CIPs L4M7 Chapter 2 Flashcards
What raw materials classifications are there?
Opening stock - Inventory held at start of accounting period
Stock take - audit check of physical stock on site. volume and value
Finished goods - Products ready to use or sale
Works in progress - Expression given to stock part way through manufacturing process. Service industry refer to this between order and delivery
Closing stock - inventory held at the end of an accounting period. it then become the next periods opening stock
Raw material - basic inputs to manufacturing a product, usually un processes for example, metal, wood
Components - manufactured items elsewhere which are included in larger final product manufactured. For example, cars
What is Redundancy?
State of being no longer required or surplus to requirements
The stock is still in good condition will likely be used elsewhere so effort to sell the the right person is key. Once person losing interest in a good make it redundant. But it may not be redundant to someone else
Linked to the word over supply/ surplus
What causes redundancy:
Poor forecasting
Weak customer relationships
Over stocking / poor stock control
Changes to internally polices such as making items more eco friendly, discontinuing a product,
What is Obsolescence?
The process of becoming outdated
Obsolescence stock is typically finished goods in good condition whereby declining demand for them is irreversible falling toward zero. Once it reaches zero it is then obsolete.
Obsolescence stock will need to be written off or reworked into a demand product e.g. old smart phone with updated software
The idea of the term obsolescence and obsolete is based on demand never returning
What causes obsolescence:
Technological change
Cultural change
Legislation
What is Safety Stock, also known as Buffer Stock?
Stock held as a contingency against disruption or unexpected demand
What is Stock out?
Have no or sufficient material to continue production and meet an order/ demand
What is Working Capital?
Current assets - current liabilities.
A measure of a company ability to cover short term debts
Linked to meaning extend your working capital
What does Written off/ to write off mean?
Accepting that cost can not recouped, thus marking the assets value down to near zero showing that the asset is of no value i.e obsolete stock. Essentially revaluing assets
What is Just In Time?
Production methodology where stock is acquired literally just in time to be incorporated into production process. It is a means to reduce stock holding
What is Book Value?
The notional value of stock as set in a companies accounts. It is an estimate of value which can go up or down
What is S&OP?
Sales and Operations Planning
What is the difference between direct and indirect supplies?
Direct - supplies which are integrated into the finished product
Indirect - Supplier not incorporate into finished product which keep the business/ factory operating. e.g. maintenance and machinery parts, MRO stock
What is MRO?
Maintenance, repair and operations
Cleaning stock, machinery/ equipment parts stock etc
What is Stock Turn/ Stock Turnover?
How any stock is is being used over a given time. Could refer to stock being bought or sold
Can you explain ABC classification of stock?
Starts with pareto principle of 80% of outcomes result from 20% of inputs. e.g. 80% of inventory spend come from just 20% of the inventory items. Also expressed as the term “significant few and insignificant many”
In absence of detailed data it serves well to understand the trend of 80/20 rule will likely be the answer.
Helps prioritise which stock should be more closely managed and allocate resources allocated to managing it. May as well focus effort on products causing the highest expenditure to understand if its really necessary to help challenge it and reduce cost of hold expensive stock. A is the focus
B is a middle ground
C is where complication ocurrs in managing the vast array of stock codes but little effort applied as the value is too low to care. This is known as Tail spend - spend that is not actively managed, low spend, high volume, many suppliers
What is Stock Profile?
Description of stock from description, codes, value, volume, size etc stock turnover/ usage
