3.3.2 The Role of Procurement

Holding stocks to prevent problems in case of a delay from suppliers or a sudden unexpected increase in demand

• Supply chain

• Just in case

• Just in time

• Stock levels

All the people and businesses that take part in the production processes from the start until it gets to the customer

• Supply chain

• Procurement

• Chain of command

• Logistics

When the cost per unit falls if large orders are placed with suppliers due to a bulk discount

• Purchasing economies of scale

• Technical economies of scale

• Marketing economies of scale

• Risk-bearing economies

One advantage of just-in-time production

• Less of the business’s capital is tied up in stocks

• A greater risk of running out of stock

• Buying smaller quantities more often means losing out on bulk buying discounts

• Leads to higher levels of quality

What is meant by 'Procurement'?

• Knowing how to get the right supplies quickly

• Involves selecting suppliers, establishing the terms of payment and negotiating the contract

• Ensuring the right supplies will be ordered and delivered on time

• Building a business relationship with suppliers

Logistics

• The movement of goods and services, information and money throughout the production process

• Knowing how to get the right supplies quickly

• Building a business relationship with suppliers

• Obtaining the right supplies from the right supplier

Efficiency

• Improving quality through the use of training

• How well the business is using its resources to produce goods and services

• Obtaining the right supplies from the right supplier

• Developing motivational strategies to improve productivity

Holding as little stock as possible; items are ordered immediately before they are used

• Logistics

• Re-order level

• Just in time

• Efficiency