Operations Flashcards
JIC vs JIT
JIC - cost of holding buffer stock (e.g. warehouses); stock may perish/be damaged/become obsolete; spare stock to satisfy sudden demand (no time wasted waiting)
JIT - reduced inventory holding costs (more cashflow); cost of more frequent deliveries (could face delays - need reliable supplier); lost purchasing economies of scale (no bulk discounts)
What is JIT more suited for?
mass produced products - hand made products take longer to complete, so may need spare stock available to satisfy demand and meet delivery times
if there is regular demand - can’t satisfy sudden demand
Should a business choose a cheaper supplier?
pros - unit costs are reduced, can be passed on to customers through lower prices; increased ability to compete on price, could increase market share
cons - could lead to poor quality, may increase costs as have to replace faulty goods, impacts reputation; could lose customers
Factors that affect the choice of supplier for a mass car manufacturer:
Price - operates in a competitive market, if manufacturer can keep costs down, can pass on to consumers in the form of lower, more competitive prices, which would increase demand
Quality - important in terms of safety and image; poor quality can damage reputation; could lead to a fall in sales
Reliability - need continuous production, so delays could halt production, which increases costs and lowers efficiency, business may struggle to compete on price
Factors that affect the choice of supplier for a national supermarket:
Price - operates in a competitive market, businesses need to be able to rival/undercut competitors, so keeping costs down could increase sales
Quality - poor quality will deter customers, will by elsewhere; quality should reflect the price charged by business
Reliability - if shelves are empty, customers will go elsewhere; stock needs to be constantly replenished to satisfy customer needs, and gain customer loyalty
Procurement (or purchase)
involves selecting suppliers, establishing the terms of payment and negotiating the contract
Logistics
the movement of goods or services, information and finance throughout the production process
Supply chain
is all the businesses, people and activities involved in the production process from the start until it reaches the customer
Why does managing an effective supply chain lead to a reduction in costs?
- working with suppliers, will help to reduce delays in the production process, can increase efficiency/reduce costs
- working with suppliers, will help to ensure that the quality standard required is met consistently, reduces waste and costs
- working with suppliers to negotiate a suitable price, will reduce costs, can lead to greater cash flow
Why does managing an effective supply chain lead to the business getting good and services for the best price and value?
- business may choose a more expensive supplier, as quality may be more consistent/greater, could lead to lower overall costs for business (e.g. waste), more value for money
Depends on - what business environment/market the business operates in
Why does managing an effective supply chain lead to a reduction in waste?
- if reliable suppliers are chosen, they’re less likely to waste employee resources (e.g. time), as there would be fewer/no delays, increasing productivity and therefore efficiency
- working with JIT suppliers, will reduce waste, inventory less likely to become obsolete/damaged/perish; space is not wasted, less money tied up in stock, more cash flow
Why does managing an effective supply chain lead to faster production times?
- suppliers selected are reliable; so fewer/no delays in production process; leading to faster production times
- more efficient use of resources (e.g. people and machinery), increases productivity, so faster production times achieved
