Entrepreneurship

Quarter 4, Week 2

Lesson: Identifying Suppliers and managing Supply Chain

MELC: Describe the 4Ms (Manpower, Method, Machine, Materials) of operations in relation to
the business opportunity: Select/pinpoint potential suppliers of raw materials and other inputs
necessary for the production of the product or service; Discuss the value/supply chain in
relation to the business enterprise, and Recruit qualified people for one’s business enterprise.
(TLE_ICTAN11/12EM-Ia-2)

Learning Objectives:
After reading these information sheets, you will be able to:
1. Identify potential suppliers of raw materials and other inputs necessary for the
production of the product or service;
2. Discuss the value/supply chain to the business enterprise; and
3. Recruit qualified people for one’s business enterprise.

INFORMATION SHEET
Identifying Suppliers and managing Supply Chain
Introduction:
This Learning Activity Sheet will help you identify and select potential suppliers of raw
materials and other inputs necessary to produce a product or service. You will also learn to tell
the value/supply chain to the business enterprise and recruit qualified people for one’s
business enterprise.
What a business buys indeed has an evident impact on what the business sells to its
customers. Therefore, as an entrepreneur, you have to make sound decisions about what,
how, and to whom you buy the items your business needed. Every business enterprise, be it a
start-up or a fully established one, must buy items for their business either for selling or
consumption. Therefore, it is necessary to identify the items to be bought and the suppliers to
buy the items.
Organizing your business buying function is an essential step in the buying process.
The people in your company responsible for the buying process need to ascertain what
customers want by monitoring their buying behavior constantly. They also need to be up to
date on the new products coming into the market. It is recommended that you designate one
person authorized to make final purchasing decisions for your business.
Key Concepts

Items the business need to buy

1. Equipment is all the machinery, tools, workshop fittings, office furniture, etc., that
your business needs to make goods or provide services. Buying equipment costly
machinery is a serious matter, as it impacts your profitability.
2. Raw materials. Manufacturers need raw materials to make goods to sell. Raw
materials are all the materials that go into the goods you produce. Try to use raw
materials that are readily available from reliable suppliers and are of good quality.
Using quality assured raw materials increases the value of your products and the
likelihood that they are perceived as reliable by your customers. On the other hand,
do not buy and use raw materials that make your product cost more than your
customers are willing to pay.
3. Finished goods. Manufacturers use equipment to make raw materials into finished
goods. Wholesalers and retailers buy and sell finished goods produced by
manufacturers.
4. Services and outsourced items. Your business will require services from other
businesses, such as security services, transport services, cleaning services, and
equipment servicing and maintenance. In many cases purchasing services from
reputable service providers is less expensive than doing it yourself. You may also
consider outsourcing some production work if your people do not have the
necessary skills or seasonal work. For example, a garment factory can outsource
embroidery to women in the village who can work at home. Outsourcing helps you
save production costs, plus it creates good relationships with local people and
generates more employment.

Steps to follow when buying

To be effective, buying for your business should follow a systematic step-by-

step process. These are called buying rules and procedures. There are eight
recommended steps to follow. Such procedures will reduce fraud and ensure your
business gets the best prices and conditions.
Step 1: Find out what your business needs based on what your customers need.
Step 2: Get as much information as possible about different suppliers by asking people
who work with you, looking on the internet, reading newspapers, magazines,
trade journals, and checking the telephone book. Also, go to trade fairs to meet
with potential suppliers Step 3: Conduct background checks on suppliers to learn
about the suppliers’ reputations and reliability.
Step 4: Contact the suppliers for quotations and compare them to determine what the
different suppliers can offer.
Step 5: Negotiate the terms and choose the best suppliers by contacting each supplier to
request the best terms they can offer. Compare these negotiated quotations to
determine which is best for your business.
Step 6: Sign a contract and make the order: It is always best to order in writing. Think
carefully about the quantities you need.
Step 7: Receive and check the goods immediately. If there is something wrong, tell the
supplier instantly.
Step 8: Check the invoice and make the payment. Ensure that you have received
everything you are paying and the prices and totals are correct.

Identifying Potential Suppliers of Raw Materials and Other Inputs

Find out which suppliers sell the goods, materials, services, or equipment you
need. Information gathering is vital if the potential supplier does not have a relationship
with your business. It also helps you to identify other suppliers that you may not have
known about.

Ways to get information about potential suppliers:

 Ask. Inquire from the potential informant such as people you worked with, former
teacher, a consultant, other people who knew about the supplier, and even those
who know where the competitors buy.
 Contact. Communicate with business groups like the Chamber of Commerce, who
usually support budding businesses and know reliable suppliers.
 Look. Find the list of suppliers and other information about them in newspapers,
magazines, trade journals, and telephone yellow pages.
 Search. Searching the internet for the websites of potential suppliers as valuable
information about the product they sell, price list, credit terms, and delivery deals
can be found there.
 Use social media. Social media nowadays became a key source of information.
Suppliers are now using social media platforms to share information about their
products and business terms. It also allows you to read reviews and comments
from customers who have had experiences with your target supplier.
 Visit. Visiting trade fairs to meet prospective suppliers is still reliable as you can
get first-hand information about the supplier and their products and immediately
negotiate with them.
 Advertise. Advertising for suppliers promotes competitive bids and is cost-
effective since interested suppliers are the ones who will go to you.
Why is there a need to conduct background checks on suppliers?
The reputation and reliability of the supplier are important. Consider the following:
 Does the supplier usually deliver on time?
 Does the supplier accept returned goods or materials?
 How responsible is the supplier for the quality of goods or materials?

The value/supply chain to the business enterprise

The network of individuals, organisations, programs, activities, and technologies
involved in manufacturing and distributing a product is known as a supply chain. The
supply chain includes distributing source goods from the supplier to the manufacturer to
the final sale to the end-user. The distribution channel is the link in the supply chain
that transports the finished product to the consumer. Lead time is the amount of time it
takes for all of these procedures to complete from beginning to end. Supply chain
administrators oversee supply chains, monitor lead times, and coordinate processes at
all levels to maximize customer satisfaction. Despite the fact that supply chains and
value chains can be compared, they all contribute to the same end product in different
ways. The aim of supply chains is to meet customer demands. Value chains aim to add
value to a product on top of its intrinsic value. The objective of the value chain is to give
the company a competitive advantage in the marketplace. Supply chain and value chain
management are two different approaches to the exact basic mechanism that work
together to meet two different definitions of "market."

Steps in the supply chain

The fundamental steps of a supply chain in order are as follows:
1. Sourcing raw materials.
2. Refining those materials into basic parts.
3. Combining those basic parts to create a product.
4. Order fulfillment/Sales.
5. Product delivery.
6. Customer support and return services.

Supply chain management

Supply Chain Management is the process of monitoring raw materials,
documents, and finances as they move from supplier to manufacturer to wholesaler to
retailer to consumer (SCM). The three key flows of SCM are commodity flow, knowledge
flow, and financial flow, which occur in three stages: policy, preparation, and service.
SCM integrates and incorporates the said flows within and between companies.

Supply chain models

There are many traditional supply chain business models, each with its own
approach to achieving its objectives. The models are designed with two key goals in
mind: responsiveness and performance. Furthermore, models tend to choose one over
the other. Organizations should weigh each's value proposition against their priorities
and constraints to determine which is best for them. The models can overlap, so the
supply chain manager should tailor them to the specific supply chain.
The model types are:
1. Continuous flow model – this model is best for mature companies with a high
degree of stability.
2. Agile model – this model works best for companies selling made-to-order products
and products with unpredictable demand.
3. Fast chain model – it works best for companies selling products with a short
lifespan, such as fashion items.
4. Flexible model – works well in industries with a high degree of consistency and a
few consistent demand peaks.
5. Custom configured model – focuses on customizing.
6. Efficient chain model – it is most effective in highly competitive markets where
pricing is a major factor.

Recruitment of qualified people

You need to organize and lead the people properly for your business to be
productive. Your business is an organization wherein you and your workers are working
together to achieve business goals. If your business is well organized and all the
employees know their positions, responsibilities, job descriptions, and who manages
them, they are properly structured. An organization structure refers to the arrangement
of people and their position in the organization

When setting up organizational structures, the following must be considered:

 The system must be straightforward, adaptable, and free of bureaucratic red
tape.
 It should be constructed following the job descriptions.
 Employees should be involved in the planning and execution of work schedules.
 All staff must be adequately informed about the structure.
 The structure must be revised regularly to account for changes in the climate.
How to recruit the right people?
Your business must have a clear recruitment policy that is based on the needs of the
business. The recruitment policy should clearly state what skills are necessary for your
business, the type of people you would like to recruit, the number of people you will
recruit, and how you will find and hire them. All the people who are involved in the
recruitment process in your business must consistently follow this policy. It must be
applied to all candidates, including relatives and family members.

When recruiting people, you must:

 Determine the work that needs to be done in your business.
o Step 1: List the kind of work to be done and the skills and attitude needed.
o Step 2: Estimate the amount of work involved.
o Step 3: Determine who does what job
 Write job descriptions that specify who is to do what. A job description is like a
work programmed for one person. Job descriptions help you decide who should
do what job and the skills and abilities needed to perform the job. Job
descriptions also help workers understand what is expected from them.
 Attract suitable applicants and then interview and select the right workers.
 Finally, help the new worker to settle in and to understand your business
(induction).

Recruitment
✓ It is the method of identifying and recruiting qualified job applicants. The
procedure starts with the recruitment of candidates and concludes with the
submission of their applications. As a result, a pool of candidates is created from
which new hires are chosen.
✓ It is the method of putting together a pool of eligible work candidates.
✓ The HR department's primary responsibility is recruitment. Although HR is
involved in various fields, including employee engagement, employee growth,
regulatory enforcement, data management, and many others, the organization's
primary emphasis is on recruiting, finding, and hiring suitable candidates.

Process of Selection
Activity 1 Identication
Directions: Identify what your business need to buy based on what your customers need.

What do your customers need? What does your business need to buy?
1. 1.

2. 2.

3. 3.

4. 4.

5. 5.

Activity 2 Essay
Directions: Answer the following questions on a separate sheet of paper.
1. How do you know your suppliers well?
____________________________________________________________________________________
____________________________________________________________________________________
2. Will you buy in bulk? Why or Why no?
____________________________________________________________________________________
____________________________________________________________________________________
3. How do you select and contact prospect suppliers?
____________________________________________________________________________________
____________________________________________________________________________________

Activity 3 Analysis
Directions: Analyze the facts stated below and answer the questions afterward.

Hair and Nails Manufacturers Hair Deals

•• Free delivery within a 100 km radius •• Free delivery
•• Delivery within 48 hours from date of •• Delivery within two weeks from the
the order date of the order
•• No credit; Cash on delivery •• Fourteen days credit
•• Lower prices for some items •• Higher prices for some items

Questions:
1. Which supplier has the lowest prices?
2. Which supplier offers the best credit terms?
3. Which supplier has the best terms of delivery?
4. Which supplier do you think Hair and Nails Salon chose? Why?
Assessment:
Directions: With a proposed business in mind, answer the following questions:

1. What is your proposed business?

_______________________________________________________________________________________
2. Identify the suppliers for your proposed business. Explain how you will find and contact
them.
_______________________________________________________________________________________
_______________________________________________________________________________________
3. How many people are needed for your proposed business? Explain your answer
_______________________________________________________________________________________
_______________________________________________________________________________________
4. Discuss the structure of responsibilities, reporting hierarchy, and job descriptions of your
possible employees?
_______________________________________________________________________________________
_______________________________________________________________________________________
_______________________________________________________________________________________
Answer Key
Activity 1 Identification
Answers may vary

Activity 2 Essay
Answers may vary

Activity 3 Analysis
1. Hair deals
2. Hair deals
3. Hair and Nails Manufacturers
4. Hair and Nails Manufacturers
Assessment
Answers may vary

References
Morato, Jr. Eduardo Entrepreneurship. Philippines: Rex Bookstore, Inc. 2016

Prepared by:
Mark G. Javillonar

Quality Assured:
Edheson M. Gapad

Language Editor:
Marianne R. Valdez

Reviewed by:
Sean A. Catelo

Management Team:
Aurelia B. Marquez
Rodgie S. Demalinao
Rosalyn C. Gadiano
Sean A. Catelo

For inquiries or comments, write or call:

Department of Education –MIMAROPA Region

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Telephone No. (02) 863-14070
Email Address: lrmds.mimaroparegion@deped.gov.ph