Cambridge O Level Commerce: Outsourcing and Wholesaling — Practice Questions (7100)

These are original questions written for Marlbridge, for revision and practice on this content. They are not reproduced past-paper questions, and they do not replicate the exam’s exact structure, question count or mark tariffs — examination boards hold copyright in their own papers. Use these alongside the official past papers available free from your board.

Related: Outsourcing, Wholesaling and Communication revision notes | Outsourcing, Wholesaling and Communication study guide | Commercial operations practice questions

These questions cover sub-topics 2.2 Outsourcing and 2.4 Wholesaling of Cambridge O Level Commerce (7100). The main Commercial operations practice page includes questions on enterprises, retailing, trading documents and communication.

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Section A

1. Define contract manufacturing. [1]

2. State two reasons why outsourcing has grown. [2]

3. State three functions a wholesaler performs for a manufacturer. [3]

4. What is a cash and carry wholesaler? [2]

Section B

5. A sportswear company in Lahore has always made and delivered its own products. It is considering outsourcing production to a contract manufacturer and deliveries to a contract logistics firm.

(a) Explain two benefits to the company of using contract manufacturing. [4] (b) Explain two problems it might face. [4] (c) Explain why the growth of ecommerce has increased the use of contract logistics. [3]

6. Explain three services a wholesaler provides to a small retailer, and why each is valuable. [6]

7. Explain how a voluntary chain operates and how it benefits both the wholesaler and the independent retailer. [6]

8. “The wholesaler is no longer needed in modern commerce.” Discuss this statement. [8]

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Answers

1. When a business pays another firm to make its goods, or parts of them, to its own specification [1].

2. Any two: lower costs; access to specialist expertise or equipment; focus on core activities; flexibility to change output; growth of ecommerce; easier coordination through digital communication [1] [1].

3. Any three: buys in bulk; stores goods; bears risk; pays promptly; distributes to many retailers; provides market information [1] [1] [1].

4. A wholesale warehouse where retailers select goods, pay for them immediately [1] and transport them themselves, with no credit or delivery provided [1].

5. (a) Any two, 2 marks each: lower costs — the contractor’s scale or lower wages make each garment cheaper, increasing profit [1] [1]; expertise — the contractor has specialist machines and skilled workers, which may improve quality [1] [1]; focus — the company can spend its time and capital on design and marketing its brand [1] [1]; flexibility — it can order more for busy seasons without building a bigger factory [1] [1]. (b) Any two, 2 marks each: less control over quality — faulty products would damage the brand [1] [1]; dependence — if the contractor is late or closes, the company cannot supply customers [1] [1]; confidentiality — new designs could be copied [1] [1]; reputation — poor working conditions at the contractor could cause bad publicity [1] [1]. (c) Online sales mean many small orders sent to individual homes [1]; this needs warehouses, picking and fast delivery that small firms cannot provide cheaply [1], so they pay specialist logistics firms that have the systems and vehicles already [1].

6. Any three, 2 marks each: breaking bulk — the retailer can buy small quantities, so it does not tie up capital or need large storage space [1] [1]; credit — the retailer can pay after selling the goods, helping its cash flow [1] [1]; wide range — many manufacturers’ goods in one place save time and give customers choice [1] [1]; delivery — saves the retailer transport costs [1] [1]; advice — information on new products and displays helps sales [1] [1].

7. A group of independent retailers agree to buy most of their stock from one wholesaler [1] and trade under a shared name with joint advertising and promotions [1]. Wholesaler: gains regular, guaranteed orders from loyal customers [1], so it can compete with direct buying by supermarkets [1]. Retailer: pays lower prices because of the group’s bulk buying [1] and benefits from shared branding while remaining independently owned [1].

8. Levels-based. For the statement: large supermarket chains buy direct from manufacturers and have their own warehouses [1]; ecommerce lets manufacturers sell direct to consumers [1]; cutting out the wholesaler removes its profit margin, lowering prices [1]. Against: small retailers cannot buy in bulk or deal with many manufacturers, so they rely on breaking bulk, credit and delivery [1]; manufacturers still benefit from storage, risk-bearing and distribution to thousands of small shops [1]; independent wholesalers have adapted through cash and carry and voluntary chains [1]. Judgement: the wholesaler is less needed by large retailers but remains important for small shops and manufacturers selling widely [1] [1].

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Frequently asked questions

What is the difference between contract manufacturing and contract logistics? Contract manufacturing outsources making the goods; contract logistics outsources storing, transporting and delivering them.

Why might a manufacturer bypass the wholesaler? If it sells to large retailers that buy in bulk, or sells direct to consumers online, it may save the wholesaler’s profit margin.

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Where marks are usually lost

• Stating a benefit of outsourcing without explaining the effect on the business.
• Writing wholesaler functions without saying whether they help the manufacturer or the retailer.
• Confusing a voluntary chain with a franchise.
• Giving a one-sided answer to a “discuss” question.