What mistakes do students make with The role of procurement?

Confusing buffer stock with reorder level. Buffer stock is the minimum extra held, while reorder level triggers a new order. Ignoring the opportunity cost of tied-up working capital. Explain that cash spent on stock cannot be used elsewhere. Assuming buffer stock always increases profit. Evaluate that holding costs may exceed the benefit if demand does not rise.

What are the exam tips for The role of procurement in Business AQA GCSE?

Use the case study figures to calculate holding cost and contribution from extra sales before making a judgement. Structure answers to show both benefits and costs, then reach a clear conclusion about whether buffer stock is worthwhile. Avoid drawing stock control charts; focus on written analysis and calculations.

AQA · GCSE · Business

Course version: 8132 · Version from Sept 2017

The benefits of having spare stock to satisfy demand balanced against the…

Full specification wording

The role of procurement: The benefits of having spare stock to satisfy demand balanced against the cost of holding buffer stock.

Buffer stock is extra inventory held to absorb unexpected demand or supply delays.

Checked against the AQA 8132 specification (opens in a new tab) on 22 September 2026.

Point 6 of 21

Study notes

From the checked teaching notes for this specification point.

The idea

What earns the marks

Defines buffer stock as extra inventory held to meet unexpected demand or supply delays.
Explains at least two benefits: avoiding stockouts, maintaining customer service, preventing lost sales, and keeping production flowing.
Explains at least two costs: storage, insurance, tied-up working capital, obsolescence, and damage.
Applies the trade-off to a given business context, showing how holding buffer stock can protect revenue but increase costs.
Uses a calculation to compare the cost of holding buffer stock with the contribution from additional sales.

Common mistakes and how to put them right

Confusing buffer stock with reorder level.
Put it right: Buffer stock is the minimum extra held, while reorder level triggers a new order.
Ignoring the opportunity cost of tied-up working capital.
Put it right: Explain that cash spent on stock cannot be used elsewhere.
Assuming buffer stock always increases profit.
Put it right: Evaluate that holding costs may exceed the benefit if demand does not rise.

Exam tips

Use the case study figures to calculate holding cost and contribution from extra sales before making a judgement.
Structure answers to show both benefits and costs, then reach a clear conclusion about whether buffer stock is worthwhile.
Avoid drawing stock control charts; focus on written analysis and calculations.

Try the lesson

The start of the The role of procurement: The benefits of having spare stock to satisfy demand balanced against the cost of holding buffer stock. lesson, made from checked teaching notes for this specification point.

Have a go first

What is the name given to the extra stock a business keeps so that it can still meet customer demand if deliveries are delayed?

Tip: press 1 to 4 to choose

Listen

Buffer stock is extra inventory held to absorb unexpected demand or supply delays. Benefits: avoids stockouts, maintains customer service, prevents lost sales and production stoppages. Costs: storage, insurance, tied-up working capital, and risk of obsolescence or damage. For example, a bakery holding 100 extra loaves costs £0.50 per loaf per day; if unexpected demand sells 80 loaves at £1.50 each, revenue is £120, extra cost £40, net benefit £80. If demand does not rise, the £50 daily holding cost is wasted. Businesses balance by comparing holding costs with potential lost contribution from stockouts. This is assessed through calculations and case-study analysis, not by drawing stock control charts. A strong answer earns marks for these points. Defines buffer stock as extra inventory held to meet unexpected demand or supply delays. Explains at least two benefits: avoiding stockouts, maintaining customer service, preventing lost sales, and keeping production flowing. Explains at least two costs: storage, insurance, tied-up working capital, obsolescence, and damage. Applies the trade-off to a given business context, showing how holding buffer stock can protect revenue but increase costs. A common slip: Confusing buffer stock with reorder level. Instead, buffer stock is the minimum extra held, while reorder level triggers a new order. Exam tip: Use the case study figures to calculate holding cost and contribution from extra sales before making a judgement.

See it

A top-down flowchart. The top node reads 'Buffer stock: extra inventory held' and branches into two nodes: 'Benefits' and 'Costs'. Under Benefits are four nodes: 'Avoids stockouts', 'Maintains customer service', 'Prevents lost sales' and 'Prevents production stoppages'. Under Costs are four nodes: 'Storage', 'Insurance', 'Tied-up working capital' and 'Obsolescence or damage'. The first benefit node and the first cost node both lead to a final node reading 'Balance holding costs against potential lost contribution'. — It shows buffer stock split into its benefits and costs, which the business then balances against each other.

Label the diagram

Some boxes have lost their names. Pick the right name for each number.

The diagram again, with 3 boxes numbered instead of named. A top-down flowchart. The top node reads 'Buffer stock: extra inventory held' and branches into two nodes: 'Benefits' and 'Costs'. Under Benefits are four nodes: 'Avoids stockouts', 'Maintains customer service', 'Prevents lost sales' and 'Prevents production stoppages'. Under Costs are four nodes: 'Storage', 'Insurance', 'Tied-up working capital' and 'Obsolescence or damage'. The first benefit node and the first cost node both lead to a final node reading 'Balance holding costs against potential lost contribution'.

1Box 1
2Box 2
3Box 3

0 of 3 labelled

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