Working with Suppliers
Business: Edexcel GCSE, topic 2.3.3
Supply Chain
A supply chain is the sequence of processes involved in converting raw materials into a final product and then distributing it to customers. There are many businesses involved in a supply chain and the number and type of firms will change depending on the product. A typical supply chain involves:
Raw materials
- A typical supply chain starts with suppliers of raw materials.
- For example, a mining company like Rio Tinto.
Manufacturer
- This is the firm that turns the raw materials into a product.
Distributor
- This is the firm that takes the product and delivers it to shops.
Retailer
- This is the shop that sells the product to the consumer.
Procurement and Logistics
Procurement is the process of finding and buying the materials and equipment that a firm needs to provide its product or service. Logistics is the organising of the processes involved in the supply chain (including transport of raw materials and final products).
Efficiency
- Logistics and procurement are very important to successfully running a business.
- If a business has effective logistics and procurement systems then it will minimise waste in the production processes and find the materials it needs at the best possible price.
- This can lower the business’ average unit costs, which is likely to increase profit if they make the same number of sales.
Jaguar Land Rover and DHL
- For example, Jaguar Land Rover use DHL to transport the stock of its car parts to and from its factories but also within car plants (for example at the Castle Vale factory in Birmingham).
Stopping the supply chain breaking down
- Logistics and procurement also make sure that the supply chain does not break down at any time.
- If a supply chain did break down it might mean that customers want to buy a product but are unable too.
- This could mean that a business gains a reputation for being unreliable.
Test yourself on Working with Suppliers
Supply Chains
What are the components of a typical supply chain?
What do we call a firm that turns raw materials into a product?
Why do companies need effective procurement and logistics systems?
Jaguar Land Rover use DHL to transport the stock of its car parts to and from its factories but also within car plants. What is this process called?