
Conclusion
The Contingency Approach to Leadership is an effective strategy for Sarah as it allows her to adapt to various challenges in her cake shop, ensuring smooth operations, strong supplier management, and motivated employees.
By modifying her leadership style based on the situation, employee skill levels, supplier performance, and business challenges, Sarah can:
✅ Develop a high-performing team by offering the right mix of guidance and independence.
✅ Manage supplier relationships effectively by adjusting her leadership approach based on reliability and market conditions.
✅ Handle operational challenges efficiently, ensuring business continuity and customer satisfaction.
Ultimately, flexibility and adaptability are key to her success, making the Contingency Approach an ideal leadership style for small business management.

Question 5

SIMULATION
Discuss supplier due diligence in relation to the case study below. How and why should it be implemented? (25 points) Delicious Ltd is a cake manufacturing organisation with complex supply chains. They are based in the UK and source raw ingredients such as sugar and flour internationally. They use over 20 different suppliers, many of whom are in the commodities industry and some from low-cost countries.

Correct Answer:
See the Answer is the explanation
Explanation:
Overall explanation
Below you will find how you can plan and draft the essay. Remember this is an example of one way you could approach the question. At Level 6 the questions are much more open so your response may be completely different and that's okay.
Essay Plan
Introduction- what is due diligence - assessing and evaluating suppliers.
Section 1 - how to do due diligence: risk assessments, supplier selection, audits, contracts, continuous processes, communication Section 1 - why - quality issues, risk to business continuity, ethical reasons, customer/ stakeholder requirements Conclusion: it's essential for Delicious Ltd (relate back to case study).
Example Essay
Supplier due diligence is a critical process for organizations like Delicious Ltd, which rely on complex international supply chains to source commodity items. Due diligence involves assessing and evaluating the performance, reliability, and ethical practices of suppliers to ensure they meet the company's standards and requirements.
Here's how supplier due diligence can be implemented:
Risk Assessment: Begin by identifying the potential risks within the supply chain. This may include geopolitical risks, natural disasters, economic instability, and even supplier-specific risks like production delays or quality issues. It should also look at ethical considerations such as the use of forced or child labour in the supply chain and the working conditions of those employed by suppliers.
Supplier Selection: Carefully select suppliers based on criteria such as their track record, reputation, financial stability, quality control processes, and ethical practices. Delicious Ltd should consider multiple sources for critical raw materials such as sugar and flour to diversify risk. This means if one supplier goes bust, or is unable to provide the required quantities, Delicious Ltd can source materials elsewhere. The Kraljic Matrix would be a useful tool here.
Audits and Inspections: Delicious Ltd can conduct regular audits and inspections of suppliers' facilities and practices to ensure they meet the company's standards. These audits can include quality checks, ethical compliance checks, and supply chain continuity assessments. They can use an independent 3rd party to do this.
Contractual Agreements: Delicious Ltd should define clear terms and conditions in supplier contracts, specifying quality requirements, delivery schedules, pricing structures, and dispute resolution mechanisms. These contracts should reflect the results of due diligence assessments.
Continuous Monitoring: Establish a system for ongoing monitoring of suppliers' performance. This includes regular communication, feedback mechanisms, and performance reviews to ensure suppliers maintain the desired standards. Delicious Ltd could use the Demming Plan Do Check Act cycle here.
Contingency Planning: Develop contingency plans for potential supply chain disruptions. This could involve identifying alternative suppliers or establishing safety stock levels for critical raw materials. For example, by holding a surplus stock of flour in it's own warehouse, Delicious Ltd mitigates the risk of late deliveries interrupting production.
Transparency and Reporting: Delicious Ltd should be transparent about supplier due diligence efforts with stakeholders, including customers, investors, and regulatory bodies. They should regularly report on compliance with ethical and sustainability standards and can publish findings on their website.
For Delicious Ltd, implementing supplier due diligence is essential for several reasons:
Quality Assurance: Ensuring the quality of raw ingredients is crucial for a cake manufacturing organization like Delicious Ltd. By conducting due diligence, the company can verify that suppliers meet specific quality standards, which is essential for producing consistent and high-quality products. If an ingredient such as flour was contaminated, this may result in Delicious Ltd's customers falling ill. This is a risk that needs to be eliminated.
Supply Chain Reliability: International supply chains can be susceptible to disruptions, such as natural disasters, political instability, or economic fluctuations. Supplier due diligence helps identify potential risks within the supply chain and allows the company to develop contingency plans to minimize disruptions.
Ethical Sourcing: Customers and stakeholders increasingly demand transparency and ethical sourcing practices. Due diligence enables Delicious Ltd to assess whether suppliers adhere to ethical standards, such as fair labour practices and environmental sustainability, which can protect the company's reputation and market position. Delicious Ltd risk losing customers, and thus profit, if they fail to conduct due diligence.
Cost Control: By evaluating suppliers' financial stability and pricing structures, the company can negotiate better deals, optimize costs, and avoid unexpected price hikes or financial risks associated with supplier instability.
In conclusion, implementing supplier due diligence is essential for Delicious Ltd due to its complex international supply chains. It helps ensure quality, reliability, and ethical practices among suppliers, while also mitigating risks associated with the supply chain. By effectively implementing due diligence processes, the company can enhance its reputation, protect against disruptions, and maintain cost control.
Tutor Notes
- Remember that due diligence isn't just about ethics. That's a big part of it (checking supply chains for modern day slavery etc). Due diligence is about getting the 5 Rights of Procurement (remember this from Level 4?), it's about ensuring supply chain security and continuity, and about risk aversion too.
- To improve on the essay above you could talk more in detail about where you can get information on suppliers, such as D&B and Companies House for financial information, customer references and checking registrations such as ISO14001. Some of these are specific to the UK, so Delicious Ltd may need to look at international equivalents. You don't have to know what these are for the exam though so don't worry!
- How deep you conduct supplier due diligence depends on how important the supplier is to you. You could mention this in your conclusion and bring it back to Delicious Ltd - the flour supplier is probably very important, but the supplier of stationary for the workers in the office is probably less so. So Delicious need to do thorough due diligence on the flour supplier and less on the stationary guys. Kraljic is the tool for this.
- Because this is a case study question, you don't have to bring in any real life examples. But if the question was more open e.g. discuss how a procurement manager can do Due Diligence, you could talk about a real life example, so have one in your back pocket for the exam
- For a really high score you could mention this: Home - KnowTheChain

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