Business Location & the Supply Chain (Years 9–11) — Business Studies

Factors affecting where a business locates, and how supply chains and stock (inventory) are managed.

Deciding where to locate a business, and how to manage the flow of materials and stock, are important operations decisions that affect cost, service and profit.

Why this matters A poor location can add cost or cut off customers, while badly managed stock ties up cash or leaves the firm unable to serve demand. Good choices keep costs low and customers satisfied.

Factors affecting location

Nearness to market: shops and cafes locate where customers can reach them easily.
Nearness to raw materials: firms using heavy or perishable inputs locate close to them to cut transport costs.
Labour supply: firms locate where suitable, skilled workers are available.
Cost of land and rent: cheaper sites reduce fixed costs.
Transport links: good roads, ports and rail make deliveries easier.
Government incentives: grants may encourage firms to certain areas.

The supply chain

The supply chain is the sequence of stages that move a product from raw materials to the final customer:

Suppliers → producer → wholesaler/distributor → retailer → customer

Managing it well means goods arrive on time, at the right quality and at a fair cost.

Stock falls steadily until it hits the re-order level, triggering a new order; it keeps falling during the delivery lead time, then jumps back up when fresh stock arrives.

Managing stock (inventory)

Stock includes raw materials, part-finished goods and finished products waiting to be sold. Firms must balance two dangers:

Too much stock ties up cash, needs storage space and may go out of date.
Too little stock risks running out and disappointing customers.

Just-in-time (JIT) stock control orders materials only as they are needed, reducing storage costs, but it depends on reliable suppliers. Holding a buffer of stock is safer but costs more. Firms often set a re-order level, a point at which they order more stock so that fresh supplies arrive before the old ones run out. Good stock management keeps the business running smoothly without wasting money, so that customers are served on time and cash is not tied up needlessly. Together, a well-chosen location, a reliable supply chain and careful stock control give a business a strong operational base on which the rest of its plans can be built.

Put these stages of the supply chain in order, from raw materials to the final customer:

Suppliers (raw materials)
Producer (makes the product)
Wholesaler / distributor
Retailer
Customer

Common exam mistake: thinking just-in-time (JIT) stock control means holding no stock at all. JIT still holds stock — just the smallest amount needed, ordered precisely so it arrives when required — and it depends on very reliable suppliers, since there is no buffer to fall back on if a delivery is late.

Exam technique: for "should this business use JIT or hold buffer stock?" questions, weigh supplier reliability and storage cost against the risk of running out — a business with unreliable suppliers or unpredictable demand is usually safer holding some buffer stock.