Role Of Procurement Flashcards
Pros of having stocks
Stocks allow a business to operate and produce. Having stocks also means you can show customers your of products
Cons of having stocks
All the money that is invested in stocks could be in the bank gaining interest, therefore having an opportunity cost. Being unable to sell stock could mean having to dispose of or discount products; costs profit.
Just in time stock control
Minimises the amount of stock held, stock arrives just in time to be used in the production process.
Pros of JIT stock control
Means less money is tied up, a lower opportunity cost. Less space needed to warehouse stocks so this land can be used otherwise or sold off. Fewer materials to be damaged (or stolen) while waiting to be used
Cons of JIT stock control
More deliveries; environmental impact, costly. Any delays from suppliers will halt production. Less likely to recieve purchasing economies of scale
Pros of Just-in-case stock control
Holding stocks in case they need to be used. Likely for a business to buy in bulk meaning lower delivery costs and possibly leading to purchasing economies of scale.
Cons of Just in case stock control
Inefficient in terms of storing cost. Opportunity cost of having money invested in stocks. Stocks may need to be discounted or disposed of. Cant be sold if out of date.
Procurement
(For purchasing) involves selecting suppliers, establishing the terms of payment and negotiating a contract. A business may have specialist managers to make sure money is spent wisely with the right suppliers.
Supply chain
Refers to all the businesses, people and activities that take part in the production
Importance of suppiers
Business needs stock to manage customer demands and a reliable supplier is needed for this. If a supplier is quick and reliable it wont need to hold as much stock. A good quality supplier will help a business’ reputation as they won’t have problems defects or returns. An efficient supplier allows a business to reduce costs and sell for lower prices or with higher profit margins
Factors influencing choice in supplier
Costs
Quality
Range of products
Speed of delivery
Flexability
Reliability
Payment terms
Contract terms
Logistics
The movement of goods, services, information and money throughout the production process. Ensuring everything’s in the right place at the right time.
Trade-offs in the supply chain
Might choose speed with higher costs or lower costs but slow delivery, for example.
Buffer stock
An amount of stock kept in case of an increase in demand or in case of issues with suppliers.
