A cosmetics producer is launching a new face cream. It needs glass jars with lids that do not leak during delivery. Procurement has found a supplier offerin...
Question 1 Report
A cosmetics producer is launching a new face cream. It needs glass jars with lids that do not leak during delivery. Procurement has found a supplier offering recycled jars, but its minimum order is 30 000 units. Forecast sales for the first three months are only 12 000 jars. The owner wants to avoid holding excessive stock.
(a) What is meant by a minimum order quantity? [1]
(b) Explain one problem caused by ordering 30 000 jars for this launch. [2]
(c) Which one of the following should be tested before the business selects the jar supplier: whether lids leak, the colour of office walls, employee job descriptions, or social-media followers? [1]
Answer Details
(a) A minimum order quantity is the smallest quantity that a supplier will accept in one order. [1]
(b) Ordering 30 000 jars when forecast sales are 12 000 means the business will hold many unused jars. [1] This ties up cash, uses storage space and risks obsolete stock if sales are lower than forecast. [1]
(c) The business should test whether the lids leak, because jars and lids must protect the face cream during delivery. [1]
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