2.3.2 Working with Suppliers

Question 1

Just In Time (JIT)

Answer 1

Receiving Stock from suppliers just before it is needed.

Benefits:
- Cash not tied up in stock
- Stock will be fresh
- Less storage space needed

Costs:
- Unforeseen circumstances can cause late deliveries
- Requires reliable supplies

Question 2

Buffer stock

Answer 2

Benefits:
- Less likely to run out of stock
- Can meet surges in demand

Costs:
- Ties up cash that could be used
- Higher storage cost
- Stock can perish

Question 3

Definition of Re-order level

Answer 3

When stock levels drop to a certain amount, the business will place another order with the supplier (usually triggered automatically)

Question 4

Definition of Lead time

Answer 4

the time it takes between when an order is placed and when it arrives from the supplier

Question 5

What makes good suppliers?

Answer 5

• Flexibility
• Fair trade credit terms
• Large discounts for large orders
• Reliable
• Consistent quality goods
• Fair prices
• Short lead time

Question 6

Why are good suppliers important?

Answer 6

Late deliveries can hold up customers
If not reliable, might not get delivery
Supplier can influence branding of business
Flexibility can help businesses to meet customers requirements

Question 7

What is Logistics?

Answer 7

Logistics is concerned with the efficient storage and transportation of goods. Logistics aims to ensure that the right products will be ordered and delivered on time.

Question 8

Benefits of having Logistics

Answer 8

• High customer satisfaction if the right quantity of the right product can be delivered at the right time to the right place.
• Reduced costs if it can be done efficiently.

Question 9

Types of stock

Answer 9

• Raw materials needed to make products
• Finished goods - goods made and ready to sell

Question 10

Problems of high stock levels

Answer 10

• High cost to store the stock
• More space needed to store stock
• Increased insurance costs
• Extra stock is a cost to the business if sales are low and not used
• Stock can go out of date (perishable goods)

Question 11

Problems of low stock levels

Answer 11

• Difficult to meet customer demand
• Potential loss of repeat purchases
• Customers buy from someone else
• More risk if suppliers are unreliable

Question 12

What is Procurement

Answer 12

The process of buying and sourcing stock