Managing inventory and supply chains Flashcards
(25 cards)
Product flexibility
Switching from producing one product to another eg: Cadbury
Depends on availability of materials/suppliers
Meets a wide range of customer needs
More expensive as have to buy more materials
Volume flexibility
Changing the level of output to meet changes in demand eg: car companies
Relies on availability of suppliers
Respond quickly to changes in demand - good brand image
Delivery flexibility
Changing the volume and timing of customer’s deliveries eg: Amazon
Relies on good distribution network
:) can respond to impulse purchases
:( have to scale up business to respond quickly
Mix flexibility
Providing a wide variety of alternative versions of the same product
Mass customisation
Offering individually tailored goods or services to customers on a large scale
Types of mass customisation:
- Collaborative
- Adaptive
- Transparent
- Cosmetic
Collaborative customisation
Needs of the customer and understood and followed as part of the manufacturing process
Adaptive customisation
Customers want the product to perform in different ways on different occasions, and available technology makes it possible for them to customise the product easily on their own.
Transparent customisation
Customers specific needs are predictable or can easily be deduced, and especially when customers do not want to state their needs repeatedly.
Cosmetic customisation
Customers use a product the same way and differ only in how they want it presented. Rather than being customised or customisable, the standard offering is packaged specifically for each customer.
Factors required for mass customisation
- A market in which customers value variety and individuality - if customers are not willing to pay premium prices for personalised products there is no point in doing it.
- Quick responsiveness to market changes - businesses must understand changing consumer tastes and react to them
- Ability to provide customisation - requires technology and machinery which can often be expensive
- Scope for economies of scale - can produce on a mass scale and still benefit from economies of scale
Advantages of customisation
- Higher revenue
- Greater customer loyalty
- Competitive advantage
- Improved understanding of customer’s wants
- Greater protection from market changes
- Improved workforce motivation
- Higher profits
- Works well with e-commerce ordering
Disadvantages of customisation
- Requirement for technical and expensive machinery
- Greater expense in terms of IT, machinery and training
- Problems with rejected product
- Unsuitable supply chain
- Missing out on economies of scale
Improving speed of response and flexibility
- An effective and up to date information technology system, so that customer requirements can be recognised and dealt with quickly
- A flexible workforce that is prepared to focus on priority tasks even where this involves changing their expected pattern of work
- Targets for meeting customer requirements that are challenging but achievable
- Integrated systems that enable staff involved in a customer order to draw on information from all areas of the business
- Close relationships with suppliers, distributors and other organisations involved in the provision and delivery of the product
How does a business match demand with supply?
A business will have a core capacity that produces a given level of capacity.
This will then be supported by a flexible structure that enables the business to react quickly to changes in demand.
3 ways to match demand with supply:
- Producing to order
- Using temporary or part time workers
- Outsourcing
Procurement
Involves buying the goods and services that enables an organisation to operate. It involves sourcing raw materials from suppliers and bringing them into the organisation to enable the production of goods for customers.
Supply chain
Refers to all the businesses, people and activities that take part in the production process from the start until the product gets to the customer.
Lead time
Measures the length of time for the supply chain to work. From ordering to arriving with the customer.
Influence on choice of supplier
- Prices
- Payment terms
- Quality
- Capacity
- Reliability
- Flexibility
- Ethics
- Trade credit terms
Effective supply chain management can lead to…
- Lower costs
- Higher quality
- Greater speed of response
- Greater flexibility
- Greater dependability
- Environmental objectives being met
- Added value
Approaches to supply chain management - traditional
VIKING (Volume Is King)
Buying resources in large amounts to benefit from economies of scale.
Businesses focus on just a part of the supply chain.
Approaches to supply chain management - modern
Buying smaller amounts from a wide range of suppliers.
Creates competition within the supply chain causing prices to fall.
More of a focus on how their actions within the supply chain affects the environment.
Porter’s strategic forces and suppliers
- Cost advantage - economies of scale benefits
- Differentiation - USP provided by supplier innovation
Types of inventory held by a business
- Raw materials
- Work-in-progress
- Finished goods
Advantages of high inventory levels
- Customer demands are met promptly
- There is no loss of goodwill caused by running out of inventory
- Sudden increases in demand can be dealt with efficiently
- Production lines are not halted because of shortages of raw materials
- Companies can benefit from bulk buying and from longer production runs
