Local and global supply chain process

· A supply chain is the flow of materials, information, and finished goods from supplier to manufacturer to distributor / retailer to customer.
· A local supply chain usually means shorter distances, faster communication, lower transport risk, and often greater control, but may have higher input costs or less supplier choice.
· A global supply chain gives access to lower-cost inputs, specialist suppliers, and economies of scale, but increases lead times, transport costs, exchange-rate risk, and the risk of disruption.
· Good exam application: judge supply chains using cost, speed, flexibility, reliability, quality, and risk.
· Common disruptions: delays, geopolitical issues, transport failures, supplier shortages, quality problems, and unexpected demand changes.
· Strong evaluation point: a business may accept a more expensive local supplier if this improves dependability, response time, or brand reputation.

This diagram shows the main stages of a company’s supply chain and the movement of goods between them. It is useful for linking suppliers, production, distribution, and final customers in one visual flow. Use it to explain why longer chains can create more risk, delay, and coordination problems. Source

This resource illustrates the logic of JIT inventory management: stock is kept very low and arrives close to the point of use. It helps students explain why JIT can improve efficiency and cash flow, but also why it increases exposure to supplier and transport disruption. Source

This stock control chart shows how inventory falls over time and highlights the key labels needed in IB answers, such as reorder level, lead time, and buffer stock. It is especially useful for practising diagram interpretation questions and explaining the consequences of too much or too little stock. Source

Capacity utilization and defect rate

· Capacity utilization rate measures how much of a firm’s maximum possible output is actually being used.
· Formula: $Capacity\ utilization\ rate = \frac{Actual\ output}{Maximum\ possible\ output} \times 100$
· High capacity utilization can mean efficient use of resources and lower unit costs, but if it is too high it may cause overuse of machinery, worker stress, bottlenecks, and more quality problems.
· Low capacity utilization suggests spare capacity and underused resources; this may be useful in seasonal industries, but often means higher fixed cost per unit.
· Defect rate measures the proportion of output that is faulty / below standard.
· Formula: $Defect\ rate = \frac{Defective\ units}{Total\ output} \times 100$
· A high defect rate increases waste, rework costs, customer complaints, and can damage brand reputation.
· In evaluation, firms may accept a little spare capacity if it improves flexibility and reduces defects.

This visual gives the core capacity utilization formula used in exam calculations. It helps students connect the number to business judgement: low rates can imply underused resources, while very high rates may signal strain, bottlenecks, or quality risks. Source
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This resource helps explain operating leverage visually by linking fixed costs, sales changes, and operating income. It is useful for evaluation questions where a business can earn more from rising sales but faces greater risk if demand falls. Source

Exam skills and evaluation moves

· Always apply numbers to the business context: a result is only useful if you explain what it means for costs, efficiency, quality, or customer service.
· In stock-chart questions, comment on whether buffer stock is adequate and whether the firm faces stockout risk.
· In JIT vs JIC questions, avoid generic answers; judge based on supplier reliability, nature of product, demand predictability, and cost of running out of stock.
· In productivity / capacity questions, balance efficiency gains against possible quality problems or operational stress.
· For CTB vs CTM, a top-band answer usually gives a clear recommendation supported by both quantitative and qualitative factors.