Working with suppliers

Edexcel
GCSE

Business 1BS0

Making
operational
and financial
decisions
Unit 8
Working with suppliers

2

• Understand how businesses manage stock:

• Interpretation of bar gate stock graphs

• The use of just in time (JIT) stock control

• Understand the role of procurement:

• Relationships with suppliers: quality, delivery (cost, speed,

reliability), availability, cost, trust

• The impact of logistics and supply decisions on: costs,

reputation, customer satisfaction

Objectives

Working with suppliers

Unit 8 Making operational and financial decisions

What is stock?

• Stock refers to the goods that are

stored and are readily available for
use, sale, or distribution

• The Disney film Frozen was released

in 2013 and became incredibly popular

• During Christmas 2014 one of the most

in-demand toys was a singing Elsa doll

• Shops were unable to meet demand

and sold out very quickly

• Explain the implications of running

out of stock of Elsa dolls for both
toy retailers, and customers

Multiple Choice

What is stock, in relations to business operations

• Stock is the inventory of goods held by a business for sale or production.
• Stock refers to the amount of money a business has in its bank account.
• Stock represents the market value of a company's shares.
• Stock is the total number of employees in a company.

Multiple Choice

The Disney film Frozen was released in 2013 and became incredibly popular, During Christmas 2014 one of the most in-demand toys was a singing Elsa doll. Shops were unable to meet demand and sold out very quickly.

Explain the implications of running out of stock of Elsa dolls for both toy retailers, and customers

• Running out of stock of Elsa dolls results in lost sales for retailers and disappointment for customers.
• Retailers benefit from increased prices due to high demand.
• Customers are happy to wait for restocks without any issues.
• Retailers can easily source more dolls from other manufacturers.

Working with suppliers

Unit 8 Making operational and financial decisions

Importance of stock

• It is important that a business has stock available for

consumers to buy, when they want to buy it

• It is also important that manufacturers have stock of

materials available for use in the production process,
when they need it

• What are the implications of a manufacturing business not

having enough stock of materials available at the right time?

• Explain two consequences this could have on a business

Multiple Choice

What are the implications of a manufacturing business not having enough stock of materials available at the right time?

• Higher production efficiency and lower waste.
• Production delays and increased costs.
• Immediate availability of all materials without delays.
• Increased customer satisfaction and loyalty.

Multiple Select

It is important that a business has stock available for consumers to buy, when they want to buy it. It is also important that manufacturers have stock of materials available for use in the production process, when they need it.
Explain two consequences this could have on a business

• Increased competition from suppliers offering lower prices.
• Decreased production costs due to excess stock.
• Risk of production delays and lost sales if materials are not available.

• Increased customer satisfaction and loyalty due to timely product availability.

Working with suppliers

Unit 8 Making operational and financial decisions

Excessive stock

• Excessive stock can

be as problematic for a
business as not having
sufficient stock

• Explain three possible

implications of a
business carrying too
much stock

Multiple Select

Excessive stock can be as problematic for a business as not having sufficient stock Explain three possible implications of a
business carrying too much stock

• Risk of becoming obsolete

• Cash flow issues.

• Increased employee productivity.
• Increased holding costs.

Working with suppliers

Unit 8 Making operational and financial decisions

Stock control

• Stock control is crucial to

ensuring a sufficient, but not
excessive stock, readily
available in the quantities
needed, at the right time

• Stock management control is

crucial to maximise productivity,
efficiency, and profitability

• Computerised stock control

systems are all based on the
principles of the traditional bar
gate stock graph

Drag and Drop

Placeholder

is crucial to ensuring a sufficient, but not ​

Placeholder

stock, readily available in the quantities needed, at the right time. ​

Placeholder

control is crucial to maximise productivity, efficiency, and ​

Placeholder

. ​

Placeholder

systems are all based on the principles of the traditional bar gate stock graph

Drag these tiles and drop them in the correct blank above

Stock control

Stock management

Computerised stock control

profitability

excessive

Working with suppliers

Unit 8 Making operational and financial decisions

The bar gate stock graph

• The bar gate stock graph illustrates the following:

• The maximum stock the business wants to hold at any time

• The minimum amount of stock the business wants to be left

with at any time

• The stock level at which the business needs to re-order,

which will depend on the ‘lead-time’ for delivery

• The lead time which is the amount of time between placing an

order for stock, and receiving delivery

• The quantity of stock that needs to be ordered

• The buffer stock that needs to be held for emergencies should

the stock level fall below the minimum stock level

Working with suppliers

Unit 8 Making operational and financial decisions

Bar gate stock graph

Working with suppliers

Unit 8 Making operational and financial decisions

Bar gate graph assumptions

• Looking at the graph, what assumptions can you see

that it makes?

Working with suppliers

Unit 8 Making operational and financial decisions

Stock control challenges

• More units are sold one month than anticipated,

taking stock below the minimum stock level

• Does this mean that

the business has run
out of stock and can’t
supply any more
customers?

• How should the

business respond
to get control of its
stock levels back
to the desired levels?

Working with suppliers

Unit 8 Making operational and financial decisions

More stock control challenges

• What should the business do if there is a slump in

sales one month?

• If a supplier has a

problem and cannot
deliver the stock for
three weeks, what
would the impact
be?

• How should the

business respond to
get control of its stock
levels back to the
desired levels?

Labelling

Identify the size of the buffer stock held.

Drag labels to their correct position on the image

2000

10000

Hotspot

Identify the day when the business placed order C with its suppliers.

Math Response

Calculate the size of order A.

Type answer here

Correct Answer: 14000

Deg^°

Rad

Math Response

Calculate the length of time between order B arriving and order C arriving.

Type answer here

Correct Answer: 10

Deg^°

Rad

Math Response

Calculate the length of time it took order C to arrive after the order was placed with suppliers.

Type answer here

Correct Answer: 8

Deg^°

Rad

Working with suppliers

Unit 8 Making operational and financial decisions

Just-in-time (JIT) stock control

• One of the problems of holding stock is the cost

of storage and the money that is tied up in it

• Some businesses therefore try to have minimal

amounts of stock and organise having it delivered just
as they need it

• This is known as just-in-time stock control

• Explain two problems that could arise from

using a JIT stock control system

• What does an effective JIT stock control

system rely on?

Multiple Choice

What is Just In Time Stock Control System?

• A method that increases inventory by overstocking items.
• A system that relies on forecasting demand to maintain stock levels.
• A system that minimizes inventory by ordering stock only as needed for production.
• A strategy that involves purchasing all stock in advance to avoid shortages.

Multiple Select

Explain two problems that would arise from Just in TIme Stock Control System?

• Enhanced production flexibility.
• Risk of stockouts disrupting production.

• Dependence on suppliers increases vulnerability to delays.

• Increased inventory holding costs.

Multiple Select

• What does an effective JIT stock control system rely on?

• High inventory levels and minimal supplier contact.
• Random stock placement and no demand analysis.
• Strong supplier relationships.

• Accurate demand forecasting

Working with suppliers

Unit 8 Making operational and financial decisions

Analysing JIT stock control

• JIT can be an efficient method of controlling and

managing stock levels, however it is not without its
own challenges

• Explain two advantages and two disadvantages of using a

JIT stock control system

Match

Match the advantages disadvantages of using a Just in Time Stock Control System

• Just in Time Advantage

• Just In Time Disadvantage

• Just in Time Advantage

• Just In Time Disadvantage

Reduces inventory holding costs

Risk of stockouts

Enhances product quality

Requires reliable suppliers

• Reduces inventory holding costs

• Risk of stockouts

• Enhances product quality

• Requires reliable suppliers

Working with suppliers

Unit 8 Making operational and financial decisions

Worksheet 2

• Complete Task 2 on the worksheet

Working with suppliers

Unit 8 Making operational and financial decisions

• The process of finding suppliers

and agreeing terms,
is known as procurement

• Some businesses employ teams

dedicated for the procurement process
who ensure the best value goods or
services are obtained on time

• What factors can you think of that

would result in an efficient
procurement process?

Procurement

Multiple Select

What factors can you think of that would result in an efficient procurement process?

• Quality

• Delivery

• Availability and trust

• Cost

Working with suppliers

Unit 8 Making operational and financial decisions

Quality

• A business needs to ensure that the supplies on

offer to it are of a sufficiently high standard to
meet its needs

• What are the implications

of insufficient quality?

• Explain whether a

business should always
aim to source the highest
possible quality supplies

Multiple Select

• What are the implications of insufficient quality?

• damage to reputation.

• increased costs,

• customer dissatisfaction,

• Insufficient quality leads to higher employee satisfaction.

Multiple Choice

• Explain whether a business should always aim to source the highest possible quality supplies

• A business should always prioritize the highest quality supplies regardless of cost.
• Sourcing the highest quality supplies is the only way to ensure customer satisfaction.
• No, a business should not always aim to source the highest possible quality supplies; it should balance quality with cost and market needs.
• Quality should never be compromised, even if it means higher expenses.

Working with suppliers

Unit 8 Making operational and financial decisions

Delivery

• A business will need to ensure that a supplier can

deliver the supplies when they are needed

• Outline two businesses, or business situations, when

reliability of delivery will be especially important

• How will speed of delivery impact on the

price paid for supplies?

Multiple Choice

How will speed of delivery impact on the price paid for supplies?

• Higher speed of delivery generally increases the price paid for supplies.
• Higher speed of delivery leads to lower quality supplies.
• Speed of delivery has no effect on the price paid for supplies.
• Faster delivery reduces the price paid for supplies.

Multiple Select

• Outline two businesses, or business situations, when reliability of delivery will be especially important

• Construction material supply
• Healthcare industry (medical supplies delivery)

• E-commerce (customer order fulfillment)

• Event planning and coordination

Working with suppliers

Unit 8 Making operational and financial decisions

Availability and trust

• When choosing a supplier, a business will want to

know that the goods will be available when they
need them

• Why will this will be especially important for a business using

a JIT manufacturing process, and one that operates with a
very small buffer stock?

• Why is a relationship of trust especially important for a

business that uses a JIT stock control system?

Multiple Choice

Why is a relationship of trust especially important for a business that uses a JIT stock control system?

• A relationship of trust ensures reliable and timely deliveries, which are critical for JIT systems.
• A relationship of trust increases inventory levels.
• JIT systems rely solely on automated processes.
• Trust is not necessary for JIT systems.

Multiple Choice

When choosing a supplier, a business will want to know that the goods will be available when they need them. Why will this will be especially important for a business using a JIT manufacturing process, and one that operates with a very small buffer stock?

• It is crucial for timely production and to avoid halting operations.
• It increases the amount of inventory on hand.
• It reduces the need for supplier communication.
• It allows for more flexible production schedules.

Working with suppliers

Unit 8 Making operational and financial decisions

Cost

• An essential aspect

of procurement is
securing the best price
for the materials
needed

• Explain why a business

shouldn’t always go with
the cheapest supplier
they can find

Multiple Choice

Explain why a business shouldn’t always go with the cheapest supplier they can find

• Cheapest suppliers always provide the best service.
• A business shouldn’t always go with the cheapest supplier because it may compromise quality, reliability, and service, which can negatively impact the business in the long run.
• Quality is not important when choosing a supplier.
• All suppliers offer the same level of reliability.

Working with suppliers

Unit 8 Making operational and financial decisions

Impact of logistics and supply

• The decisions a business

makes concerning its logistics
and supplies channels can
have a huge impact

• The main areas of impact are:

• Costs

• Reputation

• Customer satisfaction

• Explain how a bad procurement decision

can impact on each of these areas

Multiple Choice

Explain how a bad procurement decision can impact on each of these area : Costs

• Improved supplier relationships and trust
• Increased employee satisfaction and morale
• Lower costs due to bulk buying discounts
• Higher costs due to overpayment, unnecessary purchases, poor quality, and operational disruptions.

Multiple Choice

Explain how a bad procurement decision can impact on each of these area : Reputation

• A bad procurement decision can damage an organization's reputation by leading to customer dissatisfaction and negative publicity.
• A bad procurement decision can improve supplier relationships.
• A bad procurement decision has no effect on employee morale.
• A bad procurement decision can enhance brand loyalty.

Multiple Choice

Explain how a bad procurement decision can impact on each of these area : Customer satisfaction

• A bad procurement decision can lead to delays and poor product quality, negatively impacting customer satisfaction.
• A bad procurement decision has no effect on customer satisfaction whatsoever.
• A bad procurement decision can improve customer satisfaction by providing better products.
• A bad procurement decision can lead to increased costs that enhance customer loyalty.

Open Ended

McDonald’s Just In Time production and stock control

Founded in California in 1940, McDonald’s is an American fast food company. It is the world’s largest restaurant chain, operating in over 100 countries and serving over 69 million customers a day.

The principle of JIT production is to ensure the required items are produced at the required quality, in the required quantity, at the required time. McDonald’s embrace the concept of JIT production with a ‘made-to-order’ production process: The JIT system used at McDonalds focuses on an efficient production output, with the lowest possible cost and minimal waste, whilst also minimising the lead time to customers. McDonald’s believe that the system that they operate, with the investment in technology and manufacturing equipment that they have made, allows them to achieve the following:

·         Improved quality: food is freshly prepared, thereby offering better quality than pre-prepared food 

·         Customer service – preparing the food after the order is places allows customers to make special requests 

·         Cost reduction – reduced wastage as the uncooked materials have a longer shelf life than food that has been prepared 

·         Reduced waiting time – utilising specialist equipment including sophisticated burger-making technology and a record-breaking bun toaster, McDonald’s have been able to reduce customer lead time and make it fast enough for customers to be willing to wait To support an efficient JIT production system to customers, McDonald’s operates a JIT stock control system. The business has a list of approved suppliers that it sources its supplies from and uses an e-procurement system to ensure that all orders are made on time. As such, logistics and supply issues such as quality, delivery, availability and cost are hugely important aspects of McDonald’s procurement processes.

Explain the impact of McDonald’s JIT stock control system on the following areas: Cost, Reputation, Customer Service.

Working with suppliers

Unit 8 Making operational and financial decisions

Plenary

• Understand how businesses manage stock:

• Interpretation of bar gate stock graphs

• The use of just in time (JIT) stock control

• Understand the role of procurement:

• Relationships with suppliers: quality, delivery (cost, speed,

reliability), availability, cost, trust

• The impact of logistics and supply decisions on: costs,

reputation, customer satisfaction

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Working with suppliers

Unit 8 Making operational and financial decisions