Business - Supply Chains


Supply Chains

  • Input - what is put in, taken in, or operated on by any process or system
  • Output - the amount of something produced by a person, machine or industry
  • The supply chain is the complete sequence of stages involving in transforming raw materials into finished goods and getting them into the hands of customers.
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What businesses would you find in the supply chain

  • Farm/Mine
  • Supermarket/Shop
  • Transport
  • Manufacturer
  • Customers
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Supply Chain Stages

Supplier --> Manufacturer --> Distributor --> Retailers --> Customer

  • All members need to be dependable
    • need to be flexible on time taken to supply and volume of supply
      • help manage sudden changes in demand
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Understanding Different Suppliers

  • Strategic suppliers - provide goods or services that are essential for the business e.g., high value raw materials
  • Non-strategic suppliers - provide low value supplies, e.g., office stationary 
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Influences of Supplier Choice Part 1

  • Cost
    • cheaper supplies = higher profit margins
  • Quality
    • cheaper = may mean poorer quality
  • Reliability 
    • supplies at the right price and high quality may be of little use if they arrive late
    • Lead time = the time between ordering products and receiving them
  • Frequency
    • how often they can deliver to use, type of business + production system used = how many deliveries required
  • Flexibility
    • short lead time is key
    • meet changes in demand
  • Payment Terms
    • this gives time for goods to be sold, providing cash to make it easy to pay bills
    • most business transactions paid in credit
  • Demand
    • how much is wanted
      • Peak = lots of people want it
      • Trough = few or no people want it
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Influences of Supplier Choice Part 2

  • Supply to demand - the quantity needed to meet demand
  • Outsourcing - employing another company to make your product
  • Peripheral workers - people who are employed on a temporary basis to meet peaks in demand
  • Mass customisation - when a product is paid for by the customer before it is manufactured
  • A well-managed supply chain improves operational performance and efficiently matches supply of demand
    • productivity increases = costs will fall
    • much better position to meet customer expectations
    • when demand increases supply chain can adapt
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Supply Chain Efficiency

  • Supply Chain Efficiency = the standard of performance of the organisation
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Supply Chain Efficiency - Lean Production Methods

An approach to management that focuses on cutting out waste whilst ensuring quality. It can be summarised as: doing simple things well, doing things better, involving employees in a continuous process of improvement, and as a result reducing waste and therefore costs.

Examples of waste in business include: over-production, waiting time, holding too much stock, and defects in products

Main methods of lean production include: time-based management, simultaneous engineering, just-in-time production, cell production, kaizen (continuous improvement)

Simultaneous Engineering - an approach to project management that helps firm develop and launch new products more quickly. All parts of the project are planned together. Everything is considered simultaneously.

Cell production - a form of team working where production processes are split into cells. Each cell is responsible for a complete unit of work.

Effective lean production requires:

  • good relations with suppliers
  • committed, skilled and motivated employees
  • a culture of quality assurance
  • trust between management and employees
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Time-based Management

A general approach that recognises the importance of time and seeks to reduce the level of wasted time in the production process.

Requirements: flexible production methods (able to change products quickly, can change production volumes/runs, trained employees (multi-skilled staff, trust between workers and managers)

Just in time - the business gets its deliveries exactly when it needs them and if a delivery is even slightly late their product will be out of stock and they may lose sales, but less needs to be spent on warehouse space. Inputs only arrive when they are needed.

Just in Case- the business will generally hold some stock just in case a delivery is late. More needs to be spent on warehouse space but it is less likely they will run out of stock and lose sales.

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Ways supply chains can increase efficiency

Developments in IT can make companies more efficient: computer-aided design, computer-aided manufacturing, 3D printing, computers make stock control easier, spreadsheets are very useful in finance and marketing departments, emails are fast and efficient at communicating, the internet allows businesses to reach a huge customer base 

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Advantages and Disadvantages of Capital Production

  • Capital Production
    • Uses more machinery and relatively few workers. Large firms tend to be more capital-intensive than smaller companies. The rise in cost of labour can also cause companies to switch to capital-intensive methods of production.
    • Advantages:
      • cheaper than manual labour in the long term
      • machinery often more precise than human workers, which might lead to more consistent quality levels
      • machinery is able to work 24/7
      • machines are easier to manage than people
    • Disadvantages
      • high set-up costs
      • machines are usually only suited to one task, which makes them inflexible
      • if machinery breaks down, it can lead to long delays
      • the fear of being replaced by a machine can cause workers' motivation to decrease
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Advantages and Disadvantages of Labour Production

  • Labour Production
    • Uses more workers and less machinery. In countries where labour is cheap, labour-intensive methods of production are common.
    • Advantages
      • people are flexible and can be retrained
      • cheaper for small-scale production
      • labour-intensive methods are also cheaper where low-cost labour is available
      • workers can solve any problems that arise during production and suggest ways to improve quality
    • Disadvantages
      • harder to manage people than machines
      • people can be unreliable - they can get sick
      • people can't work without breaks or holidays
      • wage increases mean that the cost of labour increases over time
      • labour costs as a % of turnover are high
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