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setting operational objectives(updated)
managing supply chains and inventory
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Supply chain
All the activities involved in the process of producing
goods
or services and getting them to the
consumer
Supply chain of a product
1. Planning for and
sourcing
raw
materials
2.
Choosing
suppliers
3. Purchasing the
materials
4. Turning the raw materials into
products
5. Transporting,
warehousing
and distributing the products
Supply chain of a service business
1. Sourcing and
managing
data
2.
Providing
and maintaining web services
3. Managing the process of selling over the
internet
A business that manages the supply chain effectively will have
competitive
advantage because it will
maximise
its productivity
Flexibility
Ability of a business to meet a customer's
requirements
Mass
customisation
Tailoring
goods to specific customer
requirements
Flexibility
Flexibility in terms of
numbers
ordered
Flexibility in the
internal
processes and decision making to respond quickly to changes in the market and the
external
environment
Speed of response and dependability
Doing these right can result in a
competitive
advantage as it will lead to greater customer
satisfaction
Relies on good
communication
and relationships with suppliers
If a business has too little supply
It will miss out on
lucrative
orders and future orders due to a lack of
dependability
If a business has too much supply
It will incur the costs of holding the excess, and the business may be faced with selling the good at a
reduced
price
Managing demand
Using the marketing mix to
influence
demand (increasing/reducing prices,
advertising
, sales promotions)
Hotels and
airlines
are a good example of businesses that try to match
supply
and demand
Center Parcs charges
higher prices
during school holidays and has a capacity utilisation of 90%
Managing the supply chain effectively
Enables the business to deliver goods and services to its customers more
quickly
Improves the business's
competitive
position as it's more likely to get the market share if it's
first
to market
Involves
monitoring
the whole process and its component parts to see where it can be made more
efficient
Requires
coordinating
and
integrating
every process in the chain
Ways to manage supply
1. Flexible workforce (multi-skilled, part-time,
zero-hour
contracts)
2. Increased
capacity
3. Produce to
order
Produce to order
Manufacturing and other
industries
only start production when an
order
is received
Factors
to consider when deciding whether to make to order
Type of product and whether it's
appropriate
Speed
at which orders can be fulfilled
Unit cost of keeping high levels of
stock
if sales aren't immediate
Availability of
component
parts and
materials
Influences on the choice of suppliers
Cost and
credit
terms
Location
Quality
Reliability
Flexibility
Outsourcing
Allocating an element of the
supply
chain process to a
third
party
Benefits
of outsourcing
Enabling a
quicker
response to
increases
in demand
Greater
dependability
for customers during periods of
increased
demand
Lower
costs in cases of
temporary
increases in demand
Drawbacks of outsourcing
Quality
may suffer
Reliability of supplies may not be
guaranteed
Likely to be more costly than producing
in-house
Matching supply with demand
1.
Outsourcing
or sub-contracting to increase production without increasing workforce and resources
2. Depends on cost of storage, ability to tie up
capital
in stock, and whether product has a use-by date
Flexible staff resource
Employing
additional part-time
staff as needed in times of
peak
demand
Make to order
Production process only starts when an order is
received
, allowing
minimum
stock levels
Make to buy
Anticipating demand and producing
stock
based on
estimated
demand
Factors to consider when deciding make to order or make to buy
Type of product and whether it's
appropriate
Speed
at which orders need to be fulfilled
Price
Unit
cost of keeping high levels of stock if sales aren't immediate
Availability of
component
parts
Mass customisation
Allowing different
combinations
of existing components to satisfy customer
demand
for customised products at a reasonable price
Inventory control
Inventory means the
value
of all the materials held by a business, including
raw
materials, work in progress and finished goods
Main influences are
nature
of demand,
nature
of the product, nature of production, and opportunity cost
Inventory control chart
1. Buffer
stock
(minimum amount held to cover emergencies)
2. Lead
times
(time from order placement to supply)
3.
Re-order
level (when to automatically place an order)
4. Maximum
stock
level (highest amount able to be held)