Procurement Flashcards
What do you think procurement means?
Procurement is the whole process of dealing with suppliers and involves selecting suppliers, establishing the terms of payment and negotiating the contract.
All businesses hold stocks of some form. What do you think are the different types of stock a business may hold?
Day-to-day supplies - paper and pens
Raw materials Components
Semi-finished products Finished products
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 meant by logistics?
● The movement of goods, services, information and money throughout the production process.
● It involves managing and ensuring everything is in the right place when it should be (coordination).
What trade offs are in the supply chain?
Deciding which supplier to use will have trade offs, higher quality means higher cost, or it may cost more to get suppliers quicker etc.
