managing supply chains and inventory

Cards (29)

  • 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)