The Role Of Procurement
Overview
A customer walks into a clothes shop wanting the jacket she saw online, in her size, in navy. The shop has it in three sizes and two colours, and neither of them is hers. She leaves. Nothing was wrong with the jacket, the price, the staff or the shop. The business lost the sale because of a decision taken weeks earlier, by somebody she will never meet, about how much of what to order.
Procurement is the unglamorous part of a business that decides whether the glamorous parts work. In this lesson you will learn how stock is managed, what just in time really costs as well as what it saves, and why holding spare stock is a genuine business decision rather than an oversight. Then you will look at how a business chooses its suppliers, weighing price against quality and reliability. This is a Business operations topic, so it appears on Paper 1 only, and it has produced a six mark question in every recent series precisely because the trade-offs in it are so easy to state and so hard to settle.
Objectives
- Managing stock:
- Just in time (JIT).
- Factors affecting choice of suppliers.
Mind map
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Lesson Note
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Lesson Evaluation
Congratulations on completing the lesson on The Role Of Procurement. Now that youve explored the key concepts and ideas, its time to put your knowledge to the test. This section offers a variety of practice questions designed to reinforce your understanding and help you gauge your grasp of the material.
You will encounter a mix of question types, including multiple-choice questions, short answer questions, and essay questions. Each question is thoughtfully crafted to assess different aspects of your knowledge and critical thinking skills.
Use this evaluation section as an opportunity to reinforce your understanding of the topic and to identify any areas where you may need additional study. Don't be discouraged by any challenges you encounter; instead, view them as opportunities for growth and improvement.
- Which one of the following is a benefit to a business of using just in time stock control? A. It can always meet a sudden rise in demand from stock B. It keeps the discounts available for bulk orders C. Less money is tied up in stock D. It needs fewer deliveries Answer: C
- Which one of the following is a cost of holding buffer stock? A. Money is tied up that could be used elsewhere B. Production stops when a delivery is late C. Sales are lost when an item is unavailable D. The business loses its bulk purchasing discount Answer: A
- A business holds stock worth an average of 150,000. Holding stock costs 20 per cent of its value each year. What is the annual cost of holding that stock? A. 3,000 B. 7,500 C. 30,000 D. 75,000 Answer: C
- Which three factors does the specification name as affecting the choice of supplier? A. Location, size and age B. Price, quality and reliability C. Price, advertising and packaging D. Quality, ownership and profit Answer: B
- Why is reliability of supply especially important to a business using just in time? A. Because it holds no stock to fall back on if a delivery is late B. Because it must buy in very large quantities C. Because its customers pay in advance D. Because it has no storage space to rent Answer: A
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