3.4.5- Making operational decisions to improve performance: managing inventory and supply chains

Question 1

What is lead time?

Answer 1

The amount of time taken between ordering stock and the stock being delivered

Question 2

What is buffer stock?

Answer 2

The amount of stock held in case of unexpected events or orders that can still be met.

Question 3

What is re-order level?

Answer 3

The inventory point at which a new order must be placed to replenish stock before it runs out.

Question 4

What can businesses do to match supply to demand?

Answer 4

• Have peripheral workers deal with changes
• Outsourcing
• Mass customisation

Question 5

How can peripheral workers deal with changes?

Answer 5

They can help a business deal with unforseen or forseen increases in demand. E.g. supermarkets employing seasonal workers for high chirstmas demand.

Question 6

What are peripheral workers?

Answer 6

Employees who are not essential to the business, usually temporary, part time or zero-hours

Question 7

How can outsourcing help meet demand?

Answer 7

• If the busienss doesnt specialise in something but need it, they can outsource
• More people/businesses can increase supply

Question 8

What is outsourcing?

Answer 8

When businesses contract out some activites to other businesses rather.

Question 9

What are the strengths of outsourcing?

Answer 9

They can benefit from specialised knowledge from the business they outsource to.

Question 10

What are the weaknesses of outsourcing?

Answer 10

The business doesnt have control over the quality of the outsourced work.

Question 11

How can mass customisation help meet demand?

Answer 11

• Allows an increase in customer choice
• More catered to customers needs and wants

Question 12

What is mass customisation?

Answer 12

Products that are made after ordered to meet individuals needs

Question 13

What is a strength of mass customisation?

Answer 13

• Can meet consumer needs
• Can lead to a competitive advantage

Question 14

What is a weakness of mass customisation?

Answer 14

• Can be difficult to make efficient and profitable
• Can be expensive and take time to be delivered

Question 15

What factors impact the choice of suppliers?

Answer 15

• Price
• Payment terms
• Quality
• Capacity
• Reliability
• Flexibility

Question 16

Why is price a factor when choosing a supplier?

Answer 16

• Firms decide how much they’re willing to pay and if cost is high priority
• The cheaper a supplier is, the more value added to the final product, however there may be low quality

Question 17

Why is payment terms a factor when choosing a supplier?

Answer 17

• To know how much they’re payng and how much they will recieve
• New companies pay up front
• Established companies will be given credit

Question 18

Why is quality a factor when choosing a supplier?

Answer 18

• Needs to be consistant
• Poor quality will affect business not supploier

Question 19

Why is capacity a factor when choosing a supplier?

Answer 19

• Businesses pick suppliers who can meet any peaks of demand
• Big companies buy in bulks for a discount

Question 20

Why is reliability a factor when choosing a supplier?

Answer 20

• If a supplier lets a firm down, firms cannot supply customers
• Suppliers need high-quality products on time

Question 21

Why is flexibility a factor when choosing a supplier?

Answer 21

• Suppliers need to respond easily to changes
• Flexible suppliers can adapt to meet other companiy requirments

Question 22

How can companies build strategic relationships with their suppliers?

Answer 22

• Linked networks: Shared IT systems- can improve efficieny, cut costs, improve customer value
• Innovation: Companies can work wit suppliers, sharing ideas and save money- can develop new product, alter supply network

Question 23

How can companies improve their supply chain?

Answer 23

• Only buy the supplies the company really needs
• Know the difference between a strategic supplier (provides goods and services) and a non-strategic supplier (provides low value supplies).
• Limit the nb of sources they buy from- can be cost effective, but its dangerous to only have one
• Having an alternate supply source ready just in case.

Question 24

How can businesses supply chain adapt to a demand increase?

Answer 24

• Hire more perpheral workers
• outsource
• Temporarily increase capacity utilisation
• Supply sources may have to supply raw materials