34) Stock Management

Question 1

What is operations?

Answer 1

The process of turning right materials into finished articles

Question 2

What does the operations department do?

Answer 2

Purchase raw materials, manage the control of stocks, organise an efficient method of production, quality control, storage and final distribution

Question 3

Why must the operations department control and manage stock levels?

Answer 3

To ensure the correct quantity is available at all times to keep production going

Question 4

What 3 factors do the operations department have to consider relating to stock control?

Answer 4

What is the maximum/minimum stock they should hold?

At what level should they reorder stock?

What should the reorder quantity be?

Question 5

What should businesses take into account when considering the maximum stock level?

Answer 5

Storage space, security, cost of storage facilities, finance tied up in stock

Question 6

What should a business consider when setting minimum stock levels?

Answer 6

Delivery times so that stock doesn’t fall below resulting in reduced output

Question 7

What are the disadvantages of overstocking?

Answer 7

High storage costs, high security costs, high insurance costs, large amount of space needed, money is tied up in stock, stock could deteriorate, danger of theft

Question 8

What are the disadvantages of understocking?

Answer 8

Unable to cope with unexpected order, with deliveries are delayed stock could run out, holding the stock means more frequent orders increasing administration costs, bad reputation

Question 9

What is just-in-time production?

Answer 9

The stock is ordered and arrived just in time to be used in production. To be successful the system depends on reliable suppliers, good quality control and a team of committed and skilled workers