Chapter 12 - Management activities 3: Controlling Flashcards
What are the 4 steps of controlling?
- set the standard
- measure performance
- compare performance with standard
- take corrective action if necessary
What is controlling?
a management activity that measures how well an organisation achieves its goals and objectives that it has set
What is stock control?
activity that aims to keep optimum stock levels so that the organisation doesnt have too much or too little stock
What are the 4 main types of stock a business holds?
- raw materials - materials used to make products
- work in progress - stock of goods that are partially completed
- finished goods - goods that are finished and have not been sold yet
- merchandise - goods bought by the firm to sell to consumers
What are the 3 methods of managing stock levels?
- manual stock taking - employees physically count and record all stock in the business. counted stock is compared to the firms computer system to identify differences
- EDI (electronic data interchange) - edi enables firms to communicate information like invoices electronically rather than on paper.
- just in time (jit) - business holds the minimum amount of stock and receives regular deliveries from suppliers
What are 2 advantages of jit?
- helps to reduced business costs such as storage, insurance, security
- all finished goods are completed just in time for delivery to consumers
What are the benefits of stock control?
increased efficiency - computers are more accurate than humans
feedback - instant feedback on all stock levels, easy to identify what is selling and what is not
reduced costs - avoids having too much stock or too little stock
theft - easy to identify theft
What does optimum stock level means?
the ideal level of stock that a business should have
What does maximum stock level mean?
the largest amount of stock that should be held
What does minimum level of stock mean?
the lowest amount of stock that should be held
What does re-order level mean?
the level of stock at which a new order should be placed at
What does lead time mean?
the time from when an order is placed to when the stock arrives at the firms stockroom
What are 4 consequences of having too much stock?
- lower profits
- obselete stock (increased risk of it going outdated)
- theft
- inefficient use of cash
What are 4 consequences of having too little stock?
- loss of sales
- loss of economic scale (may not receive discounts)
- storage costs
- production delays
What does economic of scale mean?
a firm benefits by buying products in bulk as it can receive a discount
What is quality control?
a set of procedures used to check work completed to ensure it meets the standards set
What is the purpose of quality control?
- detect - identify quality issues in the products
- prevent - set up procedures to prevent quality issues
- correct - take corrective actions to prevent problems in the future
- improve - the business should strive for improvements in the future
List 4 ways a business can achieve quality control.
- inspections
- quality circles
- quality awards
- total quality management
Explain the 4 ways a business can achieve quality control
- inspections - use trained inspectors to carry out tests on finished goods. sampling
- quality circles - a group of people volunteer to test the product in order to identify issues, they can offer solutions to the issue
- quality awards - awards given to an organisation for achieving agreed quality standards
- total quality management - a system where the whole business seeks to improve quality
Name 3 quality awards.
- Q mark - awarded for continually trying to improve the quality of products awarded by eiqa
- bord bia quality mark - awarded to foods in ireland that reach the quality standards needed
- iso 9000 series - an international award system to rewards very high quality standards
What are 4 benefits of quality awards?
- consumer trust
- marketing
- exports
- pricing
What is credit control?
a person who ensures that customers who use credit facilities pay their bills in full and on time
What is a bad debt?
when a debtor fails to pay the amount owed for goods or services
What is a debtor?
a customer who owes the business money
