4.5 Inventory and Supply Chain Management (AQA A Level Business): Flashcards
Exam code: 7132
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Why is matching supply and demand important?
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Why is matching supply and demand important?
If supply exceeds demand, money is wasted on storage/unsold goods; if it falls short, customers face delays or go elsewhere.
Name three methods of matching supply to demand.
Outsourcing, hiring temporary/part-time staff, and producing to order.
Define outsourcing.
Outsourcing is delegating specific business activities (e.g. IT, HR) to external service providers.
Define subcontracting.
Subcontracting is when specific parts of a larger project are assigned to third parties, while the business keeps overall responsibility.
Give one advantage of outsourcing.
Cost savings, access to specialised skills, increased flexibility, and the ability to focus on core competencies.
Give one disadvantage of outsourcing.
Harder quality control, loss of control, data-security risks, and communication/cultural differences.
Define flexible working.
Flexible working is a culture where workers can do different roles or work in a range of employment patterns.
Give two examples of flexible employment.
Part-time or temporary contracts, flexible hours, and working from home (any two).
Give one benefit of flexible employment.
It attracts and retains staff, raises productivity and well-being, and lowers overhead costs.
Give one challenge of flexible/remote working.
Weaker communication/collaboration, the cost of home-office kit, slower innovation, and the need for monitoring.
Define producing to order.
Producing to order is building a product only after a customer confirms an order, rather than making it for stock.
Give one advantage of producing to order.
Little/no finished-goods stock, high personalisation (premium prices), and lower risk of obsolete stock.
Give one disadvantage of producing to order.
Longer lead times, complex scheduling, a need for flexible suppliers, and higher unit costs.
Producing to order can support sustainability objectives through waste .
Producing to order can support sustainability objectives through waste minimisation.
True or False?
If supply exceeds demand, a business may waste money on storage or unsold goods.
True.
When supply exceeds demand, money is wasted on storage or unsold goods.
A temporary or fixed-term contract hires people for a set period to cover busy spells; when it ends, so does the .
A temporary or fixed-term contract hires people for a set period to cover busy spells; when it ends, so does the job.
True or False?
Producing to order means holding large amounts of finished-goods stock.
False.
It means little or no finished-goods stock — products are made only after an order.
Define inventory.
Inventory (also called stock) is everything a business owns today for the purpose of selling tomorrow.
Name the four types of inventory.
Raw materials, components, work-in-progress, and finished goods.
Name two factors that influence the level of inventory a business holds.
Demand variability, lead-time length/reliability, product perishability, and storage capacity/cost (any two).
On an inventory control chart, what is the reorder level?
The stock level at which a business places a new order with its supplier.
Define buffer stock (minimum stock level).
Buffer stock is the lowest level to which a business will allow inventory to fall (the minimum stock level).
Define lead time.
Lead time is the length of time from ordering inventory from the supplier to it being delivered.
How is the reorder quantity calculated from an inventory control chart?
Maximum stock level − minimum stock level (e.g. 1,000 − 200 = 800 units).
On an inventory control chart, what does a downward-sloping line show?
Inventory being used up; the line shoots upwards when an order is delivered.
On an inventory control chart, the maximum inventory level is the most stock a business can hold in normal .
On an inventory control chart, the maximum inventory level is the most stock a business can hold in normal circumstances.
Give one problem of holding too much inventory.
Higher storage costs, greater risk of spoilage/shrinkage, and excess stock sold at a lower price.
Give one problem of holding too little inventory.
Running out of stock (production stoppages, higher unit costs) and being unable to meet sudden demand.
If stock is ordered when it hits 500 and the minimum is 200, the reorder is 800 units (max 1,000 − 200).
If stock is ordered when it hits 500 and the minimum is 200, the reorder quantity is 800 units (max 1,000 − 200).
True or False?
Buffer stock is the maximum amount of inventory a business holds.
False.
Buffer stock is the minimum stock level; the maximum is the most stock held in normal circumstances.
True or False?
The reorder level is the point at which a business places a new order with its supplier.
True.
When stock falls to the reorder level, a new order is placed with the supplier.
Give an example of work-in-progress inventory.
A car chassis on a production line — items partway through production.
Goods that spoil quickly (high ) must be ordered in smaller batches.
Goods that spoil quickly (high perishability) must be ordered in smaller batches.
Define the supply chain.
The supply chain is the network of organisations, people and activities that move a product from raw material to the final customer.
Give one reason an effective supply chain matters.
Faster delivery, lower operating costs, consistent quality, and greater resilience to shocks.
Name two decisions in building an effective supply chain.
Make-or-buy, choosing suppliers, the purchasing approach, information sharing/technology, and logistics structure (any two).
Name two factors that influence the choice of supplier.
Quality, delivery reliability, availability, price/payment terms, ethics/sustainability, relationship/trust, and flexibility (any two).
Why might delivery reliability outrank price for a JIT firm?
Late or erratic deliveries halt production, so a JIT firm values reliability above a slightly lower price.
Poor-quality inputs travel through to the final product and could damage the .
Poor-quality inputs travel through to the final product and could damage the brand.
Give one advantage of outsourcing.
Cost savings, access to specialised skills, increased flexibility, and a focus on core competencies.
Give one limitation of outsourcing.
Harder quality control, loss of control, data-security risks, and communication/cultural differences.
Why do some businesses use global supply chains?
Some stages cost less in certain countries (e.g. Vietnam's low-cost clothing), or scarce materials are only available there.
True or False?
An effective supply chain can make a business more resilient to shocks.
True.
Backup suppliers and data-sharing let the business adapt when something goes wrong.
True or False?
For a cost-leader, price is never a consideration when choosing suppliers.
False.
Price could dominate for cost-leaders, though reliability may outrank price for JIT firms.
How can technology help manage complex supply chains?
Live data/blockchain tracking, AI forecasting, greater transparency, shared IT platforms, and IoT sensors.
Outsourcing lets a business focus its resources on its core , where it can add most value.
Outsourcing lets a business focus its resources on its core competencies, where it can add most value.
Why is outsourcing especially valuable in industries with seasonal demand?
It gives flexibility to scale operations up or down based on demand fluctuations.
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