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How do businesses manage stock and choose their suppliers?

Working with suppliers: the role of procurement and the supply chain, managing stock including just-in-time and just-in-case, the factors in choosing a supplier, and the impact of supplier relationships on the business.

A focused answer to OCR GCSE Business J204 topic 4.6, covering procurement and the supply chain, stock management (just-in-time and just-in-case), choosing a supplier, and the impact of supplier relationships.

Generated by Claude Opus 4.810 min answerUpdated 2026-06-02

Reviewed by: AI editorial process; not yet individually human-reviewed

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Quick answer

Procurement is the process of finding, buying and managing the goods and services a business needs from suppliers. The supply chain is the whole network from raw materials through to the finished product reaching the customer. Stock management balances having enough materials to operate against the cost of holding stock. Just-in-time (JIT) holds little or no stock and orders materials to arrive exactly when needed, cutting storage costs and waste but relying heavily on reliable suppliers. Just-in-case (JIC) holds a buffer of extra stock to cope with surges in demand or delivery delays, giving security but tying up money and risking waste. Choosing a supplier depends on price, quality, reliability, delivery, flexibility and ethics. Good supplier relationships bring better prices, reliable deliveries and quality, which support the whole business.

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What this topic is asking
Procurement and the supply chain
Managing stock
Choosing a supplier
The impact of supplier relationships
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What this topic is asking

OCR J204 topic 4.6 wants you to understand procurement and the supply chain, how businesses manage stock (including just-in-time and just-in-case), the factors in choosing a supplier, and the impact of supplier relationships on the business. The exam often gives a business making a stock or supplier decision and asks you to weigh the effects. Paper 2 is synoptic, so this links to finance (costs and cash flow) and quality.

Procurement and the supply chain

Good procurement secures the right inputs at the right price, quality and time. A smooth supply chain means materials flow reliably, so production is not interrupted and customers are served on time; a disruption anywhere in the chain (a supplier failing, a delivery delayed) can halt the whole business.

Managing stock

The right approach depends on the business: a restaurant using fresh ingredients leans towards JIT; a business facing unpredictable demand or unreliable supply may prefer JIC.

Choosing a supplier

A business balances these, often trading a slightly higher price for better reliability or quality, because the cheapest supplier is not always the best value if deliveries are late or goods are faulty.

The impact of supplier relationships

A strong, long-term relationship with suppliers brings real benefits: better prices (through loyalty and larger orders), reliable deliveries, consistent quality, and sometimes trade credit (time to pay). Poor relationships or a weak supplier can cause shortages, quality problems and disruption. Because suppliers are a key external stakeholder, treating them fairly (paying on time, clear communication) helps secure the inputs the business depends on.

Comparing the stock-holding cost of two approaches

Set out the figures

A business uses materials worth $200{,}000$ a year. Under just-in-case it holds about $40{,}000$ of stock on average; under just-in-time it would hold about $5{,}000$ . Holding stock costs the business $20\%$ of the stock's value a year (storage, insurance, tied-up money).

Holding cost under just-in-case

\text{Cost} = 40{,}000 \times 0.20 = 8{,}000 \text{ a year.}

Holding cost under just-in-time

\text{Cost} = 5{,}000 \times 0.20 = 1{,}000 \text{ a year.}

Calculate the saving

\text{Saving} = 8{,}000 - 1{,}000 = 7{,}000 \text{ a year.}

Interpret the result

Just-in-time saves $7{,}000$ a year in stock-holding costs. But the saving only holds if suppliers deliver reliably: a single failed delivery that stops production could wipe out the saving in lost sales. So the decision weighs the $7{,}000$ saving against the risk of running out, exactly the judgement OCR rewards.

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Q1. State two factors a business should consider when choosing a supplier. [2 marks]

Cue. Any two of price, quality, reliability, delivery, flexibility, ethics.

Q2. A firm holds $30{,}000$ of stock and holding costs are $10\%$ of its value a year. Calculate the annual holding cost. [2 marks]

Cue. $30{,}000 \times 0.10 = 3{,}000$ .

Exam-style practice questions

Practice questions written in the style of OCR exam questions on this dot point, with worked answer explainers. The year tag is the paper they imitate, not the source.

OCR J204/02 20182 marksState the difference between just-in-time and just-in-case stock management. (Paper 2, Section A)

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A 2-mark AO1 question. Just-in-time (JIT) means holding little or no stock and ordering materials to arrive exactly when they are needed, while just-in-case (JIC) means holding a buffer of extra stock so the business can cope with unexpected demand or delays. One mark for the idea that JIT keeps stock to a minimum and relies on timely delivery, one for the idea that JIC keeps a buffer stock as a safeguard. A common error is to describe only the benefits rather than the difference.

OCR J204/02 20226 marksA restaurant is deciding whether to use just-in-time stock management for its fresh ingredients. Analyse two effects this could have on the business. (Paper 2, Section B)

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A 6-mark "analyse" needing two developed chains applied to the restaurant. Effect one (lower costs and fresher food): holding little stock means ingredients arrive just before they are needed, so less food is wasted or spoiled and less money is tied up in storage, which means lower costs and fresher meals. Effect two (reliance on suppliers and risk of shortages): JIT depends on suppliers delivering on time, so a late or failed delivery could leave the restaurant unable to serve some dishes, which means lost sales and unhappy customers. Markers reward two effects, each developed with a chain that refers to the restaurant, ideally weighing the cost and freshness benefits against the risk of running out.

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Sources & how we know this

OCR GCSE Business (J204) specification — OCR (2017)