Exam code: J204
The role of procurement for a car manufacturer might involve:
advertising a new range of electric vehicles
negotiating deals with car showrooms
receiving deliveries of tyres and windscreens
testing the brakes of every new car
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Primark Ltd
Primark Ltd is a fashion retailer that sells clothing and homeware at prices lower than most other retailers. The company is aware of the importance of consumer law and of having low-cost suppliers.
Primark Ltd started to sell its products online in 2022. After changes in buying habits and pressure from customers, in 2022 Primark Ltd launched an online click and collect service for shoppers.
Primark Ltd is very aware of the need to have ethical suppliers. The following ethical factors are among those important to Primark Ltd:
giving clothes a longer life by using material from sustainable sources
encouraging its supply chain to pay a living wage and look after the health and well-being of their workers.
Analyse one benefit for Primark Ltd of having low-cost suppliers.
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David works in a biscuit factory and is responsible for procurement.
Which task is not likely to be part of David’s job role?
Buying sugar
Ordering biscuit packaging materials
Purchasing stationery
Selling biscuits
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Choosing how products will be delivered to customers is an example of a:
flow production issue
liquidity problem
logistical decision
purchasing concern
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Riley runs his own cleaning business. He wishes to keep supply costs as low as possible. The table below shows the price of cleaning fluid at four possible suppliers.
Supplier 1 | Supplier 2 | Supplier 3 | Supplier 4 | |
Quantity | 100 litre barrels | 200 litre barrels | 1000 litre barrels | 2000 litre barrels |
Price | £80 | £100 | £600 | £800 |
The lowest cost that Riley can obtain 1200 litres of cleaning fluid from one supplier is:
£480
£600
£700
£800
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Zara
Zara is a global fashion brand based in Spain. Zara is best known for the speed and frequency it can get its new clothing ranges into its online shop and 2270 stores. Approximately 50% of Zara’s clothes are manufactured in Spain; the rest come from other European countries, or from Asia and Africa. Like most firms in 2020, Zara experienced a fall in sales. Zara’s global sales revenues in 2019 were €19 954 million, but in 2020 these fell to €14 129 million. However, during this period Zara’s online sales increased by approximately 75%, as consumer buying habits changed in favour of e-commerce.
Zara can get new clothing designed, manufactured and delivered to its stores within 15 days. It does this by buying fabric in large quantities from suppliers in Europe, which helps keep its variable costs low. This means that it is delivered quickly to its factory in Spain, where it can then be made up into the new designs.
Zara’s highly responsive supply chain is central to its business success. This means it can change its clothing designs on average every two weeks, while competitors change their designs every two or three months.
(i) Identify two roles of the procurement function in a business.
[2]
(ii) Evaluate the importance to Zara of having reliable suppliers in the supply chain for its clothing.
[7]
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Hugh works in procurement at a factory that makes jeans.
Which of the following would not be part of Hugh’s job role?
Choosing a supplier of zips and buttons
Ordering printer paper and ink cartridges
Receiving delivery of threads and fabrics
Sewing the size label on to the waistband
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Pukka Pies Ltd
Pukka Pies Ltd is a family-owned business with approximately 360 employees. It makes a range of high-quality savoury pies, including steak, chicken and mushroom, and chicken balti, in batches at its factory in Leicester, England. Pukka Pies are sold in more than 4000 food stores nationwide as well as in sports stadiums, fish and chip shops and cafés across the country.
Three of Pukka Pies Ltd’s key values are recruiting people who are ambitious, delighting customers with quality pies, and building trust with suppliers through food safety. Each of these values helps the business meet the requirements of consumer law.
The success of Pukka Pies Ltd is affected by many factors, including its logistical and supply chain decisions. Pukka Pies Ltd procures the ingredients for its pies from businesses across the UK and overseas; consequently its supply chain is long. Nevertheless, all of these ingredients need to arrive in good condition and, therefore, its logistics are time-critical. Unemployment levels also have a significant impact on Pukka Pies Ltd.
Pukka Pies Ltd considers its environmental impact across all aspects of business activity. It has already replaced some of the non-recyclable plastics used in its packaging with alternatives that can be recycled. In addition, none of the company’s waste goes to landfill.
(i) Analyse the impact of each of the following on Pukka Pies Ltd:
the length of its supply chain .................................................................................
the time-critical nature of its logistics ...................................................................
[6]
(ii) Recommend whether the length of its supply chain or the time critical nature of its logistics has the greater impact on Pukka Pies Ltd’s success.
[3]
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John Lewis & Partners
John Lewis & Partners (JLP) is a chain of department stores that stocks a wide range of products from clothing to home furnishings. As a result it is always looking for high quality suppliers for its products.
JLP uses face-to-face selling in its stores. Staff in the electrical department are trained to have good product knowledge. These products include a wide range of computers, televisions and washing machines. However, JLP’s recent growth has come from e-commerce.
JLP has a wide range of suppliers. It is important that the right supplier is chosen, so JLP will take time evaluating new suppliers and will review existing suppliers regularly so that it can continue supplying high quality products to its customers.
Explain one role of procurement within JLP.
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John Lewis & Partners
John Lewis & Partners (JLP) is a chain of department stores that stocks a wide range of products from clothing to home furnishings. As a result it is always looking for high quality suppliers for its products.
JLP uses face-to-face selling in its stores. Staff in the electrical department are trained to have good product knowledge. These products include a wide range of computers, televisions and washing machines. However, JLP’s recent growth has come from e-commerce.
JLP has a wide range of suppliers. It is important that the right supplier is chosen, so JLP will take time evaluating new suppliers and will review existing suppliers regularly so that it can continue supplying high quality products to its customers.
(i) Identify two factors that affect the supply decisions made by a business.
[2]
(ii) Evaluate factors that may have influenced JLP when choosing which suppliers to use.
[7]
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Choosing which supplier to use is a:
marketing decision
pricing decision
procurement decision
sales decision
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A supermarket decides to extend its opening hours.
The supermarket is likely to need:
a longer supply chain
fewer staff
lower quality products
reliable suppliers
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The transport costs of Global Logistics United plc (GLU plc) for the last five years are shown below.
Mode of transport: | By road | By rail | By air |
2014 | £150 000 | £350 000 | £600 000 |
2015 | £160 000 | £370 000 | £620 000 |
2016 | £170 000 | £390 000 | £635 000 |
2017 | £180 000 | £410 000 | £640 000 |
2018 | £190 000 | £430 000 | £650 000 |
The data shows that:
the company prefers to transport its goods by air
the company’s transport costs have fallen year on year
GLU plc spent more than £1.25 million on transport costs in 2018
GLU plc transports more goods by rail than by road
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