Harprita.

Paper 1
May June 2023 9609/11

5 (a) Analyze two benefits to a business of holding high levels of inventory. [8]

The business can respond to unexpected demand.High levels of inventory allows the business
to have enough raw materials to meet customer demand.This allows for the business to satisfy
customers and gain customer loyalty.This gives the business a competitive advantage over
other businesses,allowing it to potentially become the market leader.

The business can also gain from economies of scale.Purchasing economies of scale can be
gained because raw materials are bought in bulk for high levels of inventory.This means that
suppliers may offer discounts for businesses,which reduces cost for the business.The business
can take advantage of this and increase selling prices so that it gains more profit while reducing
its unit costs.

(b) Evaluate whether supply chain management is the most important operational activity to the
success of a manufacturer of electric cars. [12]

Supply chain management is the management of the flow of goods and services from the
supplier of the raw materials to the final products used by the customer.

Supply chain management is important because it speeds up the production process.The use of
technology of and flexible workforces allows the production of electric cars to run smoothly
without any halts.This lowers the cost for the business,because there are fewer chances of cars
with errors.Therefore,giving the business a competitive advantage.

Supply chain management is also important because it increases efficiency.This aims to

establish excellent relationships with supplier companies of the components needed for the
electric cars.This means that the deliveries of key components will be made on time,of the right
amount and quality.Therefore,this allows for a higher output to be produced within a shorter
period of time.This allows to improve customer satisfaction, giving the manufacturer loyal
customers.

However,supply chain management may not be as important because the buyers of the electric
cars may not be concerned about the flow of production.The buyers may only be interested in
the price and quality of the electric cars.This means that the business should be more
concerned in ensuring that the cars have no defects and are of a high quality.This will allow the
manufacturer to charge reasonably high prices for its cars to help increase its sales revenue.

In conclusion supply chain management is important for the manufacturing of electric

cars.These cars are considered environmentally friendly,so process of manufacturing these cars
must be sustainable as well which may be of importance to the buyers,meaning they will have a
greater interest in the process of manufacturing the electric cars.However,supply chain
management may be considered a complex operation because the manufacturer has to
carefully manage and coordinate activities with suppliers,therefore needing to hire trained
employees in order for the operation to run effectively.This may be considered an opportunity
cost for the business because the finance could rather be spent on expanding the business of
electric cars to other markets.