Untitled Flashcards Set

AQA A-Level Business: Managing Supply Chains & Supply Chains Overview

Supply chain management (SCM) is a crucial part of business operations, ensuring that goods and services move efficiently from suppliers to consumers. This topic falls under Operations Management in AQA A-Level Business and is essential for understanding how businesses maintain competitiveness, reduce costs, and improve customer satisfaction.

1. What is a Supply Chain?

A supply chain consists of all the businesses, individuals, resources, and processes involved in the production and distribution of a product or service.

Key Components of a Supply Chain

1. Suppliers – Provide raw materials or components.

2. Manufacturers/Producers – Convert raw materials into finished goods.

3. Warehouses – Store goods before they are needed.

4. Distributors – Deliver products to retailers or customers.

5. Retailers – Sell goods to the final consumer.

6. Customers – End-users who purchase and consume the product.

A well-managed supply chain ensures that each component works efficiently together to minimize costs, maximize quality, and improve speed.

2. Managing Supply Chains Efficiently

To ensure an efficient supply chain, businesses must consider:

A. Flexibility and Agility in the Supply Chain

• Agile Supply Chains → Quickly respond to market changes (e.g., fashion industry).

• Lean Supply Chains → Focus on reducing waste and improving efficiency (e.g., Toyota’s Just-in-Time system).

B. Supply Chain Resilience

• Diversifying Suppliers → Reduces risk if one supplier fails.

• Holding Buffer Stock → Helps meet demand spikes.

• Strong Relationships with Suppliers → Ensures reliability.

C. Effective Supplier Management

• Reliability – Suppliers must deliver on time and meet quality standards.

• Costs – Businesses negotiate prices to ensure profitability.

• Ethical Sourcing – Ensuring fair labor conditions and sustainability.

3. Inventory Management and Stock Control

Businesses must manage stock effectively to avoid problems like overstocking (wasting resources) or understocking (failing to meet demand).

A. Types of Stock

1. Raw Materials – Unprocessed inputs for production.

2. Work-in-Progress (WIP) Stock – Goods in the production process.

3. Finished Goods – Completed products ready for sale.

B. Stock Control Methods

• Just-in-Time (JIT) Production

  • Stock is ordered only when needed.

  • Reduces waste but risks delays if suppliers fail.

  • Used by companies like Toyota.

• Just-in-Case (JIC) Production

  • Extra stock is held as a buffer.

  • Prevents stock shortages but increases storage costs.

C. Stock Control Charts

• Lead Time → Time between ordering and receiving stock.

• Reorder Level → When new stock should be ordered.

• Buffer Stock → Minimum stock to prevent shortages.

• Maximum Stock Level → The highest amount a business can hold.

4. The Role of Technology in Supply Chains

Technology plays a key role in improving efficiency and transparency:

• Automation → Robotics and AI help streamline production.

• ERP (Enterprise Resource Planning) Systems → Integrate supply chain functions into one system.

• RFID (Radio Frequency Identification) → Tracks stock movement in real time.

• Big Data & AI → Predicts demand patterns to optimize inventory.

5. Logistics & Distribution

Logistics is the process of transporting, storing, and handling goods from suppliers to customers.

A. Distribution Strategies

1. Direct Distribution

   • Manufacturer → Consumer (e.g., Apple selling directly online).

2. Indirect Distribution

   • Manufacturer → Retailer → Consumer (e.g., supermarkets).

B. Transportation Methods

• Road → Flexible but affected by traffic.

• Rail → Good for large, heavy goods.

• Air → Fast but expensive.

• Sea → Cheap for bulk but slow.

C. Global Supply Chains

• Advantages: Lower costs, access to more suppliers.

• Disadvantages: Longer lead times, currency fluctuations, and risks like political instability.

6. Improving Supply Chain Performance

A. Ways to Improve Efficiency

1. Supplier Relationships – Strong relationships ensure better prices and reliability.

2. Automation – Reduces human error and increases speed.

3. Outsourcing – Some tasks can be given to third parties (e.g., logistics companies like DHL).

4. Sustainability & Ethical Sourcing – Ensuring fair labor practices and reducing waste.

B. Measuring Supply Chain Performance

• Lead Time → How fast products move through the supply chain.

• Stock Turnover Ratio → How often stock is sold and replaced.

• Customer Satisfaction → Ensuring deliveries are on time and products meet expectations.

7. Case Studies & Real-World Examples

1. Amazon – Uses advanced AI and robotics to streamline inventory and delivery.

2. Toyota – Pioneered Just-in-Time (JIT) manufacturing to reduce stock waste.

3. Zara – Keeps supply chains short and fast to react to fashion trends quickly.

8. Supply Chains & Business Strategy

A business’s supply chain strategy should align with its overall business objectives:

• Cost Leadership → Keeping supply chain costs low to offer lower prices (e.g., Aldi).

• Differentiation → Using high-quality, sustainable suppliers to stand out (e.g., Tesla).

• Customer Focus → Fast and efficient supply chains to improve customer satisfaction (e.g., Amazon Prime).

9. Exam Practice & Essay Questions

Potential Exam Questions

1. Explain the key components of a supply chain and why managing them effectively is important.

2. Compare the advantages and disadvantages of Just-in-Time vs. Just-in-Case stock control.

3. Discuss the impact of technology on supply chain management.

4. Evaluate the importance of logistics and distribution in supply chain management.

5. Assess how businesses can improve the efficiency of their supply chains.

Final Thoughts

Managing supply chains effectively is crucial for businesses to reduce costs, improve efficiency, and ensure customer satisfaction. The key to mastering this topic in AQA A-Level Business is to understand theory, real-world applications, and exam techniques.

Would you like detailed notes on any specific subtopic?