2.4.3 Inventory Control Flashcards
what is inventory/stock
the store of raw materials, work-in-progress or finished products
most businesses want to ____________ stock levels to keep _____ low
minimise, costs
for your exam you must be able to interpret a stock control diagram
-
what is buffer stock
- this is a quantity of goods/raw materials kept in case of shortages
- it is the minimum level of stock ‘just in case’
what is lead time
this is the time between ordering stock from suppliers and it arriving
what is the re-order level
this is the level of stock that indicates to the business that they need to order more stock from suppliers
what is the re-order quantity
- this is the amount of stock that the suppliers deliver at once
stock control diagrams can be used to _______ and ________ stock over time
analyse, control
why is it beneficial to hold buffer stocks
+ creates stability in supply, can respond to demand surges and maintain customers
+ this builds brand loyalty
+ allows businesses to buy in bulk
what are the drawbacks of holding buffer stock
- costs of holding stock, management, storage ?
- opportunity cost, the money tied up in buffer stocks could be used elsewhere in the business
- risk of obsolescence, stock may be damaged/perish or demand may fall
what are stock-in costs
costs of holding stock
what are stock-out costs
the costs associated with running out of costs
what are the implications of poor stock control
- high stock-in costs (costs from holding too much stock)
- high stock-out costs (costs from running out of stock)
- if a business is a supplier they may disrupt the supply chain and lose buyers
- customers may get impatient waiting for stock and move to a competitor
what is lean production
production focused on waste minimisation
one method of lean production is just-in-time management, explain it.
- little stock is stored, raw materials are delivered at the moment they need to be used
what are the advantages of just-in-time stock management
+ stock-in costs are minimised
+ cash flow improved as money is not tied up in stock
+ the business can be flexible
+ takes teamwork, this can be motivating
what are the disadvantages of just-in-time stock management
- EOS is made difficult
- hard to organise and stressful
- staffing costs for admin and management
- unreliable suppliers
explain stock wastage and its impacts
- stock can become obsolete, it could perish, get damaged, not be in demand etc.
- it increases the unit costs of production
what 3 ways can a business minimise waste
1 storage- refrigeration and protection
2 planning- training, forecasting
3 sales tactics- reduced prices to encourage purchases, alternative uses for obsolete stock
how does lean production result in a competitive advantage
- the business is using fewer resources (staff, time, materials etc.)
- this reduces costs which can either be passed on to customers or higher profit margins can be enjoyed
