English for Logistics

Chapter 3
Stocking and distributing your product
 Economies of scale
• Economies of scale are cost advantages companies
experience when production becomes efficient, as
costs can be spread over a larger amount of goods.
• A business's size is related to whether it can achieve an
economy of scale - larger companies will have more cost
savings and higher production levels.
• Economies of scale can be both internal and external.
Internal economies are caused by factors within a single
company while external factors affect the entire industry.
 Buffer stock
• Buffer stock is an excess amount of raw materials kept
on hand to guard against any unplanned inventory
shortages leading into the production process. The
amount of buffer stock to retain involves balancing the
cost of the extra inventory against the amount of
production downtime that is avoided by having the extra
inventory.
• The advantages of buffer stocks are that they maintain
price stability, minimize food shortages, and prevent
sudden drops in prices.
 Buffer stock vs Safety stock
• Similarity: The terms 'safety stock' and 'buffer stock' are often used
interchangeably. Both describe the extra stock retailers use as a cushion
for unexpected demand or uncertainties within the supply chain.
• 'buffer stock' refers to inventory held specifically for unexpected
increase in product demand (e.g., a promotion that brings in more sales
than expected).
➔ Purpose: To protect the customer from running out of inventory in case
there is a sudden increase in demand that exceeds short-term production
capacity
• 'safety stock' refers to inventory held in case of work-in-process
inventory or supplier delays (e.g., manufacturing shutdown)
➔ Purpose: To protect the producers from the incapability of their upstream
processes and suppliers
 Cycle stock
• Cycle Stock is the amount of inventory that is planned for
use over a certain period of time.
• This stage is usually defined as the time between orders
(for raw materials) or the time between production cycles
(for work in the forming and finishing of the product)
 Factory gate pricing
• Factory Gate Pricing: is the price of goods or services as
quoted by the manufacturer, before any taxes, shipping, or
other fees are added.
• Factory gate pricing is a supply chain initiative. Essentially, with
factory gate pricing (FGP), retailers buy goods at the
suppliers' "gate" and take care of getting it to their stores or
distribution centers, either with their own trucks or those of their
contracted carriers. It removes transportation costs from the
overall price that retailers pay for the goods that they will
eventually sell in their stores.
 Tender
• A tender is a formal proposal or request issued by a
company, and sometimes government, to suppliers.
Generally, the issuance of tender is a call for the suppliers
to bid for the supply of a specific project, product or
service.
• The tender is mostly issued to get a project done at a
reasonable cost and time frame possible. To ensure a
smooth and fair competition among the bidders, the
process of bidding is guided by law.
1. Matching
 Lead time
• Lead time measures how long it takes to complete a
process from beginning to end.
• In manufacturing, lead time often represents the time it
takes to create a product and deliver it to a consumer.
 Cycle time
• Cycle time represents the amount of time it takes to
complete one task, production, service, or process from
start to finish.
• Cycle Time is the amount of time a team spends actually
working on producing an item, up until the product is
ready for shipment
Lead time vs Cycle time
 Order cycle time
• (Customer) order cycle time: the amount of time it takes
for a customer to receive their online purchases (from the
moment a customer places an order to the point when the
product is delivered to the customer)
 JIT- Just in time
• The just-in-time (JIT) inventory system is a management
strategy that minimizes inventory and increases efficiency.
• The success of the JIT production process relies on steady
production, high-quality workmanship, no machine
breakdowns, and reliable suppliers.
• this method reduces costs by minimizing warehouse needs.
Companies also spend less money on raw materials because
they buy just enough resources to make the ordered products
and no more.
• The disadvantages of JIT inventory systems involve potential
disruptions in the supply chain
JIT- Just in time
JIT- Just in time
 JIC- Just in case
• Just-in-case (JIC) is an inventory system where
companies keep large inventories on hand.
• This strategy minimizes the probability that a product will
sell out of stock.
• A company that uses this strategy typically has difficulty
predicting consumer demand or experiences large
surges in demand at unpredictable times.
2. Fill the statements using the words in the box
 CRP
• CRP (Continuous Replenishment Program)" is a base that
supports the Efficient Consumer Response (ECR) strategy.
• The program is commonly used in the shipping and logistics
industry to help manufacturers or suppliers meet the demands
of their customers in a timely and efficient manner.
• In a continuous replenishment program, inventory levels are
monitored in real-time using automated systems that track
sales data and inventory levels. When inventory levels fall
below a certain threshold, orders are automatically
generated to replenish the inventory. This helps to ensure
that retailers or customers always have a sufficient supply of
products on hand.
 CRP
● Continuous replenishment is a strategy in which
businesses share inventory information with suppliers,
allowing those suppliers to automatically replenish
inventory when needed.
● Automating inventory replenishment helps reduce logistics
and warehousing costs and aligns production with
demand
 Stock level
• Stock level means the level of stock required for an
efficient and effective control of goods, to avoid over-and
under-stocking of goods. The need of inventory control is
to maintain the stock of goods as low as possible but at
the same time make them available as and when required
 Point of sale- POS
• Point of sale (POS) is where a customer makes the payment
for goods purchased in a store. To simplify, a POS is the
point of purchase where orders are processed, bills are
generated, and customers pay for their purchases.
• Customers can find a POS system at retail stores, restaurants,
hospitals, gas stations, hotels, etc., to allow a space for
customers to pay their bills. The payment page of an
online transaction is also a POS.
• The POS system allows processing payment transactions,
recording of transactions, inventory updates, and various other
things depending on the software features.
POS system
3. Fill in the
blank
4. Complete the statement with the passive form of verbs
5. Complete the
statement