2.4.3 Stock Control

Question 1

What is stock

Answer 1

Also called inventories is they are used to make products which are then sold to customers

Question 2

What are factors affecting stock

Answer 2

-demand
-stockpile goods
-the cost of holding stock
- the amount of working capital available
- the type of stock
-lead time
- external factors

Question 3

How does demand affect stock

Answer 3

Demand: The level of demand for a product or service can affect how much stock a business needs to hold. Higher demand means more stock is needed to meet customer needs, while lower demand may allow for less stock to be held.

Question 4

How does stockpile goods affect stock?

Answer 4

Stockpile goods: If a business decides to stockpile goods, this can impact their stock levels. Depending on the reason for stockpiling (e.g. to prepare for a potential shortage), the business may need to hold more stock than they usually would.

Question 5

How does The cost of holding stock affect stock

Answer 5

The cost of holding stock: Holding stock incurs costs such as storage, insurance, and potentially depreciation. These costs can impact the decision of how much stock to hold.

Question 6

How does The amount of working capital available affect stock?

Answer 6

The amount of working capital available: The amount of working capital a business has available can impact their ability to hold stock. If a business has limited working capital, they may need to hold less stock than they would like.

Question 7

How does The type of stock affect stock?

Answer 7

The type of stock: The type of stock being held can impact the management of stock. Perishable items, for example, may need to be sold quickly, while durable items can be held for longer periods.

Question 8

How does lead time affect stock?

Answer 8

Lead time: The lead time (i.e. the time between placing an order and receiving it) can impact the management of stock. Longer lead times may require a business to hold more stock to ensure they have enough to meet demand.

Question 9

How does external factors affect stock?

Answer 9

External factors: External factors such as changes in the market, natural disasters, or political events can impact the management of stock. For example, a sudden increase in demand due to a current event may require a business to hold more stock than usual to meet customer needs.

Question 10

What is the problem with having too much stock?

Answer 10

• storage
• opportunity cost
  -spoilage costs
  -administrative and financial costs
  -unsold stock
• shrinkage

Question 11

What’s the problem with storage having too much stock?

Answer 11

Storage: Holding too much stock can require additional storage space, which can be costly for a business.

Question 12

What’s the problem with opportunity cost having too much stock?

Answer 12

Opportunity cost: The money tied up in excess stock could be invested elsewhere in the business, generating a higher return. Having too much stock ties up resources that could be used more effectively in other areas of the business.

Question 13

What’s the problem with spoilage cost having too much stock?

Answer 13

Spoilage costs: If the excess stock is perishable, it could spoil or expire before it can be sold, leading to waste and loss of revenue.

Question 14

What’s the problem with administrative and financial cost having too much stock?

Answer 14

Administrative and financial costs: Managing excess stock requires additional administrative and financial resources, such as inventory tracking and insurance. These costs can eat into the profitability of the business.

Question 15

What’s the problem with unsold stocks having too much stock?

Answer 15

Unsold stock: Excess stock can lead to a buildup of unsold inventory, which ties up resources and ties up capital that could be used elsewhere in the business

Question 16

What’s the problem with shrinkage having too much stock?

Answer 16

Shrinkage: Holding too much stock can increase the risk of shrinkage (i.e. loss of inventory due to theft, damage, or human error), leading to further financial losses for the business.

Question 17

What’s the problem with holding too little stock

Answer 17

• The business may not be able to cope with unexpected increase in demand. This may result in lost customers if they are let down too often.
• If stock deliveries are delayed, the firm may run out of stock and have to halt production. This can lead to idle labour and machinery while firm wait for delivery.
• The firm is less able to cope with unexpected shortages of materials. Again this could result in lost production.
• A firm with holds very low stocks may have to place more orders. This will raise total ordering cost it might Also miss out on discount from bulk buying.

Question 18

Advantages of JIT

Answer 18

• It improves cash flow since money is not tied up in stocks.
• The system reduces waste obsolete and damaged stock.
• More factory space is made available for productive use.
• The costs of stockholding are reduced significantly
• links with and the control of suppliers are improved.
• The supplier base is reduced significantly
• more scope for integration with the factory’s computer system.
  -The motivation of workers is improved. They are given more responsibility and

Question 19

Disadvantages of JIT

Answer 19

• A lot of faith is placed in the reliability and flexibility of suppliers
• increased ordering and administration costs
• advantages of bulk buying may be lost
• vulnerable to a break in supply and machinery breakdowns
• difficult to cope with sharp increases in demand
  -possible loss of reputation of customers are let down by late deliveries

Question 20

What methods can be used to minimise waste in production?

Answer 20

• Lean manufacturing
• Recycling
• Design for manufacturing
• Process optimization
• Training and education

Question 21

How is lean manufacturing a method of waste minimisation?

Answer 21

Lean manufacturing: Implementing a lean manufacturing approach focuses on the elimination of waste in production processes. It involves identifying and eliminating any non-value-adding activities in the production process such as overproduction, waiting times, excess inventory, over-processing, unnecessary motion, defects, and unused employee talent. By eliminating waste, lean manufacturing helps to improve efficiency and reduce production costs.

Question 22

How is recycling a method of waste minimisation?

Answer 22

Recycling: Recycling is a method of minimizing waste by reusing materials that would otherwise be discarded. This approach helps to reduce the need for new raw materials, which can help to conserve natural resources and energy. Recycling can also reduce landfill waste, which can have a significant environmental impact.

Question 23

How is design for manufacturing a method of waste minimisation?

Answer 23

Design for manufacturing: Designing products with manufacturing in mind can help to reduce waste in production. This approach involves designing products that are easy to manufacture, assemble, and disassemble. It can also involve designing products that use fewer materials and are more durable, reducing the need for replacements.

Question 24

How is process optimisation a method of waste minimisation?

Answer 24

Process optimization: Optimizing production processes can help to minimize waste by reducing the amount of time, energy, and materials required to produce a product. This approach involves analyzing the production process to identify any inefficiencies and implementing changes to streamline the process.

Question 25

How is training and education a method of waste minimisation?

Answer 25

Training and education: Providing training and education to employees on waste reduction and sustainability can help to create a culture of waste minimization within the organization. This approach can involve training employees on lean manufacturing principles, recycling, process optimization, and other waste reduction strategies. By educating employees, they can become more aware of the impact of their actions on the environment and work towards reducing waste.

Question 26

Buffer stocks

Answer 26

Stocks held as a precaution to cope with unforeseen demand

Question 27

Kanban

Answer 27

A card or an object that acts as a signal to move or provide resources in a factory.

Question 28

Lead time

Answer 28

The time between placing the order and the delivery of goods.

Question 29

Re-order level

Answer 29

The level of current stock when new orders are placed

Question 30

Re-order quantity

Answer 30

The amount of stock ordered when an order is placed.

Question 31

Stock rotation

Answer 31

The flow of stock into and out of storage

Question 32

Work -in-progress.

Answer 32

Partly finished goods