Inventory and Supply Chain Management (AQA AS Business): Exam Questions

BZT Ltd

Dean Beacon runs a family electricals business, BZT Ltd. BZT Ltd sells computers, mobile phones and household electrical items from its 15 high street stores. The stores are in prime, central locations which leads to high rent payments. BZT Ltd holds all of its inventory at its stores.

Recently BZT Ltd has received poor online reviews. Dean knows online reviews now play a large part in how many customers choose a retailer. The poor reviews were due to BZT Ltd quickly selling out of products. Dean is considering holding more inventory to prevent selling out. There is a long lead time when BZT Ltd orders these products. The suppliers offer significant discounts for large orders. Currently BZT Ltd does not get these discounts as it only orders 70% of what is needed to qualify for the discount.

Dean is concerned that profits fell in every one of the last three years. BZT Ltd’s competitors are now increasingly online only. Dean has carried out the following research comparing BZT Ltd to online competitors.

Table 1 Dean’s research

BZT Ltd is the only retailer in the market that provides a free three-year support service with every item. The business needs specialist staff to provide this service. The support provided includes:

• setup

• installation

• cover of any repair costs for three years.

BZT Ltd spends 10% of its marketing budget advertising this support service and spends over 70% promoting its traditional price match promise. The price match promise means that BZT Ltd will always lower the price of any product to match that of any competitor offering the same product. Dean believes the business is widely recognised for its price match promise which it has offered for over 50 years.

Dean has discovered the fastest-growing demographic in the market is the over 60s. The over 60s now account for over 30% of sales. Dean has carried out the following additional research on the market.

Table 2 Market research

Glade Ltd

Mary is the Chief Executive of Glade Ltd, a company that manufactures tables. Glade Ltd currently produces 4000 tables each year. It hopes to increase sales by 50% over the next three years and even more in the long run.

Glade Ltd has a reputation for being ethical because:

• Glade Ltd’s mission is to be the leader in its industry for using sustainable materials in its products. This means, for example, that it uses wood from companies that replant new trees to replace those cut down. Glade Ltd’s main competitors use about 40% of sustainable materials in their final products. Glade Ltd currently has 70% of sustainable materials and wants to continue improving this

• it pays its suppliers within one month of delivery.

Glade Ltd makes relatively low profits but a bigger issue is its regular cashflow problems. The company’s bank manager has offered Mary a large overdraft facility and has told her that interest rates are likely to fall soon. Mary is not sure whether to take out an overdraft or not.

Glade Ltd sells all its tables to three big retailers. These retailers buy in large quantities. Glade Ltd typically gets paid between two and three months after it delivers the orders. Glade Ltd’s largest rival gets paid within six weeks by threatening to charge interest on money still owed after this time.

Glade Ltd has one main supplier for the materials it uses in its tables. Mary has recently appointed a new operations manager, who has suggested that Glade Ltd switches to a new supplier. The comparison of suppliers is given in Table 3. The price of materials and payment terms would be the same for both suppliers.

The operations manager also thinks that Glade Ltd should try to reduce the amount of warehousing space the company has and sell some of the land where it is based.

Table 3