Shared Flashcard Set


Supply Chains
AS Level Business for AQA specification.
Not Applicable

Additional Business Flashcards





What is a supplier?

A supplier is a business or individual that provides goods and services to another business.
Importance of suppliers
  • An effective supply chain is needed to meet the needs and wants of customers.
  • Suppliers determine business costs such as raw materials, distribution, etc.
  • Suppliers are closely linked with product quality.
  • They provide an important source of finance through trade credit.
  • Effective relationships with suppliers are essential if the business uses methods of lean production.
Effective supplier characteristics

Price: Value for money is crucial as this has a direct impact on business profit margins, although the lowest price will not always offer the best value in terms of quality.
Quality: Consistently high quality is needed to keep customers happy and deliver the right product at the right time.
Reliability: The correct products need delivering on time and goods need to work as described.
Communication: Suppliers need to be easy to communicate with to place orders and develop supplier relationships.
Financial Security: Suppliers need to stay in business. If their cash flow is good, they may be able to offer better payment terms.
Capacity: Suppliers need to be able to handle increased volumes of orders, often at short notice.

Supplier prices

Suppliers must offer a competitive price to give businesses value for money.

Ways of pushing down prices:

  • Grouping purchases with fewer suppliers by using bargaining powers to get lower prices.
  • Ensuring suppliers compete against each other for regular orders.
Strategic suppliers

The business cannot succeed without an effective supplier relationship. Goods and services provided are essential for the business' survival. 
Examples include car components to a car manufacturer; fresh produce to fast-food chains; and IT systems to a car hire company. 

Commodity suppliers

Goods and services which can easily be bought elsewhere. Suppliers rely on the business.

Examples include office stationary for a car manufacturer; shop cleaning for fast-food chains; and water coolers for car hire companies.

Suppliers and performance

Lower Purchase Costs: Better prices from suppliers lower business costs, allowing the business to compete on price.

Better Quality: Allows businesses to satisfy customers and gain a good reputation.

Improved Customer Service: Allows for better repuation through fewer late deliveries, good reviews, etc.

Increased productivity: Lowers unit costs offering competitive advantage and cuts out wastage (lean production).

More Flexible Capacity: Allows a business to work with suppliers to meet sudden increases in demand.

Suppliers and cash flow
Trade credit allows a business to buy goods and services from a supplier and pay after a time period.
  • Extending trade creditor terms is a way of improving cash flow as it delays cash outflows.
  • Extending trade credit too far risks damaging supplier relations and suppliers may lose trust if debt turns bad.
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