2.4.3 Stock control Stock control diagrams

Question 1

What is the maximum stock level?

Answer 1

Maximum amount of stock a business can hold

This level is determined by storage capacity and operational needs.

Question 2

What is the reorder level?

Answer 2

Level at which a business places a new order with supplier

It is critical for maintaining sufficient stock levels.

Question 3

What is the minimum stock level?

Answer 3

Lowest stock level to which a business is willing to allow stock levels to fall

Ensures that the business can continue operations without interruption.

Question 4

What does lead time refer to?

Answer 4

Length of time from reorder level to delivery

Important for planning inventory and ensuring stock availability.

Question 5

What are buffer stocks?

Answer 5

Quantity of goods kept in case of stock shortages to provide competitive advantage and meet demand surges

Helps businesses manage fluctuations in demand.

Question 6

List the benefits of buffer stocks.

Answer 6

• Stability in supply
• Price stabilisation
• Raw materials security
• Competitive advantage

These benefits help businesses maintain operations smoothly.

Question 7

List the drawbacks of buffer stocks.

Answer 7

• Cost
• Risk of obsolescence
• Opportunity cost

These drawbacks can impact a business’s financial health.

Question 8

What are the consequences of poor stock control?

Answer 8

• Holding too much stock
• Holding too little stock

Both scenarios can lead to financial losses and operational inefficiencies.

Question 9

What is just-in-time stock management?

Answer 9

Raw materials are not stored onsite but are ordered as required and delivered by suppliers just in time for production

This method reduces holding costs and improves cash flow.

Question 10

List the advantages of just-in-time stock management.

Answer 10

• Stockholding costs are minimised
• Close working relationships are developed with suppliers
• Cash flow is improved
• Unused storage space can be reused
• Teamwork is encouraged

These advantages contribute to operational efficiency.

Question 11

List the disadvantages of just-in-time stock management.

Answer 11

• Does not benefit from economies of scale
• Cannot easily respond to unexpected changes in demand
• Administrative costs are increased
• Unreliable suppliers can disrupt production
• Significant changes are required

These disadvantages can pose risks to production continuity.

Question 12

What causes stock issues?

Answer 12

• Obsolete stock
• Perishable stock
• Damaged stock

These issues can lead to financial losses and waste.

Question 13

What are some methods for waste minimisation?

Answer 13

• Storage planning
• Sales tactics
• Refrigeration and protection from damage
• Effective security
• Careful stock rotation
• Diligent forecasting
• Staff training
• Computerised stock control
• Reduce prices to encourage purchases
• Alternative uses for obsolete stock

These methods help maintain efficient inventory management.

Question 14

What is the competitive advantage of lean production?

Answer 14

Less time required because production is organised efficiently

Lean production focuses on minimizing waste and maximizing efficiency.

Question 15

List the benefits of lean production.

Answer 15

• Fewer materials are used
• Less labour is required
• Space required for production is reduced

These benefits contribute to cost savings and increased profitability.