U4: Supply Chains Flashcards
(12 cards)
What do Supply Chains and Supplier Link Closely with?
Inventory Management, Working Capital, Capacity, Unit Costs, Economies of Scale, Outsourcing
What is a Supplier?
A business or individual that provides goods and services to another business
What is an example of a typical Supplier for a Food Manufacturer?
- raw materials
- energy (electricity, gas, light)
What is an example of a typical Supplier for a Fashion Retailer?
- suppliers of garments (wholesalers)
- landlord (shop lease)
What is an example of a typical Supplier for a Online Publisher?
- authors
- web host & website designers
Why are Suppliers Important?
to meet the needs and wants of customers, need an effective ‘supply chains
lean production techniques, effective relationships with key suppliers are essential
suppliers: - determine many of the costs of a business (e.g. raw materials, distribution)
- closely linked to product quality
- source of finance (trade credit)
What makes an effective supplier?
Price - often considered the most important; value for money is crucial. But often lowest price not necessarily the best value - depends on quality.
Quality - consistently high quality; the right product at the right time
Reliability - delivers the correct product on time. Goods and services work as described.
Communication - easy to communicate with supplier e.g. place orders, developing trading relationships
Financially Secure - long-term trading relationship requires supplier to stay in business. Also more likely to offer better payment terms
Capacity - ability to handle increased volumes of supply, perhaps at short notice.
What is the Importance of Supplier Price?
Textbooks emphasise importance of non- price factors (e.g. reliability, quality, location)
But suppliers must offer a competitive price (value to money)
Suppliers prices can be pushed lower by: - larger businesses use bargaining power to get lower price
- suppliers compete against each other for regular order
What are Strategic Suppliers?
Strategic Suppliers: the business cannot succeed without maintaining an effective supplier relationship. These goods and services are crucial to business success e.g. a car manufacturer relies on specialised car components suppliers
What are Commodity Suppliers?
Commodity Suppliers: they provide goods and services that can easily be brought else where and which aren’t hugely important to the business
Suppliers and Better Business Performance
Lower purchase costs: better prices from a supplier lower the costs of a business
Better quality: crucial for a business to satisfy customers
Improved customer service: e.g. fewer late deliveries
Increased productivity: e.g. fewer production delays, less wastage (lean production)
More flexible capacity: e.g. ability of a business to work with suppliers to meet sudden increase in demand
Suppliers and Cash flow
Managing suppliers is linked to managing cash flow
Trade credit = where a business buys goods and services forma supplier and pays for them later (e.g. 60 days)
Extending trade creditor terms is a way of improving cash flow (delays cash outflows)
However, extending trade credit too far risks damaging supplier relationships
