2.3.2 Working with Suppliers

• Stock

  Stock is held by businesses to help meet customers’ needs
• Stock can be held in 3 forms:

  -raw materials e.g. ingredients

  -work in progress e.g. batch of dough

  -finished products e.g. a loaf of bread
• What is a management tool used for?

  to control and monitor the flow of stock
• What does a management tool show?

  Lead time
• What is lead time in stock management?

  The time from order placement to delivery
• How is lead time measured on a stock control diagram?

  Distance from reorder to minimum stock level
• What triggers an order in stock management?

  Reorder level
• How can reorder levels be managed?

  Automatically by a computerized system
• What is the buffer level of stock?

  Stock held for unforeseen circumstances
• What happens when a business reaches its minimum stock level?

  It is left with just buffer stock
• What determines the reorder quantities?

  Buffer level of stock and lead time
• Why is buffer stock important for a business?

  To cope with unforeseen circumstances
• How do lead time and buffer stock interact in stock management?

  Lead time affects when to reorder buffer stock
• Buffer stock

  Held in case there is a problem with the delivery of new stock or a sudden increase in demand
• what are some advantages of a business keeping buffer stock?

  -can meet customer demand

  -quickly respond to increases in demand

  -continue with production even if a problem with delivery occurs
• What are some disadvantages of a business keeping buffer stock?

  -money tied up in holding stock

  -costs associated with stock holding e.g. Storage, staff, insurance

  -risk of waste e.g. out of date, damaged or obselete
• What is JIT production?

  Just-In-Time production is a method of stock control where a business aims to reduce waste by ordering products only when they need them:

  -there is no unused or obsolete stock and storage costs are reduced

  -less money is tied up in stock

  -there is no buffer stock
• What is procurement?

  Procurement is the process of acquiring goods, services, or works from an external source.

  -suppliers are responsible for providing those goods and services to businesses
• why are relationships with suppliers important?

  Quality

  -this will have a direct effect upon the quality of the finished product

  Delivery and Availability

  -are the suppliers able to make enough of a good to meet demand

  -if not, a business‘ reputation may suffer and customer needs may fall

  -reliability is important

  Cost

  -very important for those who compete on price

  -a low cost supplier means that a business can charge a lower price or choose to enjoy higher profit margins

  Trust

  -the business must have confidence in their suppliers
• What are some impacts of logistics and supply decisions?

  Suppliers will affect unit costs in the following ways:

  -the price of the components directly affects the cost of a product

  -discounts may be offered for buying in bulk

  -appropriate payment terms will help businesses avoid bank chathese
• What are some impacts of logistics and supply decisions?

  Suppliers will have direct influence of prices as:

  -high quality components allows businesses to charge higher price

  -reliability and speed of supply can add value to a product and allow a premium price to be charged
• What are some impacts of logistics and supply decisions?

  Suppliers will affect reputation and customer satisfaction:

  -quality of raw materials entering the production process

  -delivery of supplies on time

  -flexibility to match supply and demand

  -speed of delivery
• What is the supply chain?

  the network between a company and all its suppliers in the production and distribution of a good or service