5.6 Stock Control Charts HL

Question 1

Supply Chain

Answer 1

All the steps necessary to get the good or service from the supplier to the customer - Place

Question 2

What can a good supply chain do?

Answer 2

• reduce costs
• reduce delivery time to customer
• improve quality
• reduce waste

Question 3

Why do businesses hold inventories?

Answer 3

• need inputs for production
• otherwise workers and machines are idle
• work-in-progress is still in the production line
• otherwise the production line stops
• finished goods are waiting to be sold to customers
• otherwise sales may be lost

Question 4

Just in Case (JIC)

Answer 4

stock management strategy whereby firms hold high levels of stock

Question 5

Just in Time (JIT)

Answer 5

• stock control method where inputs arrive just before they are used in the production process
• no or limited inventory is held

Question 6

Pros of JIT

Answer 6

Hold less stock
* lower warehouse cost
* lower insurance costs
* factory space can be used for other profitable activities
* or they can rent it out for more revenue

Stock does not become outdated
* lower obsolescence costs
* this is especially the case for perishabe items

can respond to the market quickly
* if demand suddenly changes you can change what you sell quickly

Question 7

Cons of JIT

Answer 7

• Higher delivery costs and less bulk buying savings
• Need to purchase and maintain more complex IT system
• Loss in reputation if unable to meet orders
• entirely dependent on suppliers - late delivery may lead to lost sales

Question 8

Capacity utilization rate

Answer 8

measures how much a business produces in relation to the maximum possible

current output level x 100
maximum output level

Question 9

What if CUR is low?

Answer 9

• boost marketing efforts
• move to a factory with lower capacity
• rent out the unused capacity to another business

Question 10

What if CUR is high?

Answer 10

• Machinery and employees are used all the time - increased possiblity of breakdowns
• possibly reduced consumer service quality - overworked employees
• can’t respond to increased demand - lose potential sales

Question 11

Defect rate

Answer 11

a defect product is one which is faulty or below the required quality

number of defect x 100
total output

Question 12

productivity rate

Answer 12

ratio of output to input

Question 13

labour productivity rate

Answer 13

total output
number of workers

Question 14

capital productivity rate

Answer 14

total output
capital employed

Question 15

How to raise productivity?

Answer 15

• train workers
• Raise EE motivation
• New capital
• Better management
• New competition

Question 16

cost to buy

Answer 16

price from suppliers
pxq

Question 17

cost to make

Answer 17

look at cost of the business to make the product
e.g. increases in Fixed and variable cost