4.6 Working with suppliers

Role of procurement

• Procurement: The management of purchasing within a business. It involves obtaining the goods and services the business needs from suppliers.

Stages in the Procurement Process

Identifying Goods and Services to Buy

Influences on Decisions:

• Seasonal demand, technological changes, and shifts in fashion and lifestyle.
• Example: A clothes retailer deciding what stock to carry for the summer season. Implications: Accurate identification means that the business meets customer demand and avoids overstocking.

Choosing Suppliers

Influences on Decisions:

• Quality, cost, reliability, and speed of delivery.
• Example: A furniture store requiring consistent quality and timely delivery from suppliers. Implications: Selecting reliable suppliers is crucial to maintaining product quality and customer satisfaction.

Ordering Goods and Services

Influences on Decisions:

• Order quantity, lead time, and terms of payment.
• Example: A bakery ordering flour from a supplier to meet daily production needs. Implications: Efficient ordering processes help maintain adequate stock levels without excessive inventory costs.

Receiving Deliveries from Suppliers

Influences on Decisions:

• Inspection for quality, accuracy of order, and storage requirements. Example: A small shop owner receiving and shelving goods in the store.

Implications: Proper receiving procedures ensure that the business gets what it ordered and maintains product quality.

Impact of Logistical and Supply Decisions on Businesses

Key Logistical Issues and Potential Problems

Time

• Explanation: Timely delivery of goods is essential to meet customer demand.
• Potential Problem: Delays due to supplier issues can lead to lost sales and revenue.

Reliability of Supply

• Explanation: Consistent quality and supply of goods are vital for maintaining customer trust.
• Potential Problem: Unreliable suppliers can cause production halts and customer dissatisfaction.

Length of Supply Chain

• Explanation: Longer supply chains can introduce more points of failure.
• Potential Problem: Increased risk of delays and higher costs due to complex logistics.

Costs

• Explanation: Minimizing delivery and production costs is crucial for profitability.
• Potential Problem: High delivery costs can reduce overall profit margins.

Customer Service

• Explanation: Providing excellent service to customers involves ensuring timely and accurate deliveries.
• Potential Problem: Poor supplier performance can negatively impact customer service levels.

Summary

Logistical and supply decisions play a critical role in a business's ability to meet customer expectations and operate efficiently. Choosing reliable suppliers, managing costs, and ensuring timely delivery are essential to maintaining a competitive edge.