Managing Innventory And Supply Chains

Question 1

Why is managing the amount of inventory held is important

Answer 1

• Holding inventory uses up resources.
• Holding inventory has an opportunity cost: that is the money invested in producing products could have been used for something else.
• Inventory may go out of date and become worthless if held for too long.

Question 2

The key elements of inventory control charts

Answer 2

• The buffer inventory- This is the minimum amount of inventory a business wants to hold.
• The lead time- This is how long it takes from an order being placed with suppliers and the items arriving.
• The re order level- This is the level at which a new order must be placed for suppliers.
• Re order quantities- This is the amount a manager orders of a particular item. It might depend on factors such as the cost and the ease of storage and the usage rate.

Question 3

How can problems with inventory control arise

Answer 3

• Suppliers are delayed and do not arrive on time.
• The usage rate is faster than usual.
• There is a failure to reorder inventory.

Question 4

To match supply to demand what methods might an operations manager adopt

Answer 4

• Employing a flexible workforce.
• Using queuing systems or introducing waiting lists to manage.
• Outsourcing production to other businesses to meet high levels of orders.
• Increasing prices to reduce demand.
• Accepting orders to produce for others.
• Producing to order.

Question 5

Managing a supply chain involves making decisions about what

Answer 5

• What to produce yourself and what to buy from others.
• Which other businesses to work with.
• A supplier strategy.
• Setting out the terms and conditions of the supplier relationship.
• Deciding on the assurances from the supplier on their operations.
• How much direct involvement to have with suppliers.
• How centralised purchasing should be.

Question 6

What will effective management of the supply chain ensure

Answer 6

• The right supplies arrive on time.
• A fair price is paid for the items.
• The products are produced in a way which is acceptable to the business.

Question 7

What will the way in which the supply chain is managed affect

Answer 7

• The extent to which suppliers meet the requirements of the business reliability.
• The costs of the business.
• The ability of the business to be flexible to customer requirements.

Question 8

Influences on the choice of suppliers

Answer 8

• The costs of materials and quality.
• Dependability.
• Ethical considerations.

Question 9

What are the benefits of outsourcing

Answer 9

• It enables the business to make use of specialist skills and services, this may mean they get a better quality of work provided more efficiently.
• It can increase the capacity of the business by getting some aspects of its provision provided by others.

Question 10

What are the drawbacks of outsourcing

Answer 10

• A business will be affected by the work undertaken by other businesses in terms of the costs and quality of their suppliers.
• A business may also be held accountable for the actions of its suppliers.
• A business will have to pay enough for the products for the supplier to make a profit.