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Business Studies AQA GCSE Flashcards > 3.2 The Role Of Procurement > Flashcards

3.2 The Role Of Procurement Flashcards

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1
Q

What is just in time stock management (JIT)

A

Minimum amount of stocks of raw materials and finished goods held by the business

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2
Q

What is just in case stock management (JIC)

A

When the business holds buffer stocks of raw materials/finished goods just in case there is a problem with deliveries or there is an unexpected surge in demand

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3
Q

What are buffer stocks

A

Raw materials and components that are held by a business to protect it from interruptions to supplies of these items

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4
Q

What is purchasing economies of scale

A

When the cost per unit falls if large orders are placed with suppliers due to a bulk discount

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5
Q

What are the benefits of just in time stock control

A
  • Less storage space required, reducing rent and insurance costs
  • Less money is tied up in stock, which improves cash flow
  • Stock is less likely to perish, become obsolete or go out of date
  • Avoids being left with finished goods that cannot be sold due to changes in demand
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6
Q

What are the problems with just in time stock control

A
  • No spare or buffer stock is held if mistakes occur
  • No spare or buffer stock available to meet unexpected demand
  • System is reliant on suppliers delivering time
  • No benefits of purchasing economies of scales, as a large number of smaller deliveries are made by a firm using JIT
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7
Q

What are the benefits of just in case stock management

A
  • Stock is available for re working faulty products or to meet sudden increases in demand
  • Production is less reliant on suppliers and if stock is not delivered on time, the whole production schedule is not delayed
  • Spare finished products are available to meet unexpected orders, which can increase the level of customer service
  • Purchasing economies of scale is possible from bulk purchasing stock
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8
Q

What are the problems with just in case stock management

A
  • Higher stock holding means a need for more storage space, which increases rent and insurance costs
  • Money is tied up in stock and is therefore unavailable for other purposes
  • Stock might go out of date, prices may need to be reduced to sell excess stock
  • Build up of unsold finished products leading to higher stockholding costs
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9
Q

What is a supplier

A

A business or individual that provides goods or services to a business

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10
Q

What is a supply chain

A

All the businesses, people, and activities that take part in the production processes from the start until it gets to the customer

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11
Q

What things may a business purchase from a supplier

A
  • Items needed to run the business such as energy, telephones, and cleaning products
  • Materials used in the production process like different components
  • Purchases used to create the production process like production line equipment in a factory
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12
Q

Why are suppliers important

A
  • A business needs an effective supply chain to meet customer needs and wants
  • Suppliers determine many costs of a business (e.g. raw material, distribution)
  • Suppliers are closely linked to product quality
  • Suppliers can be an important source of finance to a business (trade credit)
  • Businesses that use lean production techniques need a good relationship with suppliers
  • The rate of which a supplier delivers determines stockholding costs and how fast customer demand is treated
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13
Q

What makes a supplier effective

A
  • Value for money
  • Consistently providing quality expected by the customer
  • Delivers the correct products of time
  • Goods and services work as described
  • Easy to communicate with
  • Long term trading relationships require suppliers to stay in business
  • Ability to handle increased volumes of supply at short notice
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14
Q

What factors affect a businesses choice of supplier

A
  • Price
  • Customers
  • Quality
  • Cash flow
  • Speed
  • Reliability
  • Tradition
  • Location
  • Government policy
  • Payment and contract terms
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15
Q

How does price affect a businesses choice of supplier

A
  • Cheaper suppliers increase profit margins and allow a business to reduce its prices, which is important in a competitive market
  • Selecting a cheaper supplier may affect the quality of the good or service
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16
Q

How does quality affect a businesses choice of supplier

A
  • Good quality raw materials contribute to a good quality product and higher customer satisfaction
  • Improved quality usually results in higher prices being charged
17
Q

How does reliability affect a businesses choice of supplier

A
  • Knowing that the supplier will meet the deadlines and quality is important especially when using systems of JIT stock control
  • A supplier should deliver on time and meet quality requirements to ensure customer satisfaction
18
Q

What are the effects of having a bad supplier

A
  • Deliveries may be late
  • Products may be bad quality or have defects
  • Business may run out of stock or sell items which are not as good as promised
19
Q

What are logistics

A

A process which plans, implements, and controls the distribution and storage of goods and services from when they are received from the supplier to when they are delivered to the customer

20
Q

Give the general stages of a supply chain

A
  • Suppliers of raw materials
  • Manufacturers
  • Wholesalers/retailers
  • Customers
21
Q

What is supply chain management and what is its purpose

A
  • Ensures that the right quantity of goods are in the right place at the right time and these are provided at the right quality and at a price that represents value for money
  • This should create value for the customer and profit for the businesses within the supply chain
22
Q

What are the benefits of managing an effective supply chain and give examples

A
  • Increased efficiency e.g. order to dispatch times can be reduced
  • Lower unit costs; prices can be negotiated with suppliers to ensure that a business receives value for money
  • Competitive advantage; any cost savings can be passed onto customers in the form of lower prices, alternatively the business may have increased profit margins which could lead to improvements in efficiency in the future, e.g. improved customer delivery methods
  • Improved flexibility; members of the supply chain can work together to meet demand to ensure a streamlined process and fast production lines 24/7 (when appropriate
23
Q

What are the disadvantages of supply chain management

A
  • Quality can suffer if costs are driven down to low e.g. suppliers may not be dedicated if they are not paid a fair price
  • Sophisticated IT systems to monitor the supply chain can be expensive to implement
  • Reliance on other members of the supply chain means a business does not have full control over its operations
24
Q

What factors make an effective supply chain

A
  • Planning
  • Procurement
  • Communication
  • Lean production
  • Changing transportation
25
Q

How does planning make a supply chain effective

A

Ensures sales forecasts are accurate to ensure the right quantity of goods and services are available

26
Q

How does procurement make a supply chain effective

A

Getting the best suppliers will result in good value and reliable supplies of the right quantity

27
Q

How does communication make a supply chain effective

A

Coordination and communication with suppliers and logistics will ensure goods arrive on time and do not delay production processes

28
Q

How does lean production make a supply chain effective

A

Lean production or removal of waste can result in a streamlined process which is faster, has lower costs, improved quality, and better reliability. In manufacturing businesses, methods such as total quality management and just in time can help

29
Q

How can changing transport make a supply chain effective

A

Logistics need to be constantly reviewed as new transport options become available and different distribution routes are required

30
Q

What one thing does a business need to do regularly to maximise efficiency

A

Review its systems/supply chain management

31
Q

Why may deciding which supplier to work with have trade offs

A
  • Businesses may have to choose between better quality or lower prices
  • It may cost more to get better quality, but this may save money later on as it may lead to fewer problems with consumers
  • It may cost more to get suppliers quicker

Business Studies AQA GCSE Flashcards (29 decks)

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