Supply chains, intermediaries and production costs
Map a supply chain, explain intermediary and digital-production roles, and calculate the costs a commercial decision must include.
Section Paper 2 · Written
Exam scope and assessment notes
This original lesson maps Cambridge IGCSE Commerce 0715 for exams in 2028 and 2029. Examples, businesses, figures and practice questions are original StudyForA material, not Cambridge questions, mark schemes or endorsements. Practice supports the knowledge, application, data interpretation, analysis and evaluation skills in the syllabus; it is self-checked and does not produce an official Cambridge grade. Full timed papers, examination-centre entry advice and review by a qualified Commerce teacher remain outside this pathway.
Before you begin
- No prior Commerce study is assumed. Work from the facts in each scenario and show calculations before making a commercial judgement.
Work on paper. Try each question before revealing help, and explain why your method works.
Quick readiness check
Which system exchanges structured business data between suppliers and buyers?
What you will learn
- Distinguish a domestic supply chain from a global supply chain and explain the roles of wholesalers, retailers, agents and factors.
- Explain how automation and electronic supplier communication can affect production.
- Identify relevant trade, commerce and production costs and calculate a simple total from given figures.
Map the chain and who adds a service
A domestic supply chain operates within one country; a global chain crosses borders. A wholesaler buys in larger quantities and resells to retailers or other businesses. A retailer sells to final consumers. An agent can represent a buyer or seller in international trade; a factor may purchase trade debts or help a seller obtain payment, depending on the arrangement.
Automation uses technology such as robotics to perform or support production tasks. It can raise consistency or output and reduce some repetitive labour, but requires investment, maintenance, training and safeguards. Electronic data interchange (EDI) lets organisations exchange structured business information directly, reducing repeated entry while making accurate formats and secure systems important.
Count the full cost, not just the visible item
Relevant costs may include advertising, bank charges, commission, customs duties, inventory, labour, packaging, transport, utilities and warehousing. The decision determines which costs are relevant; a low factory price can be outweighed by delivery, handling or inventory costs.
For a simple total, add each stated cost once and keep units and time periods consistent. Do not confuse a cost with revenue or treat the amount of a cost as proof that the activity is inefficient.
Sources for this lesson
Pause and explain
A firm introduces robots. Which new cost should it include in evaluating the decision?
Worked example
A seller pays $480 for goods, $35 for packaging, $60 for transport and $25 in bank charges. Calculate the listed total and explain one cost that could still be missing.
Show the worked solution
- Add the four stated amounts: 480 + 35 + 60 + 25.
- Check the sum and state its currency.
- Identify another relevant cost only if the scenario indicates it applies.
Answer $600. This is only the listed total; labour, insurance, warehousing, commission or customs duties could also matter if they apply.
Try a topic test
Choose Easy, Normal or Difficult. Save your answers and open worked review after finishing.
Test this topic →From guided practice to a new situation
Write your answer and reasoning first. Use a hint only if you are stuck. The model solution is for self-checking; your written work is not automatically marked.
A local bakery sells through a wholesaler and then several small shops. Draw the chain in words and explain each intermediary's role.
Give me a hint
Follow ownership from producer toward the final customer.
Compare my reasoning
- The bakery produces goods and sells a batch to the wholesaler.
- The wholesaler stores or breaks bulk and resells batches to shops.
- The retailer sells smaller quantities to final consumers.
Bakery → wholesaler → retailer → consumer. The wholesaler buys larger quantities and supplies multiple shops; the retailer presents and sells the product to final customers. Each link provides a service and adds cost.
Look for these in your work
- Correct order
- Roles explained
- Recognises costs or services
A manufacturer uses EDI and a robotic packing line. Analyse one possible benefit and one limitation of each change.
Give me a hint
Connect the technology to information flow or production, then include implementation costs or risk.
Compare my reasoning
- EDI can reduce repeated data entry and speed up ordering, but incorrect or insecure data can affect many transactions.
- Robotic packing can improve consistency or output, but installation, maintenance, training and downtime matter.
- Judge the changes using total cost, error rates, reliability and supplier capability.
EDI may speed accurate ordering but needs compatible, secure systems and good data. Robots may improve throughput and consistency but need capital, maintenance and trained staff. The net effect depends on measured performance and total cost.
Look for these in your work
- Benefits linked to mechanism
- Limitations included
- Judgement identifies evidence
A shipment costs $720 for inventory, $48 for packaging, $90 for delivery, $36 for insurance and $54 for customs charges. Calculate the listed landed cost and explain why the result is not the selling price.
Give me a hint
Add all five costs and distinguish cost from revenue.
Compare my reasoning
- Add 720 + 48 + 90 + 36 + 54.
- The listed total is $948.
- Selling price is a business decision and may need to cover other costs and leave a margin.
The listed landed cost is $948. It is a cost to the business, not revenue: the firm sets a selling price and may also need to cover other costs before earning a profit.
Look for these in your work
- Calculation correct
- Currency stated
- Cost distinguished from price/revenue
Common mistakes
- Calling every supply chain global
- Confusing an agent with a retailer
- Adding costs from different periods without adjusting them
- Assuming automation removes all labour and risk
What can you explain now?
A manufacturer buys components from another country and sells finished goods locally. Is its supply chain domestic or global?
Compare with the explanation
Global, because at least one supply-chain stage crosses a national border.
The geographical span of a supply chain is global if supply or production crosses a national border, even if final sales are domestic.
After trying it yourself, choose your next review. This is your self-assessment.
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Make it stick
Name two home-trade intermediaries and state one cost that may arise between production and sale.
If you needed the solution, close it and solve the problem again from a blank page. A correct answer is stronger when you can explain the reason for each step.