4.5 managing inventories + supply chains

Question 1

define: Inventory

Answer 1

the stock that a business holds

Question 2

what are the 3 types of inventory?

Answer 2

1. Inventory of supplies
2. Inventory of works in progress
3. Inventory of finished goods

Question 3

what is Just in time?

Answer 3

Stock is ordered just as it is needed

Question 4

what is Just in case?

Answer 4

Stock is stored on location

Question 5

what is Buffer stock?

Answer 5

Minimum amount of stock is kept on location at all times

Question 6

Features of holding inventory: Costs

Answer 6

• Storage costs
• Security costs
• Opportunity costs
• Perishable goods may decline in quality and therefore value

Question 7

Features of holding inventory: Benefits

Answer 7

• Can respond to customer orders quickly
• Production can take place immediately
• Making production smoother (less wait times)

Question 8

define: stock rotation

Answer 8

Using the oldest stocks first, a process also known as first in first out (FIFO). Firms without perishable stocks can use last in first out process (LIFO).

Question 9

define: stock wastage

Answer 9

Wastage is a cost to the firm through paying for stock that cannot be used.

• wastage can come from off cuts, reworking items not produced properly first time and defective products that cannot be rectified.

Question 10

POTENTIAL PROBLEMS WITH INVENTORY CONTROL:

Answer 10

1. Supplies are delayed and do not arrive on time - in this circumstance the business will use buffer stock for as long as possible
2. The usage rate of stock is faster than usual - perhaps due to an increase in demand
3. There is a failure to reorder inventory - increasingly, orders are done automatically but in some areas this is still done manually and can be forgotten.

Question 11

What can businesses do to match supply to demand?

Answer 11

• Flexible workforce - multiskilled employees. part time or temporary staff -> Part time staff work less than a full working week ie 20 hours and temporary staff work for a limited period of time summer/Xmas
• Queuing systems or waiting lists - NHS
• Outsourcing production
• Increasing prices
• Producing to order

Question 12

What is the supply chain?`

Answer 12

refers to all of the providers of resources (such as money, people, finance, machinery and equipment) at different stages of the operations process.

Question 13

DECISIONS TO BE MADE IN THE SUPPLY CHAIN:

Answer 13

• What to produce yourself, what to buy from others
• Which other businesses to work with
• Long standing relationships with one supplier? Or getting different suppliers to compete for the business regularly
• Setting out the terms and conditions of the supplier relationship i.e penalties
• Getting assurances from their supplier that they treat workers fairly and where they get their resources from
• Centralised or decentralised purchasing i.e do all offices get their supplies from the same place or are they allowed to choose?

Question 14

define lead time

Answer 14

The amount of time between reaching reorder level and when the stock arrives

Question 15

define reorder quantity

Answer 15

Amount a business needs to take inventory from buffer to full

Question 16

define reorder level

Answer 16

Quantity of inventory a business will place a stock order at

Question 17

INFLUENCES ON THE CHOICE OF SUPPLIERS

Answer 17

1. The costs of materials and the quality
2. Dependability
3. Ethical considerations

Question 18

define: social responsibility

Answer 18

Obligation to look after the society/ community as a whole