Which of these people would be most likely to work in the procurement department of a clothes manufacturer?
Buyer
Customer service adviser
Delivery driver
Machinist
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Which of these people would be most likely to work in the procurement department of a clothes manufacturer?
Buyer
Customer service adviser
Delivery driver
Machinist
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Which of the following formulae is used to calculate average unit costs?
Fixed costs/output
Total costs/output
Total costs/profit
Variable costs/profit
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Identify two stages of the process of procurement.
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Which of the following is correct when a business uses just-in-case stock control rather than just-in-time stock control?
Deliveries are more frequent.
Less warehouse space will be needed.
Stock is less likely to go out of date
Sudden increases in demand are not a problem.
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State two types of stock commonly held by manufacturing businesses.
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State two implications of holding too much stock.
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State one factor that affects a business's choice of supplier.
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John is a sole trader who owns a business called Adventures. The business was set up seven years ago to sell activity holidays in the UK. John has been a keen water-sports enthusiast for many years. He had been unhappy when working for a large insurance company. He therefore decided to set up Adventures. Adventures offers a range of activities such as windsurfing, canoeing and surfing.
One holiday that Adventures sells is a weekend course where people can learn to windsurf. The business employs an instructor and books the hotel. This is then sold as a package holiday to customers.
Table 1: Cost information for a windsurfing weekend
Number of participants | Fixed costs | Total variable costs |
10 | £1500 | £2600 |
John strongly believes that a successful business should be a sustainable business. Adventures will only book hotels that take responsibility for their impact on the environment by recycling and using renewable energy. This means Adventures often pay a premium price for accommodation.
Many of John’s customers go skiing during the winter months and he would like to expand and sell ski holidays in Italy. John has never skied himself so he has asked his friend Lucas for some advice. Lucas has never run his own business before but has lived and worked in an Italian ski resort called Folgaria for several years. He is familiar with the local hotels there and knows several ski instructors. Lucas does not believe that the business should pay a premium price for hotels but is keen to invest in the business. Lucas would like to form a partnership in which decisions are shared equally with John.
Using Table 1, calculate the average unit cost for 24 participants in the windsurfing weekend.
State the average unit cost formula used and show your workings.
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Explain one reason why high quality raw materials are important in production.
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Fleet Bikes is a United Kingdom (UK) business which manufactures high quality adult road bikes to sell to retailers. Orders from retailers are expected to be delivered within two weeks. There are lots of competitors for adult bikes. To increase its share of the bike market, the business has decided to develop its own range of children’s bikes. A loan will be required to fund a factory extension. The business is aiming to reduce production costs.
The factory uses total quality management (TQM). The production of bikes uses steel and aluminium. The price of these raw materials goes up and down daily. Each month, Fleet Bikes estimates the amount of steel and aluminium it will need in advance for production. These large orders are delivered within a week and take up all the space in the warehouse. Currently, Fleet Bikes receives a 10% discount from its main supplier for large orders. The supplier can deliver smaller amounts within three hours for an extra cost.
Children’s bikes will be sold only on Fleet Bikes’ website. Customers will expect quick delivery and many of the bikes will need to be manufactured and then sent to the customer within 24 hours of receiving the order.
Explain one benefit to Fleet Bikes of using just-in-case stock control.
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Demand for Fone ltd's ultra-thin phone cases has been increasing. However, the production department has not been able to make them in the quantity required. Fone Ltd has decided that it will introduce flow production in the department.
Specialist machinery was installed in April. In the new flow production process, workers have specific jobs, such as loading different coloured materials into the machines. The process will allow changes to be made quickly, such as the shape and style of the phone cases for different makes and models of phones. The new flow production process means the business can produce up to 100 000 phone cases a month.
Production of phone cases at Fone ltd
March | April | May | June | |
Number of employees in the production department | 14 | 10 | 10 | 10 |
Total costs | £160 000 | £179 000 | £234 000 | £275 000 |
Total output (number of phone cases) | 20 000 | 25 600 | ? | 50 000 |
Average unit cost of each phone case | £8 | £7 | £6 | £5.50 |
Using the information in Table, calculate the average number of phone cases per month produced from April to June.
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Explain two benefits to a business of having an effective supply chain.
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Explain what is meant by the term supply chain.
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Explain the difference between the terms procurement and logistics.
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Fleet Bikes is a United Kingdom (UK) business which manufactures high quality adult road bikes to sell to retailers. Orders from retailers are expected to be delivered within two weeks. There are lots of competitors for adult bikes. To increase its share of the bike market, the business has decided to develop its own range of children’s bikes. A loan will be required to fund a factory extension. The business is aiming to reduce production costs.
The factory uses total quality management (TQM). The production of bikes uses steel and aluminium. The price of these raw materials goes up and down daily. Each month Fleet Bikes estimates the amount of steel and aluminium which it will need in advance for production. These large orders are delivered within a week and take up all the space in its warehouse. Currently, Fleet Bikes receives a 10% discount from its main supplier for large orders. The supplier can deliver smaller amounts within three hours for an extra cost.
Children’s bikes will be sold only on Fleet Bikes’ website. Customers will expect quick delivery and many of the bikes will need to be manufactured and then sent to the customer within 24 hours of receiving the order.
When ordering raw materials of steel and aluminium, the business is considering changing to just-in-time stock control (JIT).
Advise Fleet Bikes Ltd whether or not this is a good idea.
Give reasons for your choice.
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Thorntons Ltd is a British chocolate making business which is part of a larger company. Thorntons sells its chocolate products in stores. Boxes of handmade chocolates sell for a minimum of £6. Employees are trained to personalise some products, such as adding a name to Easter eggs, to add a touch of luxury.
Two of Thorntons’ ingredients are cocoa and palm oil. A Fairtrade agreement for cocoa guarantees a higher price for Fairtrade farmers above the normal market price at which it can be sold.
The company wants to behave ethically. When its supplier of palm oil cut down too many trees and had a negative impact on the environment, it found a new supplier in South East Asia.
Information from the Thorntons website Thorntons supports human rights. It wants to ensure working conditions are safe and its supply chain pays a living wage to workers in all countries. It has set an objective to double the amount of cocoa it purchases from Fairtrade farmers. |
Analyse one factor that will influence the choice of suppliers for Thorntons.
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Style the Chic (STC) has experienced rapid growth since 2018. It outsources all the production of its fast fashion collections. It currently uses six suppliers who are based in the UK and China.
Each collection (range of clothing items) can contain up to 30 items of clothing including jackets, dresses and tops. Items will be available to buy for about four weeks. Suppliers are sent designs based on the current trend. They must create clothing samples for marketing within 48 hours. Full production and launch is a month later. If sales are high, more orders are expected quickly. Otherwise the business moves on to another collection.
Table 2 – STC’s costs and sales
2020 | 2016 | |
Average unit cost | £29.99 | £40.99 |
Output/sales (volume) | 450 000 | 50 000 |
Table 3 – STC’s suppliers
2020 | 2016 | |
Average amount (per unit) paid to suppliers | £29.99 | £40.99 |
Style the Chic (STC) currently uses six suppliers. The amount paid to them is shown in Table 3.
Analyse one benefit to STC of effective supply chain management.
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Average unit costs have increased recently at Fone ltd. Anita feels that low employee productivity is the reason for this. To improve productivity, she is considering two options.
Introduce a new lean production technique
Each department can have a group of up to three employees making suggestions on how to improve the process to lead to higher productivity
It will be optional to join these groups
Groups can be set up immediately and will have responsibility for reviewing roles and tasks within the department and suggesting changes
There will be a bonus of £5000 for each department (to be shared within the department) if they improve productivity in the next three months
Change the organisational structure and recruit internally for new assistant managers within each department
Internal recruitment for assistant managers can be completed within a month
This will result in a pay rise of £5000 for successful applicants
Assistant managers will have the authority to make some decisions and will oversee training
Figure 1 Current organisational structure of Fone ltd
Table Information about employees’ productivity in each department at Fone ltd
Operations | Finance and administration | Human resources | Marketing | |
Daily hours employees are working productively (maximum = 8 hours) | 6 | 7 | 7.5 | 7.7 |
Anita wants to increase the productivity of all employees quickly and plans to use two options to achieve this.
Introduce a new lean production technique to each department
Change the organisational structure and recruit internally for new assistant managers within each department
Analyse the effect of each of these two options on all employees at Fone ltd.
Evaluate which option Fone ltd should introduce first to improve the productivity of all its employees in the short term.
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