it s a question of procurement!

Transcription

1 business To stock or not to stock? Teacher Guidance and Instructions The following activity is designed to address the content covered in section of the dexcel specification focusing specifically on factors affecting supplier choice, procurement and logistics and managing stock. The group activity allows students to explore a range of options, weighing up the pros and cons of each, before arriving at a final justified decision. Instructions 1 Organise the students into groups of 4 2 Issue each group with a scenario sheet, supplier information cards and a decision sheet 3 Students record their suggested pros and cons based on the information provided on the decision proforma 4 Allow the students time to review the sheet and decide on a final supplier this decision must be justified 5 There are additional follow up examination questions, written specifically for each examination board, that can be completed in class or set for homework

2 SCNARIO Dreams ice-cream are a medium sized manufacturer of luxury ice-cream who supply to several high-street supermarkets as well as smaller retail outlets. Following the appointment of a new lead buyer to the procurement department the company is reviewing its current stock control methods and suppliers. Detailed research has been carried out into the range of potential suppliers and tenders have been received from three suppliers to compare alongside their current supplier. Dream Ice-cream - Data Drop: Average monthly demand 100,000 units (forecasts suggest this will increase by 50% in the next 12 months) Current output 30,000 units per week Current delivery schedule 60,000 units every two weeks Current amount of buffer stock held 20,000 units Your Task Based on all the information provided, which supplier would you advise Dreams Ice Cream to choose? You must be prepared to give reasons to support your decision. Dreams

3 Current Fresh Direct 10 5,000 5 days SA R M SO PL U RC 10% 1.80 Already have a strong working relationship after 10 years with the supplier Farm & Country 15 5,000 2 days % (on orders >10000 units) Favourable credit terms of 60 days

4 Acorn 20 50,000 7 days SA R M SO PL U RC None 1.50 Located in close proximity to Dream ice-cream Horizon Organic 10 5,000 1 day 2.00 Negotiable Deliveries are sent 24hrs a day for maximum flexibility

5 Decision sheet Pros Cons Current Fresh Direct Farm & Country Acorn Horizon Organic The final decision is: The main reason for this decision is:

6 Decision sheet/ Teacher Guidance Pros Cons Current Fresh Direct Farm & Country Acorn Horizon Organic stablished relationships 10yrs of loyalty Quality of the product is very good Price is very competitive compared with other suppliers and almost the cheapest when the discount is factored in at 10% Very short lead time which could allow Dreams to have more frequent orders and hold less stock is low and more suited to frequent ordering Credit terms could help cash flow for Dreams Cheapest supplier on offer Located close to Dreams therefore delivery costs may be lower, however lead time could be an issue Shortest lead time out of all suppliers 24hr delivery means that Dreams could have more frequent and smaller deliveries arriving at various times during the day e.g. avoids disruption to production or distribution There are cheaper alternatives Lead time is greater than possible new suppliers if more frequent orders are needed is the 50,000 units, minimum order quantity, too much? xpensive unit price (2nd most expensive) although a discount is available for larger orders Wastage could be a problem as the number of defective products are 50% higher than existing supplier High level of defective products, double the amount currently received Long lead time (7 days) and two days more than current supplier The most expensive supplier, however it is organic produce which could add a further USP in the luxury market The final decision is: See commentary below The main reason for this decision is: Students are likely to opt for either remaining with the current supplier and discuss the benefits to a business of established supplier relationships and bargaining power or opt for Horizon Organic. For this choice, although price is higher, there is scope to negotiate discounts for Dreams and also the advantage, as production is set to expand, that they could hold less stock and move to a JIT method of managing stock control. There is also the possibility of the organic USP to be utilised in the luxury ice cream market.

7 Follow up examination question dexcel exam board Managing Stock valuate the impact on Dream ice-cream of a decision to manage their stock using JIT (12 marks) Procurement & Logistics valuate the impact on the procurement and logistics of Dream ice-cream from a decision to switch suppliers (12 marks) Level Mark Descriptor No rewardable material Demonstrates elements of knowledge and understanding of business concepts and issues, with limited business terminology used (AO1b) Limited application of knowledge and understanding of business concepts and issues to the business context (AO2) Attempts to deconstruct business information and/or issues, finding limited connections between points (AO3a) Draws a conclusion, supported by generic assertions from limited evaluation of business information and issues (AO3b) Demonstrates mostly accurate knowledge and understanding of business concepts and issues, including appropriate use of business terminology in places (AO1b) Sound application of knowledge and understanding of business concepts and issues to the business context although there may be some inconsistencies (AO2) Deconstructs business information and/or issues, finding interconnected points with chains of reasoning, although there may be some logical inconsistencies (AO3a) Draws a conclusion based on sound evaluation of business information and issues (AO3b) Demonstrates accurate knowledge and understanding of business concepts and issues throughout, including appropriate use of business terminology (AO1b Detailed application of knowledge and understanding of business concepts and issues to the business context throughout (AO2) Deconstructs business information and/or issues, finding detailed interconnected points with logical chains of reasoning (AO3a) Draws a valid and well-reasoned conclusion based on a thorough evaluation of business information and issues (AO3b)