2.4.3 Stock Control Flashcards
Stock control
Stock is a current asset held by business to help meet the demand for customers
Stock can be held in 3 forms
Raw materials, work in progress, finished products
The amount of stock held will depend on
The business attitude of risk, the importance of speed of response, speed of change within a market, nature of the product
Lead time
The time is takes between placing an order and receiving deceivers. The greater the lead time, the higher the minimum stock level
Re order level
The level of stock which triggers and order, this may be done automatically. The re order level will be determined by the lead time and minimum stock level
Buffer stock level of stock
Stock held by a business to cope with unforeseen circumstances
Reorder quantities
The point at which an order for new stock is placed dependant on buffer stock and lead time
Reorder level =
Maximum level - minimum level
Advantages of holding buffer stock
Helps when demand increases unexpectedly, supplier unreliability, potential for lower unit costs by ordering high bulk quantities
Disadvantages of holding buffer stock
Large stock holdings are costly making fixed costs larger, larger risk fo stock obsolescence, more capital is tied up within perming capital, not being lean
Implications of poor stock control
Lost stock - damages profit, underutilisation of other resources, wasting resources, running out of stock
What is just in time
Where production occurs with minimum stock levels so every process is completed just in time for the next process
5 features of just in time
No stocks held, reduces waste, multitude skilled staff, production to order
Just in time depends on
Supplier relationships, reliable workers, flexible workforce, suitable equipment
Pros of just in time
Low storage costs, low security costs and insurance, less waste and better liquidity
