3.3.2 - The role of procurement

• What is required for the Just in Time (JIT) stock control method to be effective?

  A good relationship with suppliers
• What are the advantages of JIT stock control?

  • More space for sales due to removal of buffer stock
  • Fresher products from smaller, frequent deliveries
  • Less capital tied up in stock, allowing reinvestment
  • Reduced waste and costs
• How does JIT stock control affect capital management?

  It reduces capital tied up in stock that could go out of date or out of fashion
• What is a disadvantage of JIT stock control regarding demand changes?

  It can be hard for businesses to react to unexpected changes in demand
• What is a potential issue with stock availability in JIT stock control?

  Customers could receive poor service if products go out of stock
• What does procurement refer to in a business context?

  The process of managing the ordering and receipt of goods or services
• What is the role of procurement in stock management?

  To purchase and manage stock and supplies
• What does JIC stand for in stock control?

  Just In Case
• What is the purpose of JIC stock control?

  To ensure there is always stock available for the business
• What are the advantages of JIC stock control?

  • Increases customer satisfaction by reducing stockouts
  • Allows businesses to benefit from bulk-buying discounts
  • Reduces reliance on suppliers for timely deliveries
  • Economies of scale from bulk purchasing
• What is a disadvantage of JIC stock control regarding storage?

  Buffer stock requires more storage space, increasing costs
• What is a potential issue with products kept in stock for a long period?

  They can lose freshness
• What are the three key factors affecting the choice of suppliers?

  Cost, quality, and reliability
• Why is cost a vital consideration when choosing suppliers?

  It helps keep variable costs low and maintain higher profit margins
• How does quality affect a business's product offerings?

  Businesses need to produce good-quality products that customers want to buy
• What does reliability mean in the context of supplier relationships?

  Trust that products will be delivered on time and in sufficient quantities
• What is profit margin?

  The difference between sales revenue and total costs expressed as a percentage
• What does logistics involve in supply chain management?

  Ensuring the correct products are procured and arrive when needed
• What are the three key elements of logistics?

  1. Transportation: Moving goods through the supply chain
  2. Storage: Storing products before distribution
  3. Distribution: Ensuring products reach the end customer efficiently
• How can unit costs be reduced in production?

  By producing quickly or using inferior quality materials
• What is cash flow?

  The movement of money in and out of the business
• What is a supply chain?

  • The process of developing, sourcing, producing, and providing goods and services
  • Involves working with suppliers and shipping companies
  • Affects the overall efficiency and effectiveness of a business
• What are the benefits of an effective supply chain?

  • Ensures key processes run efficiently and cost-effectively
  • Obtains goods and services at the best price and value
  • Reduces waste and unnecessary costs
  • Leads to more satisfied consumers and lower return rates
• What could be the consequences of an ineffective supply chain?

  It could cause late deliveries and unsatisfactory products