Effective Supply Chains
Business: Edexcel GCSE, topic 2.3.4
Effective Supply Chain Management
Working with suppliers to make sure that key processes are running efficiently and cost effectively is important for a business.
Long-term relations
- Building long-term relationships with suppliers can help to lower costs even more in the future.
- BMW Mini use Continental tyres when they build new Mini cars. These tyres are transported between Continental and BMW car production plants using logistics companies like Plant Wackersdorf.
JIT production
- A JIT (just in time) method of distribution can be used by the businesses to make sure the supply chain is efficient and reliable.
Supplies at best price and quality
- Having a well organised supply chain has important repercussions for the price and the quality of a final product.
- Price and quality are the two main ways that businesses compete with each other.
Reduce waste
- Cutting any waste and unnecessary costs to create a streamlined process.
- This can help to reduce costs and as a result, increase profits.
Choosing Suppliers
Lots of factors affect a business' choice of suppliers:
Cost
- Firms usually decide which suppliers they want to work with based on the prices that they are offered.
- A firm like Aldi or Primark, which competes based on charging lower prices to consumers, will put lower average costs for supplies as their top priority.
Quality
- Quality is another key area where firms compete.
- This is more important for firms like Waitrose, who pride themselves on delivering high quality products.
Reliability
- If a supplier is unreliable it can lead to regular breakdowns in the supply chain.
- Products need to be delivered on time (for example Continental’s tyre deliveries to BMW Mini) and they need to come from a reliable supplier and through a reliable distributor.
Ethical and environmental considerations
- There can often be a trade-off between costs and whether a product or service is made ethically and in an environmentally friendly way.
- Some firms will place this as a high priority. Firms that advertise themselves as environmentally friendly and ethical, like the Body Shop, will find this is even more important.
Test yourself on Effective Supply Chains
Why should businesses try to build long-term relationships with suppliers?
What method of distribution can be used by a businesses to make sure their supply chain is as cost efficient as possible?
Why should businesses work with suppliers to build efficient supply chains?
To which business is the quality of suppliers' raw materials likely to be more important to?
What are the factors that affect a business' choice of suppliers?