What is the purchasing mix
the purchasing mix is all the factors a business will take into account before choosing a supplier
Name the factors to the purchasing mix
cost of raw materials quality of raw materials lead time quantity of raw materials location of the supplier reliability of the supplier reputation of the supplier storage space available
What is maximum stock level
this is determined by how popular the stock is and what storage space is available
Minimum stock level
this is determined by how popular the stock is and how long it takes for an emergency order to be received
Re-order stock level
this is determined by how long it takes an order to be received, the stock must also be received before the old stock has run out
Re-order quantity
will be set based on what the re-order stock level is, the re-order quantity should not take stock levels above the maximum stock levels
Lead time
this refers to the length of time it takes a supplier to deliver stock once it has been ordered
what is job production
job production, this involves making a product on at a time. the product are hand crafted by skilled workers with very little machinery, example off this are artist or hairdresser
consequences of overstocking
- certain supplies and raw material cam go out of date if they have been stored for too long
- their will be high costs as the company will have to pay for the holding of the stock costs like security and insurance
- the opportunity cost of having large sum of finance in stock is the money could possibly be better used in other areas of the business
consequences of understocking
- the business could run out of stock and be unable to continue with production.
- there will be increased delivery costs as the deliveries will be smaller and more often.
- there could be no stock whilst waiting for more to arrive meaning there is nothing for the business to sell giving them a bad reputation and image.
what are the advantages of computerized stock control
- databases are able to keep balances of the inventory so they can be automatically updated,also means automatic re-ordering can be done when needed as the stock is being monitored
- it can highlight seasonal shifts in market demands
- allows for stock managers make more informed decisions on best selling and slow moving stock
what are the disadvantages of computerized stock control
- computerized systems can cost a lot more to have installed and kept well maintained.
- money and time will have to be invested to have staff trained to understand how top operate the systems efficiently
what is just in time stock control
just in time is a more modern approach to stock control as is the process of having sup[plies ordered for only when they are either required for production or when a specific order has been placed by a customer.
what are the advantages to just in time stock control
- n there will be far less wastage as all the stock will be sued in the production process.
- there is no warehouse needed saving costs
- the wont be as slow to react to changes to external factors
what are the disadvantages to just in time stock control
- if their are any problems with the deliveries then they may be late which would mean the company would have issues of under-stocking
- requires excellent relationship with suppliers for it to work effectively, which can take time.
what is centralized storage
centralized storage is when all the inventory is stored in one central location
what are the advantages to centralized stock control
- large amounts of stock can be held which benefits economy of scale
- all the same procedures will be issued across the whole organisation which will improve consistency
- it can be cheaper to have inventory stored in one large site rather than many smaller ones
what are the disadvantages to centralized stock control
- inventory will have to be delivered to other divisions of the department which takes time and can cause delays
- inventory usage needs and levels can be unclear in other division of the business, good communication skills needed to be successful
- specialist equipment is needed to run the warehouse which may be expensive
- new specialized staff will needed to be employed to work equipment which will have high wage demands, or they could train staff members to work machinery which can be costly and time consuming
what is job production (with examples)
job production involves producing unique, one off products. The products are made to order and they are made one at a time from start to finish. Examples of these large scale projects like the building of a new bridge.Job production can also be for smaller scaling items for made to a customers specific needs, for example a tailor made suit
Advantages to job production
- an advantage to job production is that a higher price can be charged as the product is unique and is made to the customers requirements
- another advantage is that the products can match the exact requirements, which increase customer satisfaction
Disadvantages of job production
- high wages are needed as the work requires highly skilled staff members.
- another disadvantage is that high costs can make the price too high, this can in turn put majority of customer off
What is batch production
Batch production involves having the products made in identical groups, each group is made the same. Batch production is mostly used in the food industry.
Advantages of batch production
- one advantage of batch production is that the batches can be made specifically to customers wants
- another is the batches can be made to take advantage of seasonal factors, example products being made for upcoming events
- the machinery can be standardised to save the company money.
- there is less of a need for workers that are highly skilled.
- materials can be bought in bulk so that discounts can be received
Disadvantages of batch production
- if there any mistakes are made it can ruin the whole batch, unlike job production where only one product is ruined
- employees are likely to be demotivated as the task are monotonous and repetitive
- small batches can raise the cost of the unit
- high stock levels are required which could possible lead to the consequences of overstocking
