Section 3- Business Operations Flashcards

Question

What does procurement involve

Answer 1

Deciding what goods / services need to be bought ❑ Selecting / finding suppliers ❑ Purchase of supplies / raw materials / goods services from external suppliers ❑ Getting quotes / bids for work ❑ Negotiating terms of payment ❑ Negotiating contracts between the business and its suppliers – finding the supplier offering the best value for money ❑ Agree quality and quantity ❑ Managing how goods are ordered and received ❑ Managing logistics

Answer 2

The process of managing stock involves ensuring sufficient:- ❑ Stocks of raw materials, required to produce the finished goods, are available ❑ Stocks of finished goods are available to meet demand ❑ Staff are available in service industries, e.g., checkout operators in a supermarket, to ensure a quality service is provided to customers Many businesses use production scheduling software to plan production and stock levels. When managing stock, the key for a business is to ensure: the right quantity of stock is always available at the right time, at the right quality and at the right price!

Answer 3

The business holds buffer stocks of raw materials / finished goods just in case there is a problem with deliveries or there is an unexpected surge in demand ❑ It is often used when demand is unpredictable, suppliers are not nearby and storage is not expensive, as buffer stock is held. ❑ It is not suitable for products which perish, become obsolete or go out of date quickly.

Answer 4

Benefits: -stock is available for re-working faulty products or to meet sudden increases in demand -production is less reliant on suppliers and if stock is not delivered on time, the whole production schedule need not be delayed -spare finished products are available to meet unexpected orders, which can increase levels of customer service -economies of scale are possible from bulk purchasing stock Problems: -higher stock holding means need for more storage space, which increases rent snd insurance costs -money is tied up in stock and is therefore unavailable for other purposes -stock might go out of date -build up lf unsold finished products leading to higher stockholding costs

Answer 5

A product of good quality if it meets needs and expectations of the customer Design – looks, style, features Functionality – it does the job well Reliability – acceptable level of breakdowns or failure Consistency – product meets the same quality standards time and time again Durable – lasts as long as it should Good after sales service – ease of gaining refunds, guarantees, warranties Price / value for money – the price reflects the quality of the product

Answer 6

Loss of customers-customers dissatisfied with product and therefore will not return Reputation of business goes down Costs of recalling,scrapping or re-working/re-making Costs lf replacement funds Costs of reducing the price of products thst no demand for Legal action taken against business

Answer 7

Benefits: Higher prices-customers prepared to pay higher prices for better quality products as long as they are still good value for money Increased sales-when customers are pleased with quality a business provides, likely to repeat purchases Better reputation and image-new customers are more likely to choose them and existing customers will be retained Costs: Staff training- staff need to be doing their job properly as important that business spends money and time on training their staff well Inspection-products need to be inspected to check quality which costs both time and money

Answer 8

Level of product returns Failure / reject rates Mystery shoppers Customer satisfaction Customer loyalty Customer complaints

Answer 9

Traditional method of checking quality. All, or a sample of, products are checked at the end of the production process / after a service has been completed.

Answer 10

Benefits: Protects the standard of the product  Customers, in theory, will not receive a substandard product, but depends on whether 100% or a sample of products are checked  Specialist trained inspectors are used to check quality, leaving operatives free to complete other tasks  Opportunity to receive feedback from customers that have received a service Drawbacks: Wasteful approach; products that do not meet the quality control requirements are often scrapped  Employees may be less likely to take responsibility for errors  High cost of inspectors  Checking of services e.g., via questionnaires, happens after the event; the damage of poor- quality service may have already been done!

Answer 11

Total quality management is a quality assurance approach where all employees have a target of ‘zero defects’ and are therefore responsible for quality, through ensuring that their ‘internal or external’ customers are fully satisfied. As part of this initiative, quality circle meetings may take place, involving staff from all levels of the business.

Answer 12

Quality is embedded into the organisation resulting in few quality issues  As a result, average unit costs are reduced leading to increased efficiency  Improved motivation for employees, as they are accountable for quality  Better relationships between employees and management leading to a possible increase in productivity  Quality improvements can be easier to implement, as all staff are part of the TQM process  Businesses can see increased sales and repeat business from providing consistent levels of quality

Answer 13

Increased customer loyalty leading to additional sales Strong brand image and reputation for quality; may attract new customers May be possible to charge a higher price Fewer returns, product recalls and replacements lowering costs Can help to attract and retain high calibre employees Reduces inspection costs Overall, a competitive advantage can be gained

Answer 14

Costs of maintaining consistent levels of quality e.g. quality inspectors if quality control measures are introduced Costs of training to implement and maintain TQM Costs of time used for quality circle meetings Costs of maintaining quality, such as auditing suppliers, visiting branches / sites etc, can be expensive especially if outsourcing partners are used The reputation of the business may be affected negatively if quality standards are not met by outsourcing partners or franchisees that are operating under a brand name

Answer 15

E-commerce: The act of buying or selling a product using an electronic system such as the internet. M-commerce: The act of buying or selling a product using a smart phone or similar handheld device.

Answer 16

Convenience - products can be viewed and purchased at any time of day from any part of the world Ability to see reviews of products which can inform purchasing decisions Access to online support or chat to help with product selection Prices may be lower as online businesses do not have to pay expensive high street rents Customers may be able to compare products, before purchase, between different firms to gain the lowest prices and a product that best suits their needs Personal information and payment details can be saved to make checkout faster Preferences can be saved and products recommended based upon purchase history Delivery is made direct to the customer’s home or to a convenient location

Answer 17

Benefits:  provides a quick and easy way to communicate with large numbers of existing and potential customers  helps to raise awareness of the business and its products  provides an easy way to monitor satisfaction and collect feedback  promotes customer engagement Costs:  poor customer service stories can spread quickly to large numbers of people, affecting the reputation of the business  social media news needs to be constantly updated and reviewed by the business; if not it can lead to customer frustration if information is inaccurate

Answer 18

The methods used by a business to look after its current and future customers.

Answer 19

Product information knowledge: Information provided is accurate and accessible;staff are well trained and have a thorough product knowledge Post sales service/response to customer feedback: -dealing promptly and fairly with any negative feedback;exchanging faulty or unwanted goods;delivery within timescales;goods under guarantee,repaired Manage customer expectations efficiently and effectively: -key to success in terms of repeat business and customer loyalty Customer engagement: -positive customer experience;staff build s good relationship with each customer Speed and efficiency of service: -customer service is efficient and appropriate to the type of product that is looking to be purchased Good or service meet the needs of customers: -the good or service meets customer needs in terms of function,reliability,safety and quality

Answer 20

Increased sales – satisfied customers are more likely to try out other goods / services produced or provided by the same business Customer retention / loyalty - satisfied customers are more likely to make a repeat purchase Word of mouth promotion - satisfied customers are more likely to recommend the products to others thereby attracting new customers Enhanced public image – this helps build a brand and provides protection if there is a slip-up in customer service More effective workforce – employees receive their customers’ appreciation and are further motivated to offer good customer service Lower costs – fewer complaints, less employees needed in customer service departments and fewer refunds / replacements required Improved profitability because of increased sales revenue and reduced costs

Answer 21

Loss of customer loyalty - as satisfaction levels drop, customer loyalty drops Loss of sales – customer service problems drive customers away due to the bad reputation for customer service Customers may not report problems – sales will be lost without any information to explain why Unhappy customers spread the word – this can occur both verbally and via social media