4.5 - Managing inventory and supply chains

Question 1

State three ways of managing supply.

Answer 1

Outsourcing.

Flexible workers - Supply can be increased using part-time and temporary workers who can support the business flexibly when demand increases.

Minimising waste.

Question 2

What is the impact of producing to order?

Answer 2

Waste is minimised.

Question 3

Why is flexibility important in a businesses operations?

Answer 3

The operational objective of flexibility is important because flexibility allows businesses to respond to changes in demand with little notice.

Question 4

What is an inventory control diagram?

Answer 4

An inventory control diagram shows the maximum stock level that a business is willing to operate at.

An inventory control diagram shows the re-order level which is the point at which further stock is ordered.

An inventory control chart shows the buffer stock which is the spare stock a business holds in case there is an unexpected increase in demand.

An inventory control chart shows the lead time which is the time taken for the stock to arrive after it is ordered

Question 5

What is outsourcing?

Answer 5

Outsourcing is when a business uses another business to make part of its product or provide part of its service.

Question 6

What are the advantages and disadvantages of outsourcing?

Answer 6

Advantages:
Outsourcing can provide cost savings because a third-party business may be able to create or produce a product or service at a lower cost than the original business.

Disadvantages:
Outsourcing can lead to quality problems if the business that wins the outsourcing contract does not uphold the same quality standards.
The business may lose its influence on quality control.