Working with Suppliers

Question 1

What are Suppliers

Answer 1

People responsible for providing goods or services to businesses

Question 2

Choosing effective suppliers

Answer 2

Before choosing suppliers businesses should set criteria for the selection process, identifying what are the most important factors them

• Price
• Payment Terms
• Quality
• Capacity
• Reliability Flexibility

Question 3

Choosing effective Suppliers - PRICE

Answer 3

Price is often a key consideration in choosing a supplier
-Keeps unit cost low, can either:-
-pass on savings to consumer in the form of lower prices
-enjoy higher profit margins
Businesses must however be careful that lower prices do not mean sub standard quality
Value for money is important

Question 4

Choosing effective suppliers - PAYMENT TERMS

Answer 4

• It is common place for suppliers to offer credit to its customers i.e. the option to receive the goods or services now but pay at an agreed point in the future
• Payment terms will vary depending upon the relative sizes of the firms and also nature of the product or service
• Payment terms can be
  
  • In advance
  • Upon delivery
  • Pre agreed credit terms

Question 5

Choosing effective suppliers - QUALITY

Answer 5

Quality will have a direct effect on the quality of the finished product

• One poor quality component will affect the whole product
• The quality may also impact upon the operational efficiency

Question 6

Choosing effective suppliers - CAPACITY and RELIABILITY

Answer 6

• Is the supplier able to produce enough to meet your demand
• Can you trust the supplier to deliver your order
• If not then how will this influence operations

Question 7

Choosing effective suppliers - FLEXIBILITY

Answer 7

• Flexibility is the ability to respond to change

- A business may consider the capacity utilisation of its suppliers

Question 8

The role that suppliers play in improving operational performances

Answer 8

• Unit cost
• Quality
• Capacity Utilisation