2.4.3 Stock Control Flashcards
Define stock
●Stock is a current asset held by business to help meet the demand of customers
What 3 forms can stock be held in
Raw materials
Work in progress
Finished products
The amount of stock held depend upon
●the business’ attitude to risk
●the importance of speed of response as an operational objective
●speed of change within the market
●nature of the product e.g. perishable or long lasting
Define stock control diagrams
A management tool used to control and monitor the flow of stock , this gives a visual representation of lead time , re order level and buffer stock level
Define lead time
The time it takes between placing an order and receiving delivery
Describe lead time
- The greater the lead time the higher the minimum stock level
- Lead time can be measured on the horizontal axis of an stock control diagrams as the distance from re-order level to minimum stock level
Define re order level
The level of stock which triggers an order
Describe re order level
•The re-order level will be determined by both the lead time and the minimum stock level
Define buffer stock
Stock held by a business to cope with unforeseen circumstance e.g. sudden increase in demand, break down in supplies
Describe buffet stock
- When a business reaches its minimum stock level it is left just with buffer stock
- A business operating a just in time system will have zero buffer stock
Define re order quantities
- The point at which an order for new stock is placed, this will be dependent on buffer level of stock and lead time
- A computerised stock control system will automate this process so that when stock reaches this level an order is automatically sent to a supplier
Buffer stock ads
- Can meet customer demand
- Quickly respond to increases in demand
- Continue with production even if a problem with stock deliveries
Buffer stock disadvantages
- Money tied up in holding stock
- Costs associated with stock holding e.g. storage, staff, insurance
- Risk of waste e.g. out of date, damaged or obsolete
Implications of poor stock control
- Waste of resources
- Unable to meet customer needs
- Damaged reputation
- Under utilisation of other resources e.g. labour and machinery standing idle
- Loss of competitiveness
- Difficulty in valuing stock
Lean production techniques are working practises derived from Japan that focuses on
Cutting waste while maintaining or improving quality
Lean production techniques include
Just in time
Kaizen
Just in time management of stock advantages
- Less costs in holding inventory
- Less working capital required
- Less obsolete or ruined inventory
- Lower associated costs e.g. security and insurance
- Avoids having unsold stock
Just in time management is stock
Disadvantages
- Little room for error
- Very reliant on suppliers
- Unexpected orders harder to meet
- Any delays in deliveries due to unforeseen circumstance can cause production to come to a halt
- High initial set up costs
- Complex systems have to be put in place and understood
Stock control can lead to
- efficient stock control can reduce waste
- less obsolete or damaged stock
- Lowe costs of holding stock
- leading to competitive advantage
- better able to meet needs of customers
- cost savings can be passed on in the form of lower prices
Describe just in time
Management of stock - a technique used to minimise stock holding at each stage of the production process , helping minimise costs
Describe kaizen
A technique used that concentrates on small but frequent improvements in every aspect of the production process
