Working with suppliers — Edexcel GCSE Business
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Working with suppliers explained
Working with suppliers covers 2 specification points, including ● interpretation of bar gate stock graphs ●… and ● relationships with suppliers: quality,….
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Open a point below for its explanation and revision guidance.
Managing stock: ● interpretation of bar gate stock graphs ● the use of just in time (JIT) stock control.
Managing stock efficiently is vital for business liquidity. A bar gate stock graph visually tracks inventory levels over time. Key features include the maximum stock level, minimum stock level (buffer stock), and the reorder level (the point at which new stock is ordered). The lead time is the delay between ordering and receiving stock. For example, a retailer might reorder when stock falls to 50 units, expecting delivery before hitting their 10-unit buffer. Alternatively, Just in Time (JIT) stock control eliminates buffer stock entirely. Materials arrive exactly when needed for production, reducing storage costs and waste. However, JIT requires highly reliable suppliers and leaves the business vulnerable to delivery delays or sudden demand spikes.
The role of procurement: ● relationships with suppliers: quality, delivery (cost, speed, reliability), availability, cost, trust ● the impact of logistics and supply decisions on: costs, reputation, customer satisfaction.
Procurement involves sourcing and purchasing goods required by a business. Building strong relationships with suppliers depends on several factors: the quality of materials, delivery performance (including cost, speed, and reliability), consistent availability of goods, competitive costs, and mutual trust. For example, a bakery relies on a trusted flour supplier to deliver high-quality ingredients reliably and cheaply. Logistics and supply decisions directly impact the business. Efficient logistics lower unit costs, while poor supply decisions can halt production. Ultimately, reliable procurement ensures products are available for consumers, boosting customer satisfaction and enhancing the overall reputation of the business in a competitive market.
Your focus
- Interpret key data points from a bar gate stock graph, including lead time and buffer stock.
- Explain the mechanics and primary purpose of Just in Time (JIT) stock control.
- Evaluate the advantages and disadvantages of using JIT compared to holding traditional buffer stock.
Show all 6 objectives
- Identify the key factors that influence a business's relationship with its suppliers.
- Analyse how delivery cost, speed, and reliability affect operational efficiency.
- Evaluate the impact of logistics and procurement decisions on business costs, reputation, and customer satisfaction.
Working with suppliers exam tips
Marking Points
- Identify maximum stock, minimum (buffer) stock, and reorder levels accurately from a bar gate graph.
- Calculate lead time by measuring the horizontal time gap between placing an order and receiving the inventory.
- Explain that JIT reduces warehousing costs, security expenses, and the risk of stock becoming obsolete or perishing.
- Evaluate JIT by discussing the risk of halting production entirely if a supplier fails to deliver materials on time.
- Define procurement as the process of finding and buying materials or services needed for business operations.
- Analyse how supplier delivery speed and reliability prevent production delays and costly stockouts.
- Explain that negotiating lower costs with suppliers can improve a business's profit margins or allow for more competitive pricing.
- Assess how poor logistics and supply decisions lead to delayed customer orders, damaging brand reputation and customer satisfaction.
Examiner Tips
- 💡When interpreting a bar gate graph, use a ruler to trace the reorder level across to the y-axis to ensure accurate readings.
- 💡If asked for a disadvantage of JIT, focus on the vulnerability to external shocks like transport strikes or sudden surges in customer demand.
- 💡Link the reduction of buffer stock in JIT directly to improved cash flow, as less working capital is tied up in inventory.
- 💡When evaluating a choice of supplier, weigh up trade-offs, such as choosing a slightly more expensive supplier because their delivery reliability is significantly higher.
- 💡Use the specific terms from the specification (cost, speed, reliability) when discussing delivery to ensure you hit the exact marking criteria.
- 💡Always link supply chain issues to their final impact on the business, such as lost sales, damaged reputation, or decreased customer satisfaction.
Common Mistakes
- Error: Confusing the reorder level with the reorder quantity. Correction: The reorder level is the stock level that triggers a new order, whereas the reorder quantity is the actual amount of stock purchased.
- Error: Assuming JIT simply means ordering stock quickly. Correction: JIT means ordering stock so it arrives exactly when needed for production, deliberately holding zero buffer stock.
- Error: Misreading the lead time on a bar gate graph. Correction: Always measure lead time horizontally along the x-axis from the reorder point to the vertical line showing the arrival of new stock.
- Error: Stating that procurement is solely about finding the cheapest supplier. Correction: Procurement must balance cost with quality, delivery speed, reliability, availability, and trust.
- Error: Confusing logistics with general business operations. Correction: Logistics specifically refers to the management of the flow of goods, including transport and storage, from supplier to customer.
- Error: Failing to link supplier quality to customer satisfaction. Correction: Always explain that poor-quality supplies lead to defective final products, which directly reduces customer satisfaction.