Working with Suppliers Flashcards
All 16 cards in this deck
What is buffer stock?
The minimum level of stock a business keeps as a safeguard against late deliveries or a sudden rise in demand.
What is just in time (JIT) stock control?
A system of regular, frequent deliveries of only the stock needed for immediate production, holding no buffer stock.
Give one advantage of just in time (JIT) stock control.
Less stock is held, so warehousing costs are reduced and net cash flow improves. (Also: stock matches demand, so no excess stock sold off at a discount.)
Give one disadvantage of just in time (JIT) stock control.
If suppliers deliver late there is no buffer stock, so production stops and customer orders are not met. (Also: no bulk buying, so unit costs of materials rise.)
What is procurement?
Buying in the right supplies from the right supplier — it involves building a relationship with the business's suppliers.
Give three factors a business considers when choosing and working with a supplier.
Any three of: quality; delivery (cost, speed, reliability); availability; cost; trust.
Give one benefit to a business of having a good relationship with its suppliers.
Suppliers may give discounts on raw materials, so variable costs per unit fall and profit per item rises. (Also: faster, more reliable delivery; better trade credit terms.)
How can an unreliable supplier affect customer satisfaction?
Deliveries arrive late, so the business runs out of stock and cannot meet orders — customers are disappointed and switch to rivals, reducing revenue.
How can improving logistics reduce a business's costs?
Stock is moved and delivered more efficiently with less waste, so the cost of producing each product falls and the profit margin rises.
True or false? A poor relationship with suppliers can reduce a business's net cash flow.
True. The business may not get good trade credit terms, so it has to pay suppliers earlier.
What is logistics?
Organising how raw materials and goods are transported: getting supplies into the business and finished products out to its customers.
On a bar gate stock graph, what is the reorder level?
The stock level at which the business places a new order with its supplier.
What is lead time?
The time between a business ordering stock and that stock being delivered.
On a bar gate stock graph, what is the maximum stock level?
The largest amount of stock the business is able to hold at any one time.
Give two things a business needs for just in time (JIT) stock control to work.
Any two of: reliable suppliers it has a close relationship with; an efficient, well-planned production process; steady demand that can be forecast accurately.
How can a supplier affect a business's reputation?
Customers judge the business by what they receive, so late deliveries or poor-quality supplies from a supplier reflect badly on the business that uses them.