Role Of Procurement Flashcards
Just in time method of stock requirements:
Requires - excellent communication with suppliers as stocks must be delivered frequently and businesses to trust their suppliers to deliver correct materials, as the correct time.
Disadvantages if JIT method of stock control
Business may have to pay for more frequent deliveries of small quantities of supplies, which may increase costs.
Business may not benefit from purchasing economies of scale. If business supplies in large quantities - they can negotiate a lower price per unit
Benefit of JIT stock control
Business holds little to no stock. Doesn’t require employees to hold and manage stock.
Business has less of its money tied up in stock - money can be used for other purposes
Business doesn’t risk stock becoming out of date or stolen.
Just in case
Involves holding stock just in case there is a sudden delay from suppliers or increase in demand
Buffer stocks
The minimum amount of stock held by a business to ensure production can continue normally
JIC adv vs disadv
Dis - has to pay storage costs.
Adv - may recieve fewer deliveries of stock - reducing costs
May also receive purchasing economies of scale.
Factors affecting the choice of the supplier
Price
Quality
Reliability
Price charged by suppliers
If lower priced but not compromising too much in quality - attractive. Cheap suppliers - unit costs reduced profits - higher.
Quality of suppliers products
Business may not be able to meet customer needs if quality of inputs are inadequate.
Reliability of suppliers
Using suppliers that deliver right inputs right quantities at right time - important for business. Just in time.
What is procurement?
Also called purchasing and involves selecting a supplier, establishing terms of payment and negotiating a contract.
What’s a supply chain?
Refers to all the businesses, people and activities that take part in the production process from the start until product gets to customer.
Effect of procurement?
Buys supplies which include electricity gas water component of raw materials used in production.
Logistics
The movement of goods, services and information throughout the production process
Effect of logistics
Managers have to ensure that they have the right materials and people in the right place and the right time. As production gets more global, challenge of managing logistics gets greater.
The relation ship between reduced cost of supplier and quality of the service
Low prices - procure suppliers cheaply. Low unit cost - sell product for cheaper and win more customers, make more market share - higher profit
Lower quality - supplier may Laos be less efficient and slower at delivering. Customers feel bad quality - dissatisfied, lost sales.
Benefits of managing an effective supply chain:
Cost can be kept to a minimum
Unnecessary waste eliminated - streamlined process
Customers receive best possible products and service.
