2.3.2 Working with suppliers Flashcards
What is stock?
Constitutes the materials a business holds for use in production or sales
What can stock be?
Raw materials
Stocks of materials
Finished goods
What is maximum stock level?
Largest amount of stock that the business will hold at any one time
What is minimum stock level (buffer stock)?
Lowest amount of stock that a business will hold at any one time
What does the minimum stock level allow?
A business to continue production if there were to be a delay in delivery or an unexpected order
What is re-order level?
The stock level where new stock will be ordered
What is lead time?
The time it takes for new stock to arrive once it has been ordered
What is order quantity?
Number of units ordered
What does JIT stand for?
Just In Time
What is JIT managment?
Where businesses do not hold any stock; raw materials and components are ordered exactly when they are needed and used straight away in the production process
What does JIT require?
Regular deliveries which increase costs and requires strong supplier relationships
Why can good cash-flow be achieved?
As money is not tied-up in stock or storage costs
What can JIT businesses not take advantage of?
Economies of scale
What causes high costs for JIT management?
Supplier difficulties
Delay in delivery halts production
What is procurement?
Act of obtaining or buying raw materials, components or services from a supplier to be used in the production of gods and services
