supply chains

• what is logistics

  a process which plans, implements and controls the distribution and storage of goods and services from when they are received from the supplier to when they are delivered to the customer
• what is a wholesaler

  middle person between the retailer and manufacturer
• what is a supply chain

  a network of companies and people that are involved in the production and delivery of a product or service. The components of a supply chain include producers, vendors, wholesalers, transportation companies, distribution centres and retailers
• what is supply chain management

  ensures the right quantity of goods are in the right place at the right time and are of the right quality and at a price that represents value for money. This should create value for the customer and profit for the business within the supply chain.
• benefits of having an effective supply chain

  • increased efficiency
  • lower unit costs; prices can be negotiated with suppliers
  • competitive advantage-any cost savings can be passed onto customers in the form of lower prices
  • improved flexibility-members of the supply chain can work together to meet demands
• simple definition of supply chain

  a chain of organisations that get products to customers
• what is procurement

  choosing the right suppliers and ordering from them
• Disadvantages of supply chain management

  • Quality can suffer if costs are driven down too low e.g. suppliers may not be dedicated if they are not paid a fair price
  • Sophisticated IT systems to monitor the supply chain can be expensive to implement
  • Reliance on other members of the supply chain means a business does not have full control over its operations
• what does efficiency mean?

  how well a business uses its resources to produce products
• how to calculate average unit cost

  total costs/ number of units produced
• what does Procurement involve?

  1. Deciding what is needed

  2. Selecting suppliers

  3. Negotiating contracts between the business and its suppliers

  4. Managing how goods are ordered and received

  5. Managing logistics. 6. Terms of payment
• Stock management includes

  • Stocks of raw materials required to produce the finished goods
  • Stocks of finished goods needed to meet demand
  • Staffing in service industries e.g. checkout operators in a Supermarket
• Just in time (JIT)

  Minimum amount of stocks of raw materials and finished goods are held by the business
• Just in time stock management

  • Careful planning is required as raw materials arrive as the production line as they are required
  • Good relationships with suppliers are essential; Suppliers are usually located nearby
• Benefits of using just in time stock control

  • Less storage space required, reducing rent and insurance costs
  • Less money is tied up in stock, improving cash flow
  • Stock is less likely to perish, become obsolete or go out of date
• Problems of using just in time stock control

  • No spare or buffer stock available to meet unexpected demand
  • System is reliant on suppliers delivering on time
  • No benefits of economies of scale from bulk purchasing
• Just in case

  the business holds buffer stocks of raw materials/ finished goods just in case there is a problem with deliveries or there is an unexpected surge in demand
• Problems of JIC

  • Higher stock holding means a need for more storage space, which increases rent and insurance costs
  • Sudden increases in demand
  • Production is less reliant on suppliers and if stock is not delivered on time the whole production schedule need not be delayed
  • Spare finished products are available to meet unexpected orders, leading to higher stockholding costs
  • Build up of unsold finished products which can increase the level of customer service
• Supplier

  A business or individual that provides goods or services to a business
• Why suppliers are important

  • For a business to meet the needs and wants of customers, it needs an effective supply chain
  • Suppliers determine many of the costs of a business (e.g. raw materials, distribution)
  • Suppliers are closely linked to product quality
  • Suppliers can be an important source of finance to a business
  • For businesses that use lean production techniques, effective relationships with their suppliers are essential
• benefits of just in case

  -stock is available for re-working faulty products or to meet sudden increases in demand.

  -production is less reliant on suppliers and if stock is not delivered on time, the whole production schedule need not be delayed

  -spare finished products are available to meet unexpected orders, which can increase the level of customer service