operations - the role of procurement Flashcards
What are the 2 methods of stock control?
JIT and JIC
What does JIT stand for?
Just in time.
What does JIC stand for?
Just in case.
Give two factors which will influence whether a business chooses to use JIT or JIC stock control.
- The nature of the market
- The product
- The businesses’ objectives
What is JIT stock control?
When a business keeps stock to a minimum by ordering products only when they need them.
Give 2 advantages of JIT stock control.
- Reduces warehousing costs
- Reduces waste
- Less money tied up in stock
Give 2 disadvantages of JIT stock control.
- Dependent upon a good relationship with suppliers
- Business loses out on purchasing economies of scale
- More frequent deliveries
- Cannot meet unexpected increase in demand
What is JIC stock control?
A method of operating a production and distribution system with buffer stocks of item.
Give 2 advantages of JIC.
- Can meet unexpected increase in demand
- Benefit from purchasing economies of scale
- Stops customers going to competitors
Give 2 disadvantages of JIC.
- Stock can be wasted if not all sold
* Costly to store items
What is buffer stock?
Extra stock of items (used in JIC).
What are the 3 factors which affect a business’ choice of supplier?
- Price
- Quality
- Reliability
Why would a business let price influence their choice of supplier?
Can charge a lower price or enjoy higher profit margins.
What is a potential drawback of a supplier which charges low prices?
Low prices could mean sub-standard quality.
Why would a business let quality influence their choice of supplier?
The quality will usually have a direct effect upon the quality of the finished product.
What is a potential drawback of a supplier which has low quality?
It will decrease operational efficiency if goods have to be remade.
Why would a business let reliability influence their choice of supplier?
A business must consider if it is able to make enough of a good to meet demand.
What is a potential drawback of a supplier which is not reliable?
If business cannot meet customer demand, they will lose their custom to competitors.
What is procurement?
The finding, purchasing or acquisition of goods and services from suppliers.
What is logistics?
The movemtn of good and services from one part of the supply chain to another.
In what 2 ways does having effective procurement and logistics affect a business.
- Increases efficiency
* Lower unit costs
How does having effective procurement and logistics systems in place increase efficiency?
The business will have the supplies it needs at the right time, so there will be no breaks in production.
How does having effective procurement and logistics systems in place reduce unit costs?
It gets supplies at the best price so the firm can make more profit on each item.
What is a supply chain?
The network between a company and all its suppliers in the production and distribution of a good or service.
What are the 4 typical members of a supply chain?
Suppliers, manufacturers, distributors and retailers.
Give 2 benefits of managing an effective supply chain.
- Good relationship with suppliers
- Finding the best price and value
- Reducing waste and unnecessary costs
