Procurement Flashcards
what is procurement?
Procurement is the whole process of dealing with suppliers and involves selecting suppliers, establishing the terms of payment and negotiating the contract.
Why does stock have an opportunity cost?
It could have been used elsewhere, in the bank accruing interest, spent on motivating workers etc.
What was JIT all about and were the costs and benefits?
Stock arrives just when it’s needed.
Less money tied up - lower opportunity cost
Fewer material to be damaged or stolen
Less storage space needed
More deliveries need to be made - environment
Delays from suppliers have large impacts
What do you think is the difference between JIT and Just-in-case (JIC)?
JIC holds stocks in case there is a delay from supplies or a sudden unexpected increase in demand - also referred to as a buffer.
Why would a JIC approach be beneficial?
Always have stock available
Buy in bulk (purchasing economies of scale)
Fewer deliveries BUT high storage costs!
What things will businesses buy from suppliers?
General items used to keep the business going such as energy, utilities
Materials used in the production process
Major purchases used to create the production process such as equipment
How can suppliers affect businesses?
Do suppliers deliver on time - reliable
Can suppliers produce and deliver quickly
Quality of the suppliers products
Is the supplier efficient - reduce costs
What is a supply chain?
This refers to all the businesses, people and activities that take part in the production processes from the start until it gets to the customer.
