AQA · GCSE · Business
Course version: 8132 · Version from Sept 2017
Students should recognise that the benefits of reduced costs must be…
Full specification wording
The role of procurement: Students should recognise that the benefits of reduced costs must be balanced against the cost of more frequent deliveries and lost purchasing economies of scale.
Reduced costs may come from lower stockholding, less waste, or negotiating better supplier terms.
Checked against the AQA 8132 specification (opens in a new tab) on .
- Point 5 of 21
Study notes
From the checked teaching notes for this specification point.
The idea
Reduced costs may come from lower stockholding, less waste, or negotiating better supplier terms. However, more frequent deliveries increase transport and administration costs, and ordering in smaller quantities may forfeit bulk discounts. For example, a business using JIT may save on storage but pay more per unit and for delivery. Assessment focuses on balancing arguments and applying them to procurement decisions.
What earns the marks
- Identifies benefits of reduced costs, such as lower storage costs or less obsolete stock.
- Explains that more frequent deliveries increase transport and administration costs.
- Explains that smaller order quantities can lead to lost purchasing economies of scale.
- Balances the benefits against the drawbacks to reach a supported judgement.
- Applies the trade-off to a procurement decision, e.g. choosing a supplier or order size.
Common mistakes and how to put them right
Listing benefits without considering drawbacks.
Put it right: Balance both sides.
Assuming reduced costs always improve profit.
Put it right: Consider the extra delivery and purchasing costs.
Ignoring the impact on supplier relationships.
Put it right: Discuss how frequent small orders may affect supplier terms.
Exam tips
- Use a table to compare benefits and drawbacks before writing your answer.
- Refer to the context to make your judgement specific.
- Use connectives such as 'however' and 'therefore' to show balance.
Try the lesson
The start of the The role of procurement: Students should recognise that the benefits of reduced costs must be balanced against the cost of more frequent deliveries and lost purchasing economies of scale. lesson, made from checked teaching notes for this specification point.
Have a go first
When a business orders stock more frequently in smaller amounts, which extra cost is it most likely to face?
Listen
Reduced costs may come from lower stockholding, less waste, or negotiating better supplier terms. However, more frequent deliveries increase transport and administration costs, and ordering in smaller quantities may forfeit bulk discounts. For example, a business using JIT may save on storage but pay more per unit and for delivery. Assessment focuses on balancing arguments and applying them to procurement decisions. A strong answer earns marks for these points. Identifies benefits of reduced costs, such as lower storage costs or less obsolete stock. Explains that more frequent deliveries increase transport and administration costs. Explains that smaller order quantities can lead to lost purchasing economies of scale. Balances the benefits against the drawbacks to reach a supported judgement. A common slip: Listing benefits without considering drawbacks. Instead, balance both sides. Exam tip: Use a table to compare benefits and drawbacks before writing your answer.
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