Re-order level formula: What are the three components of the design mix? Function Cost (of production) Appearance All of these help contribute to a successful design. Its important for a product to get the balance between these three components right Knowledge Organiser - 3.2 Meeting Customer Needs Just in time (JIT) system of stock control A stock management system where stock is only delivered when its needed. This system does not keep a buffer stock like JIC. What are the two main stock control systems and why do businesses have a stock control system? There are two main types of stock control systems: just in time (JIT) & just in case (J.I.C) The main reason firms have a stock control system is to work out the economic order quantity – this is how much a firm can hold to meet demand but at the same time minimises its costs Advantages of a JIT system of stock control The cost of holding stock is minimised because no stock is held therefore this may enable lower prices to be charged to the final customers and enabling the firm to be more competitive. Cash isn’t tied up in stock therefore the business has better cash flow Having a JIT system may mean savings in wages. Having fewer works but a high rate of output means the firm is being more cot effective What are the advantages to a business of using scientific research? Businesses use scientific research to develop their products. The advantages are that it helps produce products in a better, cheaper way Firms can develop better prototypes which can be trialled It reduces impact on the environment e.g. scientific research can help develop eco friendly packaging Just in case (JIC) system of stock control This system makes sure a business doesn’t run out of stock- in others words it keeps a minimum stock level (also called buffer stock). It’s used for businesses that find it difficult to predict demand Disadvantages of a JIT system of stock control The business becomes vulnerable because it may not be able to get hold of stock when it is needed i.e. to meet increased demand which may lead to dissatisfied customers who then go to rivals instead reducing sales revenue Customer loyalty may decrease if a business gets a reputation for late deliveries What influences the level of stock in a just in case (JIC) system of stock control Seasonality Demand for finished goods Degree of perishability Rent cost What is the definition of stock? Stock is defined as raw materials, semi finished and finished goods a business sells to get revenue Advantages of a JIC system of stock control Stock is always available for businesses so they can meet sudden increase in demand therefore delivery problems like delays with from suppliers are far less likely to cause problems. Allows a firm to take advantage of economies of scale. This may enable lower prices to be charged to customers and therefore the firm can be more competitive. What’s the problem with holding too little stock? Stores will look empty and therefore unattractive You may not be able to fulfil orders therefore customers will go elsewhere What’s the problem with holding too much stock? Liquidity problems may occur because you have too much cash tied up It might take up too much space and therefore extra costs of storage Risk of waste especially if food Disadvantages of a JIC system of stock control Costs for space/warehouse e.g. rent, insurance, wages for security Risk of deterioration of stock Re-order level formula: lead time (in days) x daily usage

Knowledge Organiser - 3.2 Meeting Customer Needs Quality control v Quality assurance Quality control: Ensuring a product or service meets the minimum standards of quality often through the testing of a sample made by quality inspectors Quality assurance: A system of agreeing and meeting quality standards at each stage of production to ensure customer satisfaction Knowledge Organiser - 3.2 Meeting Customer Needs What other ways are there for a firm to reduce its costs and improve its competitiveness? Improve purchasing –the business could use different suppliers who are slightly cheaper prices or try and negotiate the price with existing suppliers. It needs to make sure that quality stays the same otherwise it could lose customers – especially if it is a luxury brand Relocate – it could move to a cheaper location (national or international location) saving money on rent and wages which means you can charge lower prices. However there is a risk that the quality of the products decrease because workers may be less skilled and moving abroad (to another country) will be disruptive in the short term. Better design – improving the design of products could mean you need less components which then reduces the cost of making it Cut overhead costs – a business could cut costs like staff through making them redundant which would help reduce its overall costs Buying in bulk because the more you buy off your supplier the cheaper price he will charge you - because of economies of scale Spending more on quality raw materials because it adds value to the product which means you can charge a premium price. However it depends if customers are price sensitive and how loyal they are to the business What's the main differences between quality control and quality assurance? In quality control quality inspectors check a sample of the final product after they are made to make sure they’re up to the right standard whereas in quality assurance, quality is checked after every stage of production, not at the end. In quality assurance there is emphasis on ‘self checking’ whereas in quality control it’s the inspector that checks the quality They are both there to ensure products are free from faults! What does it mean when a business is ‘cost effective’? Cost effectiveness is when a business reduces its costs but keep its production/output up What's productivity and how do you calculate productivity? Productivity is a measure of output per worker(or machine) over a period of time Its calculation: Number of goods sold Number of workers What are some of the costs for a business of having poor quality products? The business could lose customers/sales for example word of moth may cause a bad reputation Wasted materials and resources will increase costs and reduce the competitiveness Time an money will be wasted remaking products because they are nit up to standard? What are some of the ways a business can improve its productivity ad competitiveness? Training – workers become more motivated and get better skills which means they can produce more Better equipment – new machines may produce more and could reduce product faults which reduces costs More effective work practices – a business could adopt a JIT system which reduces storage costs If a firm increases the productivity of its workers – the cheaper it becomes to produce the products Advantages of quality control: Inspections are supposed to prevent faulty goods from reaching the customer which will improve brand image. Disadadvanatges of quality control: Increases a business's labour costs because you have to hire specially trained quality inspectors It takes the responsibility of quality away from workers to inspectors What are some of the advantages for a business of having good quality products? Gives the business a competitive edge over rivals as there is less wastage Good quality will lead to repeat purchases and increase sales and profit Good quality builds a good brand image which will mean the business can justify having a high price It a good way to add value Advantages of quality assurance: Positive effect on motivation as workers are encouraged to take responsibility for their own quality With more staff responsible for quality – there should be a higher and more consistent level of quality. Disadadvanatges of quality assurance: Requires a training of workers to work properly – expensive! Why is increased productivity important? The cost of producing a product will be reduced Prices can be lowered Profits may be higher