The Role of Procurement Flashcards
All 20 cards in this deck
What is just-in-time (JIT) stock control?
A stock control method where a business receives regular deliveries of only what is needed before existing raw materials run out, with no buffer stock held.
What is just-in-case (JIC) stock control?
A stock control method where a business holds excess buffer stock so stock is always available if required.
What is buffer stock?
A minimum level of stock a business holds at all times to reduce the risk of running out if deliveries are late.
What is lead time?
The time it takes from ordering stock for it to arrive.
Give two drawbacks of using just-in-time (JIT) stock control.
A fault or delay in orders can slow or halt production; there is only limited stock to fall back on. (Also: frequent small deliveries at short notice, no bulk-buy discounts.)
Why might a business with perishable stock (e.g. fresh food with a one-month shelf life) avoid just-in-case stock control?
Unsold perishable stock would have to be thrown away, wasting capital that could have been spent elsewhere.
Which three key factors do businesses consider when selecting a supplier?
Price (cost), quality and reliability.
What does 'reliability' mean when judging a supplier?
Delivering on time, having stock available, and having the capacity to meet increases in demand.
Why does the quality of a supplier's materials matter to a business?
Better quality materials limit defects and returned items.
Why might a business choose a supplier that can provide a full range of the raw materials it needs?
Production runs smoothly with no products delayed, so the business can meet the demand of retailers and customers.
Why is a local supplier especially suitable for a business using JIT stock control?
Frequent local deliveries ensure stock arrives when needed and reduce lead time and delivery costs, so few materials need storing.
True or false? A business should always choose the cheapest supplier available.
False. Reduced costs must be balanced against quality and reliability, as poor quality or late deliveries harm service.
What is procurement?
Getting the right supplies from the right supplier, at the right price and at the right time.
What is logistics?
Making sure the correct products are procured and arrive when needed — involving transportation, storage and distribution.
What is a supply chain?
The process of developing, sourcing, producing and providing goods and services to consumers.
What is a unit cost?
The cost of producing one individual item.
How can delays in logistics harm a business?
They cost money and limit cash flow if products are damaged, lost or unavailable.
Give two features of effective supply chain management.
Working with suppliers so processes run efficiently and cost effectively; getting goods at the best price and value; cutting waste to create fast, streamlined production.
What is the benefit to customers of an effective supply chain?
More satisfied end consumers, with fewer complaints and lower returns rates.
True or false? Holding buffer stock ties up capital that could have been used elsewhere in the business.
True. Money spent on stock sitting in storage cannot be invested in other ways of increasing revenue, and storage costs rise too.