4 Managing Supply Chains 33 Flashcards
What are the influences on the choice of suppliers?
Cost Quality Reliability Frequency Flexibility Payment Terms
Cost…
Cheaper supplies mean higher profit, price is a key factor in the relationship between a firm and its suppliers
Large purchasers may almost be able to dictate the price to the suppliers as the quantities they purchase may account for most of the suppliers output
However for small businesses with limited purchasing power, the supplier may have the upper hand
Quality…
The cheapest supplier may be one with a poor reputation for the quality of its product or service. Choosing a supplier with quality problems is likely to lead to operational problems.
Poor quality supplies can lead to machinery breakdowns and poor quality output which will lead to worsening reputation
Reliability…
Its important that a supplier can offer reliability to the purchaser. Failure to deliver on time can stop a manufacturing process or leave shop shelves empty.
Frequency…
Firms selling fresh produce will need to ensure that they are using suppliers that can supply and deliver frequently . Makes sense to look for a local supplier - as they are far more likely to be willing to deliver with a greater level of frequency
Flexibility…
A flexible supplier should have the capacity to cope with widely varying orders. Probably the most common scenario is to ensure that the suppliers have the spare capacity available to cope with sudden rush orders.
Payment Terms…
Tesco doesn’t pay Heinz straight away, but is more likely to be paid 30 or more days. This gives time for the goods to be sold, providing the cash to make it easy to pay the bill.
But with small businesses Heinz will make them pay straight away .
What factors can cause sales to fluctuate?
Fashion
Temperature and Weather
Marketing activity
Competitors actions
What are the ways to match supply and demand?
Outsourcing
Hiring temporary and part-time staff
Producing to order
Outsourcing…
Means getting an outside company to produce for you
Valuable when there are predictable peaks in the workload / The downside is that when outsourcing is carried through, jobs are lost within the original company
When outsourcing risk that the contractor cares little for “your” customers and reputation / important to get contractor to sign up to a ““Service Agreement”” , this sets out exactly what quality standards are required
Hiring temporary and part-time staff…
It gives extra flexibility to an employer
Most tourist attractions keep very few full-time staff, relying instead on an army of summer temps to run their attractions
Using temporary and part-time staff can reduce the fixed salary cost of a company
But motivation, quality and consumer service issues may arise and the workforce may feel loosely engaged with the company
Producen to order…
The term “Mas Customisation” sums this up:
Production lines that combine the cost efficiency of mass production with the flexibility of tailor-making to each customers specific requirements
