L5M6 Sample Exams

✅ Correct Answer: Highly variable demand across countries

Explanation:
Decentralised networks allow businesses to be closer to customers and more responsive when demand is uncertain or varies widely across regions.

Why the other options are wrong:
❌ Economies of scale – favour centralisation, not decentralisation.
❌ Lower unit transport costs – also point to centralisation benefits.
❌ Simplified supplier management – is not the key driver of decentralised distribution.

🧠 Summary: Use decentralisation when customer demand is diverse and requires responsiveness.
📖 Source: CIPS L5M6 Study Guide – Network configuration decisions (pp. 33–37).

✅ Correct Answer: Total cost-to-serve modelling

Explanation:
Cost-to-serve analysis maps costs by product, customer, or channel to reveal the true profitability of network options.

Why the other options are wrong:
❌ Sensitivity analysis – tests assumptions but not cost/service trade-offs in networks.
❌ Supplier preferencing – focuses on supplier relationships, not network costs.
❌ Kraljic – used for sourcing strategies, not network optimisation.

🧠 Summary: Cost-to-serve highlights how service levels and costs vary across the supply network.
📖 Source: CIPS L5M6 Study Guide – Network evaluation methods (pp. 52–56).

✅ Correct Answer: Greater vulnerability to disruption

Explanation:
Centralising inventory creates efficiency but exposes the business to higher risk if the single hub faces disruption (e.g., natural disaster, strike).

Why the other options are wrong:
❌ Duplication of stock – happens in decentralisation, not centralisation.
❌ Higher transport costs – trunk routes from a central hub are usually cheaper per unit.
❌ Compliance complexity – more likely in decentralised, multi-country hubs.

🧠 Summary: Central hubs increase efficiency but raise concentration risk.
📖 Source: CIPS L5M6 Study Guide – Risk in network design (pp. 39–43).

✅ Correct Answer: Hybrid “postponement” strategy

Explanation:
Postponement delays final product customisation until closer to demand, balancing efficiency (upstream standardisation) with responsiveness (downstream localisation).

Why the other options are wrong:
❌ Build-to-stock – risks excess inventory and reduced flexibility.
❌ Offshoring only – prioritises cost but sacrifices responsiveness.
❌ On-demand only – highly responsive but costly and difficult globally.

🧠 Summary: Postponement provides a practical balance between efficiency and responsiveness.
📖 Source: CIPS L5M6 Study Guide – Network strategies and postponement (pp. 45–50).

✅ Correct Answer: Opening new warehouses to reduce last-mile distances

Explanation:
Shortening last-mile delivery reduces overall vehicle mileage and emissions, directly contributing to sustainability.

Why the other options are wrong:
❌ Increasing order sizes – improves efficiency but not necessarily emissions reduction.
❌ Low-cost sourcing – could increase carbon footprint due to longer global transport.
❌ Reducing safety stock – lowers inventory but does not address emissions.

🧠 Summary: Sustainable network design considers location of facilities and distance travelled to minimise environmental impact.
📖 Source: CIPS L5M6 Study Guide – Sustainability in supply network design (pp. 61–67).