Business Revision Guide: 4.6

• Procurement - the management of purchasing within a business
• Logistics - the process of organising the transport of goods from the seller to the buyer
• Supply chain - the chain of businesses involved in the production of a product and its delivery to the user
• Stages of the procurement process:

  1. Identifying goods and services to buy (what to buy? year / fashion / influence
  2. Choosing suppliers (who you can buy from)
  3. Ordering goods and services (actual process of ordering)
  4. Receiving deliveries from suppliers (when will the goods be delivered / stored)
• Issue: Time

  Explanation: supplier must be able to deliver the goods on time

  Potential problem: supplier may be short of materials, may delay production = loss of sales and revenue
• Issue: Reliability

  Explanation: supplier must be able to supply the quantity and quality of goods needed by the customer

  Potential problem: if the supplier is short of materials or they are not sufficient quality it may have to delay or stop production= loss of sales and revenue
• Issue: Length of supply chain

  Explanation: an increased risk of problems occurring along the chain

  Potential problem: business which makes a component may not get the materials it needs and so cannot produce the component its customer needs to assemble its product
• Issue: Costs

  Explanation: customers will want delivery costs to be as low as possible but this must not be at the expense of reliability

  Potential problem: high delivery costs may take the total production costs too high and the firm may not be able to sell its goods at a profit
• Issue: Customer service

  Explanation: a supplier will need to provide customer service to deal with problems and enquiries from its potential customers

  Potential problem: the business may lose customers if businesses that buy from it are not happy with the service they receive