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A Level Business Theme 2 > 2.4.3 Stock control > Flashcards

2.4.3 Stock control Flashcards

1
Q

Stock (inventory)

A
  1. raw material (input, introduction process, primary sector)
  2. work in progress and finished goods (end output) held by a firm to enable production = meet customer demand
  • enables business respond immediately
  • eradicates lead time
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2
Q

first to deliver means

A
  • first mover advantage (competitive advantage)

- good reputation

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3
Q

Main types of stock

A
  1. raw materials/ components (supplier= in production)
  2. work in progress (semi / part finished production)
  3. finished goods (ready for sale /distribution)
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4
Q

why do businesses hold stock

A
  1. satisfy demand
  2. in case of mistakes (contingency) = safety buffer
  3. avoid problems supplier delays
  4. enable efficient production
  5. purchasing economies of scale
  6. seasonal changes
  7. buffer between production processes
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5
Q

buffer stock (just in case)

stock control system (pushed)

A

amount of stock held as a contingency in case of unexpected orders
so such orders can be met & in case of any delays from supplier

  • link between EPOs (electronic payment order) and stock control
  • EDI (electronic data interchange)
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6
Q

EDI

A

Electronic data interchange

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7
Q

EPOs

A

Electronic point of sale

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8
Q

factors determine whether a business needs to hold stock

A
  • level of demand (high/low) (fluctuates=dynamic market)
  • nature of market
  • nature of production process (flow vs lean)
  • amount of capital available (bulk buy/afford to store)
  • perishable/high rate of obsolescence
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9
Q

costs of holding stock

A
  1. storage costs (staffing, rent ,security)
  2. insurance
  3. depreciate value
  4. cash is stuck in stock = cash flow issues/ liquidity problem = decrease in working capital
  5. interest (tying up capital pay interest on)
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10
Q

stock levels

A

how changes occur, decreases as used, increases when delivery

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11
Q

maximum

A

most you are able/can/want to hold

max storage capacity

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12
Q

re order levels

A

“trigger” point so that when stock fall to this level, next supplier order is placed
accounts for lead time to process order and make delivery

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13
Q

minimum (buffer)

A

safety, fall back if delay

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14
Q

lead time

A

calculated from re- order point to then max stock level

amount of time between placing order and receiving stock

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15
Q

buffer stock

A

amount of stock held as a contingency in case of unexpected orders so that such orders can be met and in case of any delays from suppliers

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16
Q

Cons of JIT

A
  • arrive to early=too much
  • too late = impact production line
  • lots of risk - no room for error (contingency plans)
  • extreme vulnerability (to supplier/industrial action)
  • no purchasing economies of scale
  • struggle to meet sudden demand changes
17
Q

Pros of JIT

A
  • no waste
  • meet customer needs
  • help with cash flow (better liquidity)
  • respond to demand
  • high quality 0 defects
18
Q

Just in Time

A

production occurs with minimum stock levels so every process is completed just in time for next process

19
Q

Features of JIT

A
  1. no stock held - reduce waste
  2. multi-skilled/flexible staff
  3. production to order (pulled demand)
  4. 0 defects (no back up) = go to buffer
20
Q

JIT depends on

A
  • supplier relationships (communication, flexible, quality)
  • reliable and flexible workforce (modify work loads = cope with changes, adapt)
  • suitable equipment
21
Q

Factors influencing how much stock to reorder

A
  • current supply/max capacity store
  • demand
  • forecast changes trend
  • consider high performance production line
  • (when to order is lead time from supplier)
22
Q

Limitations of Factors influencing how much stock to reorder

A
  • assuming constant usage rate of stock (unlikely)
  • multiple products
  • no external factors affecting (delays)
  • assuming cash flow to buy stock
  • assuming experience of manager to implement
  • line gradients may change - quick/slow of stock
23
Q

waste minimisation

A

cutting out any process that does not add value to the business in order to minimise inputs (CELL)

reduce waste = reduce cost

24
Q

CELL

A

capital
enterprise
land
labour

25
Q

adding value

A

-consumer thinks worth more (pay more )

  • due to ethics, appearance, quality, brand
  • ‘perceived to be worth more in the eyes of consumer’
26
Q

waste can be…

A
  1. time wasted by idle workers
  2. workers moving from place to place unnecessarily - transition time
  3. more raw materials than needed (excess stock)
  4. throwing away faulty items (defects)
  5. machines standing idle (downtime)
  6. unsold stock (cashflow & obsolete)
27
Q

gross profit

A

sales - stock

28
Q

Competitive advantage through lean management

PRICE

A
  • reduce waste= reduce cost = reduce prices
  • lean management reduces waste
  • through JIT production/stock management
  • reduce unit cost = reduce prices
  • firms more price competitive
29
Q

Competitive advantage through lean management

NON-PRICE

A
  • lean management reduces waste-respond to demand = quality improve
  • through JIT production/stock management (no buffer stock)
  • reduce unit cost - variety - add value
  • increase profit margin (assuming price stays same) price increase
  • if profit increases re-invested into innovation & improve production/service

A Level Business Theme 2 (25 decks)

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