Operations

• Suppliers


  • Companies that provide goods or services that a company or business requires producing its products or achieving its aims
  • Suppliers can have an effect on a business's ability to produce a product or provide a service
• Factors influencing choice of supplier

  • Price
  • Location and transport costs
  • Lead time
  • Product quality
  • Reliability
  • Reputation
• Lead time


  The amount of time between an order being placed with a supplier and its shipment
• Effective supply is key to a business's success
• Factors influencing choice of supplier

  • Price
  • Location and transport costs
  • Lead time
  • Product quality
  • Reliability
  • Reputation
• Price


  The price of supplies will have a direct effect on how much it costs the company to produce a product. A higher cost of raw materials will lead to a higher cost of production. If a company can find a cheaper supplier it could lead to increased profit.
• Location and transport costs

  If a supplier is located near to your company the transport and delivery costs will be lower. If the product being supplied is perishable it would be better to source a supplier close to your business as they will be able to deliver the goods quickly.
• Lead time


  Lead time is the amount of time taken between an order being placed and an order being received. Some companies will require stock to be delivered quickly especially if the products are perishable or the company is using just in time (JIT) stock control methods.
• Product quality


  The quality of raw materials will have a direct effect on the quality of a business's finished product. It is important to source supplies of a high standard or it may affect your finished product and therefore your customer satisfaction.
• Reliability

  If a supplier does not deliver at the agreed time, or with the correct goods, this can affect a business's ability to produce and deliver their product to the customer.
• Reputation

  Suppliers that have a good reputation will be more likely to fulfil orders on time and provide a high quality product. If a supplier has a bad reputation you may not be able to rely on them to provide the quality supplies that your company requires.
• Factors to consider when choosing a supplier

  • Does the supplier offer discounts?
  • Does the supplier offer trade credit?
  • Are there any additional charges?
  • Can the supplier deliver on time?
  • Are the supplier's prices competitive?
  • Is the supplier able to supply the quantity needed?
  • Are the supplier's goods of an acceptable quality?
• Inventory management


  The processes a business uses to manage their inventory levels and the issues associated with overstocking and understocking are important factors in the survival and success of that business
• Inventory


  The materials held or used by a business to produce a product
• Types of inventory


  • Raw materials
  • Works in progress
  • Finished goods
• Raw materials


  The resources or ingredients required to produce a product
• Works in progress


  Goods that are partly made or in assembly
• Finished goods


  The end product ready for customers to buy
• Inventory management


  The processes a business uses to manage their inventory levels and the issues associated with overstocking and understocking
• Businesses will have a system in place in order to ensure they have sufficient inventory held in the warehouse
• Inventory management system


  • May utilise modern technology like barcodes to relay information about sales to the warehouse via an ICT system
  • When inventory reaches a set level or trigger point, the business will be alerted to reorder and restock the levels of inventory
• Overstocking


  Having too much inventory (stock) held in the business
• Understocking


  Having not enough inventory (stock) held in the business
• Businesses must avoid the problems of having too much inventory (overstocking) and the problems of not having sufficient inventory (understocking)
• Inventory management


  The processes a business uses to manage their inventory levels and the issues associated with overstocking and understocking
• Importance of inventory management

  • Important factors in the survival and success of a business
• Overstocking


  Having too much inventory
• Overstocking


  Brings high storage costs
• Money tied up in inventory

  Could be invested elsewhere in a business
• Inventory going out of fashion or spoiling


  Business will have to write it off as a loss
• Having too much inventory

  Results in higher storage costs in terms of both overheads and security
• Having too much inventory


  Is better than having no inventory, as this would prevent any production
• Overstocking

  Allows a business to meet any unexpected orders
• As a rule it makes financial sense for businesses to keep down the amount of stock they hold
• Understocking

  Having too little inventory
• Customers expect their orders to be made and delivered as agreed


  Business cannot fulfil orders on time
• Production may stop


  Due to the lack of available materials
• It will never be possible to meet unexpected large orders


  The business will be viewed as unreliable and its reputation will be damaged
• Methods of production


  The way we make a product can depend on the type of product and volume required
• Main methods of production

  • Job production
  • Batch production
  • Flow production