Supply Chains and Inventory Management

• Supply chains refers to all the resource providers throughout every stage of operations
• Suppliers are those responsible for providing resources to businesses
• Inventory is the number of goods held in stock including raw materials, work in progress and finished goods
• Flexibility is the ability to respond to change
• Flexibility allows a business to respond to changes in demand, consumer tastes and seasonality
• Flexibility can be improved through managing inventory and supply chain management
• Effective supply chain management allows for a good relationship with suppliers, which can help firm respond to changes in market quickly
• Just In Time operations improves flexibility
• Mass customisation is the ability to tailor goods made in bulk to meet the requirement of individual consumers. (Eg. Nike)
• The benefits of mass customisation include increased customer satisfaction as they get exactly what they want.
• The drawbacks of mass customisation are that it requires high levels of investment in technology and skilled labour.
• Speed of response is the ability to meet customer needs within a set time period (Eg. Delivery times)
• Speed of response allows for the ability to make changes to products to reflect changing consumer tastes.
• Dependability is important when operating a JIT system will be reliant on suppliers the right quantity and quality on time to ensure supply meets demand
• Managing supply to match demand is important:

  To meet operational objectives and achieve customer satisfaction
• Managing supply to match demand is difficult

  If demand fluctuates (Eg. seasonality, changes in trends)
• Managing supply to match demand is difficult

  If there are potential threats to the ability to supply (Eg. Industrial action)
• Outsourcing is a way of managing supply to match demand
• Outsourcing is the practice of the services of other organisations to complete all or parts of the manufacturing process
• Benefits of outsourcing includes: Flexibility, Increased capacity without high capital expenditure, expertise.
• Quality must be maintained when outsourcing.
• Temporary and part-time employees may be an effective way to managing supply to match demand
• Temporary employees are contracted to work for a business for a specific period of time
• Part time employees are contracted to work less than a full time employee
• Benefits of using part-time and temporary workers include: Flexible workforce, better able to match supply to demand and lower expenses.
• Recruitment and training costs for part-time and temporary workers are high and may not be seen as value for money
• Producing to order is where supply is only triggered by specific demand
• Producing to order requires high levels of flexibility
• Producing to order means that cash is not being tied up in holding inventory
• Managing stock efficiently means stock can be used to fill differences between production output and demand.
• The amount of stock held depends upon: The businesses attitude to risk, importance of speed of response, change within market and the nature of the product
• Inventory control charts are a management tool used to control and monitor the flow of stock.
• Inventory Control charts give a visual representation of Lead time, reorder levels, buffer stock and re-order quantities
• Advantages of holding buffer stock includes: Meeting customer demand and Quicker speed of response
• Disadvantages of holding buffer stock includes: Money tied up in holding stock, costs associated with stock holding and risk of waste.
• Influences on choice of suppliers includes: Price, Quality, Payment terms and flexibility
• Price is often key consideration when choosing a supplier as businesses wish to keep unit costs low
• Suppliers often offer credit to customers
• Payment terms will vary depending on the size of businesses and also the nature of the product or service
• Payment terms can be: In advance, upon delivery, pre-agreed credit terms and payment plans.