Managing inventory and supply chains.

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  • Created by: hamishc
  • Created on: 17-04-16 14:18
What is managing inventory?
Keeping track of stock levels.
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Why do businesses prefer to hold less stock?
Storage costs (rent of warehouse, refrigeration, electricity), wastage costs ( stock is damaged over time, goes out of date), opportunity cost (cost of investing money in stock instead of something else).
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What is buffer stock?
The minimum level of stock needed so the business doesn't run out of raw materials.
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What does buffer stock depend on?
storage space available, kind of product (perishable?), rate at which stock is used, and lead time.
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What is lead time?
The time it takes for goods to arrive after ordering them from the supplier.
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How does lead time affect buffer stock?
The longer the lead time, the more buffer stocks.
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What is the re-order quantity?
The amount the company orders from its suppliers.
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Equation for re-order level?
Re-order level = lead time (days) x average rate of stock usage + buffer stock level
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What is the supply chain?
The group of firms that are involved in all the various processes required to make a finished product or service.
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Give some examples of the type of firms in the chain?
Suppliers, manufacturers, distributes, retailers
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What ways can a business match supply and demand?
Use peripheral workers (workers when more staff are needed), outsourcing (when a business contracts out activities to another business, mass customisation (custom products are made after the order is placed).
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Advantage of peripheral workers?
Can help a business deal with unforeseen increases in demand.
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Advantage and disadvantage of outsourcing?
Business can accept contracts it would otherwise not be able to, however, business doesn't have control over the quality of the product.
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Advantage and disadvantage of mass customisation?
Increase in customer choice is a competitive advantage, however, customised products are expensive and take a long time to get to the customer.
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What are the factors a business considers when choosing suppliers?
Price, payment terms, quality, capacity, reliability, flexibility.
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Why is price important?
The cheaper a suppier is, the more value added to the final product, however, cheaper suppliers can mean a lower quality product.
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Why are payment terms important?
Companies need to know how much is paid, how its paid, and when its paid. New companies will pay upfront, whilst reliable well-established companies will gain credit.
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Why is quality important?
The quality of supplies needs to be consistent or the customer will associate the poor quality with the business they buy from.
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Why is capacity important?
Large businesses need to select suppliers who can keep up with peaks in demand.
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Why is reliability important?
If a supplyer cant supply, the business wont be able to supply customers. Supplies need to deliver on time, or give plenty of warning if they cannot.
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Why is flexibility important?
Suppliers need to be able to respond to the changes in the companies requirements, e.g. becoming more environmentally friendly.
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What is a strategic working relationship?
Where both company and supplier get long-term benefits from working together.
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What ways can strategic working relationships be achieved?
Shared inventory/ IT systems, JIT systems, shared costs (if business and supplyer and making same goods, they can share equipment and storage), innovation ( sharing new ideas, e.g. improving manufacturing process, saving more money for both).
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How can a business improve it supply chain?
Only buy supplies that the company needs, spend more time choosing and managing strategic suppliers, have a suitable number of supplier, have alternative suppliers.
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Other cards in this set

Card 2

Front

Why do businesses prefer to hold less stock?

Back

Storage costs (rent of warehouse, refrigeration, electricity), wastage costs ( stock is damaged over time, goes out of date), opportunity cost (cost of investing money in stock instead of something else).

Card 3

Front

What is buffer stock?

Back

Preview of the front of card 3

Card 4

Front

What does buffer stock depend on?

Back

Preview of the front of card 4

Card 5

Front

What is lead time?

Back

Preview of the front of card 5
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