Inventory control and supply chains

• How can a business cope with spare capacity?

  • Extending factories
  • Overtime or longer hours
  • Hiring new staff
  • Flexible workforce
  • Sub-contracting
• How can a business reduce its supply?

  • Sell off fixed assets
  • Change to shorter working days
  • Laying off workers
  • Transferring resources to another area
• Rationalisation

  A process by which a firm improves its efficiency by cutting the scale of operations
• What is the definition of subcontracting and outsourcing?

  Subcontracting: Hiring another company to perform specific tasks or services Outsourcing: Contracting out a business process to a third-party provider
• What is the difference between the purposes of subcontracting and outsourcing?

  Subcontracting: Specific tasks or projects are delegated to another company because the business lacks expertise or capacity Outsourcing: Entire business functions are delegated to an external provider for cost reduction and efficiency purposes
• Does the business have more control through subcontracting or outsourcing?

  Subcontracting
• What is the duration of subcontracting and outsourcing?

  Subcontracting: Temporary (for a specific project only)

  Outsourcing: Long-term
• What are the pros of producing to order?

  • Competitive advantage
  • Cut costs
  • Follow lean production techniques
  • Increase sales revenue, higher profit margins
• What are the cons of producing to order?

  • Large amount of stock if suppliers not reliable - inventory costs
  • Difficulty workforce planning
  • Lower productivity
  • Change in organisational structure / culture will take time
• Mass customisation

  Personalisation or custom-tailoring of goods / services to meet customer needs, but still at near mass-production prices

  • Flexible to customer needs
  • Mass - large quantities, lower unit costs
• What are the 7 factors considered when choosing effective suppliers?

  1. Price
  2. Payment terms
  3. Quality
  4. Capacity
  5. Reliability
  6. Flexibility
  7. Vertical integration
• How is price important with suppliers?

  Low prices - competitive advantage, but may produce poor quality products, be unreliable or not flexible to meet sudden demand
• What is essential with quality of suppliers?

  Consistent level all the time, manufacturers have no buffer stock often
• What is reliability with suppliers?

  % of deliveries made on time for JIT production and how much contract terms are met in relation to quality
• How is capacity ensured with suppliers?

  Often business' spread risk with two suppliers to ensure product is sourced and available to customers
• When is flexibility needed with suppliers?

  If a vital supplier shuts down, negative publicity, transport difficulties causing delays in deliveries, supply chain disruptions
• What is vertical integration?

  Vertical integration is a business strategy where a company controls multiple stages of the production and distribution process, often buying their suppliers so they are in charge, ensuring guaranteed reliability, quality and flexibility
• What is a stock control chart used for?

  Monitoring stock, knowing when stock needs to be reordered, notice any irregular patterns
• Stock control chart

  Label below

  A) Maximum

  B) Lead time

  C) Reorder

  D) Minimum

  E) Buffer stock

  
• How to decide reorder quantity?

  Maximum level - minimum level
• What is a temporary contract?

  A temporary contract is an employment contract that is for a fixed period or can be terminated / moved easily

  • Able to match supply with demand, greater flexibility