3.2 - the role of procurement Flashcards
what is the role of procurement?
the process of managing the ordering+ receipt of goods/services in the business
what does it mean to manage stocks?
holding stock (any supplies, raw materials, semi-finished components)
what is purchasing?
the process of buying goods/services needed for production to take place
what is JIT control?
approach attempting to limit stock being held
what is JIC control?
the approach of holding all stocks incase they are needed (also known as buffer stock to protect from any interruptions/surges)
What are the benefits of JIT?
less storage costs, more money not invested in stock, no waste, less chance of shrinkage or obsolesce
what are he issues with JIT?
with a big rush of orders, there will not be enough supplies, cant keep up with demand, lots of transport needed (big environmental impact), no economies of scale benefit as no bulk buying, mistakes cannot be changed, means the business relies on the suppliers
what are the benefits of JIC?
can handle mistakes/ changes in delivery easier, less reliant on suppliers, reduced price/benefits from bulk buying, keep up with demand
what are the drawbacks to JIC?
shrinkage + obsolence are big issues, paying for storage, cash flow, opportunity cost of getting rid of stock, wasted stock, more money invested in stock, additional admin costs to look after stock
what is obsolence?
stock becoming out of date
what is shrinkage?
stock being stolen
what is procurement?
selecting suppliers and establishing the terms of payment + negotiating contract
what is the supply chain?
all the businesses, activities and people that take part in the production process from start till customer receival
what factors contribute to choice of suppliers?
cost, quality, range of products supplied, speed of delivery, flexibility of supplier, reliability, reputation, payment terms/ contract terms
