3.4.5- Making operational decisions to improve performance: managing inventory and supply chains Flashcards
3.4 Operational management
What is lead time?
The amount of time taken between ordering stock and the stock being delivered
What is buffer stock?
The amount of stock held in case of unexpected events or orders that can still be met.
What is re-order level?
The inventory point at which a new order must be placed to replenish stock before it runs out.
What can businesses do to match supply to demand?
- Have peripheral workers deal with changes
- Outsourcing
- Mass customisation
How can peripheral workers deal with changes?
They can help a business deal with unforseen or forseen increases in demand. E.g. supermarkets employing seasonal workers for high chirstmas demand.
What are peripheral workers?
Employees who are not essential to the business, usually temporary, part time or zero-hours
How can outsourcing help meet demand?
- If the busienss doesnt specialise in something but need it, they can outsource
- More people/businesses can increase supply
What is outsourcing?
When businesses contract out some activites to other businesses rather.
What are the strengths of outsourcing?
They can benefit from specialised knowledge from the business they outsource to.
What are the weaknesses of outsourcing?
The business doesnt have control over the quality of the outsourced work.
How can mass customisation help meet demand?
- Allows an increase in customer choice
- More catered to customers needs and wants
What is mass customisation?
Products that are made after ordered to meet individuals needs
What is a strength of mass customisation?
- Can meet consumer needs
- Can lead to a competitive advantage
What is a weakness of mass customisation?
- Can be difficult to make efficient and profitable
- Can be expensive and take time to be delivered
What factors impact the choice of suppliers?
- Price
- Payment terms
- Quality
- Capacity
- Reliability
- Flexibility
Why is price a factor when choosing a supplier?
- 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
Why is payment terms a factor when choosing a supplier?
- To know how much they’re payng and how much they will recieve
- New companies pay up front
- Established companies will be given credit
Why is quality a factor when choosing a supplier?
- Needs to be consistant
- Poor quality will affect business not supploier
Why is capacity a factor when choosing a supplier?
- Businesses pick suppliers who can meet any peaks of demand
- Big companies buy in bulks for a discount
Why is reliability a factor when choosing a supplier?
- If a supplier lets a firm down, firms cannot supply customers
- Suppliers need high-quality products on time
Why is flexibility a factor when choosing a supplier?
- Suppliers need to respond easily to changes
- Flexible suppliers can adapt to meet other companiy requirments
How can companies build strategic relationships with their suppliers?
- 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
How can companies improve their supply chain?
- 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.
How can businesses supply chain adapt to a demand increase?
- Hire more perpheral workers
- outsource
- Temporarily increase capacity utilisation
- Supply sources may have to supply raw materials
