The role of procurement - relationship with suppliers

Question 1

Procurement -

Answer 1

• the whole process of managing the ordering and receipt of goods/services in the business

Question 2

What procurement involves (6)

Answer 2

1. Deciding what is needed
2. Selecting suppliers
3. Terms of payment
4. Negotiating contracts between the business and its suppliers
5. Managing how goods are ordered and received
6. Managing logistics

Question 3

Supplier -

Answer 3

• business or individual that provides goods or services to a business

Question 4

Examples of suppliers (3)

Answer 4

1. Raw materials
2. Garments
3. Equipment

Question 5

Why is supplier important (5)

Answer 5

1. For a business to meet customer needs and wants they need to have an efficient ‘’supply chain’’
2. Suppliers determine many of the costs of a business
3. Suppliers are closely linked to product quality
4. Suppliers can be an important source of finance
5. For businesses that use just in time stock, effective relationships with key suppliers are essential

Question 6

Characteristics of an effective supplier (5)

Answer 6

1. Cost
2. Quality
3. Delivery
4. Availability
5. Trust

Question 7

Factors that will affect a choice of suppliers (11)

Answer 7

1. Cost
2. Availability
3. Government policy
4. Delivery
5. Tradition
6. Reliability
7. Speed
8. Cash flow
9. Quality
10. Trust
11. Customers

Question 8

Logistics -

Answer 8

• a process which plans, implements and controls the distribution and storage of goods and services from when they are received from the supplier to when they are delivered to the customer.
• is often seen as the transportation of raw materials and finished goods, but as with procurement it is a process not just a single activity.

Question 9

What is the supply chain (4)

Answer 9

1. Suppliers of raw materials
2. Manufacturers
3. Wholesalers/retailers
4. Customers

Question 10

Supply chain management and supply decisions:

Answer 10

Ensures that the right quantity of goods are in the right place at the right time and these are provided at the right quality and at a price that represents value for money.
This should create value for the customer and profit for the businesses within the supply chain.

Question 11

Benefits of effective supply chain management and supply decisions (4)

Answer 11

1. Improved reputation (if deliveries arrive on time, exactly when they are needed, the business will gain a strong reputation for reliability and a high quality service and is likely to receive repeat orders)
2. Increased efficiency (if production can be completed more quickly or order to despatch times are reduced)
3. Lower unit costs (prices can be negotiated with suppliers to ensure that a business receives value for money; any cost savings can be passed onto customers in the form of lower prices; alternatively the business can enjoy increased profit margins which could lead to future improvements in efficiency)
4. Customer satisfaction (this can result when the right products, at the right quality (which reflects the price paid) are delivered when they are expected; this will encourage positive feedback and brand loyalty. With the increasing use of digital technology, customers have more information regarding delivery times and the status of any orders)

Question 12

Effective supply chain management

Answer 12

1. Planning : (ensure sales forecasts are accurate to ensure the right quantity of goods and services are available)
2. Procurement: (getting the best suppliers will result in good value and reliable supplies of the right quality)
3. Communication: (co-ordination and communication with suppliers and logistics will ensure goods arrive on time and do not delay production processes)
4. Removal of waste: (removal of waste can result in a streamlined process which is faster, has lower costs, improved quality and better reliability. In manufacturing businesses, methods such as quality assurance and just in time can help)
5. Changing transportation: (logistics need to be constantly reviewed, as new transport options become available and different distribution routes are required)

Question 13

Issues to consider when making supply decisions (3)

Answer 13

1. Quality can suffer if costs are driven down too low (e.g. suppliers may not be dedicated if they are not paid a fair price)
2. Sophisticated IT systems to monitor the supply chain can be expensive to implement
3. Reliance on other members of the supply chain means a business does not have full control over its operations