Inentory Managment Flashcards
What are 4 problems with understocking
• The firm is left with unsold stock, which means it loses out on sales revenue as it has money tied up in stock.
• The firm has to store the stock somewhere, which will cost the firm money in terms of air conditioning, lighting.
• The unsold stock may have to be lowered in price which means the firm will fail to maximise sales revenue
• Having too much stock can mean that it is easy for the employee to steal the stock. Remember, helping yourself to the firm’s printing paper is not a major crime but it is still seen as stealing!
Problems with understocking
stocking
• The firm may have to turn away customers which loses the firm business now and in the long-term, and gives it a bad reputation
• If the stock is late, the firm may have to turn off the production line machines. This costs the firm time and money as restarting the machines can take many hours. This is called recalibrating a machine.
• If the firm runs out of stock it will cost the firm a lot of money to buy in new stock. The firm may be charged a high price from their suppliers as they want only a small quantity, to be delivered immediately.
• Under-stocking often means the firm is only buying small quantities and so the firm will lose out on bulk-buying discounts.
What are ten 3 methods of production
Job
Batch
Flow
What is batch production
This is the production of a group of products. Products are part made, such as a batch of rolls by a baker, a brand of chocolate bars or a batch of school shirts in the medium size. One batch is made before being passed on to the next stage of the production line. Or a batch of rolls is made by the baker with plain flour, then another batch is made with wholemeal flour.
What is flow production
This is where products are made continuously, without stopping production. Ford Cars will organise the production line so that the cars are made 24 hours a day, for about a month, to keep the lines flowing, as it is expensive to stop the production lines as there are so many stages involved.
What is job production
This is the production of a single product, such as a wedding dress, a bridge or a web-site. It requires a lot of skilled staff and is very expensive to produce.
What are 3 aspects the firm would consider when choosing a method of production
Price
If the firm wants to charge a high price for their product they are likely to consider the job and batch methods of production as the firm will be able to tailor the product to the customer’s needs. These methods will allow a degree of variety which allows for higher prices to be charged.
Customer segment
If the firm is aiming the product at a mass market, eg cars or burgers then the firm will choose a flow method of production as this will maximise the output and so reach as many customers as possible.
Cost of labour
If labour is expensive then firms will likely move to a flow method production where machines will perform the majority of tasks.
What are 5 quality assurance techniques
Quality Assurance
This is where a firm checks the quality of a product at each stage of the production process.
The pizza factory, for instance, would check the flour when it arrives in the factory, also at the point when the pizza dough is made and various stages on the production line.
This should prevent mistakes from occurring in the product before it reaches the end of the production line. At this final stage it is more expensive for the firm to correct the product.
Quality Control
This is where the firm checks the quality of the finished product.
The firm would check a sample of the pizzas just before they are boxed or wrapped and sent out to the customer. The firm does not always check every product as this can be expensive and so the firm will check a sample of the products.
Benchmarking
A firm will investigate the best in the field and aim to match the standards of their product to the market leader.
This pizza company may compare themselves to a company such as Dr Oetker Pizzas. The firm will buy a selection of Dr Oetker pizzas and investigate areas such as; the variety of toppings, the thickness of the pizza, the packaging, the price and in each case the pizza company will try to match the quality.
Quality Management
The firm will aim to get all staff to improve the quality of service of their products, from the receptionists to the Managing Director, first time and every time.
In the pizza firm the receptionist will be given a computer to ensure all the employees’ details are loaded accurately and so directing calls are done correctly, first time and every time. The engineers are given clear instructions to ensure they carry out the operations to make the product correctly first time and every time.
Quality Circles
This is where the firm asks staff to volunteer to meet up in groups to discuss issues concerning the business. The groups are called quality circles and are headed up by a manager who will take notes and give feedback to senior managers for their consideration.
The pizza firm can ask employees to volunteer to meet up and discuss any problems with the firm. These meeting do not have to have to be formal and can be held at the end of the production line. It is just important that the managers allow the workers to talk openly about the business, otherwise staff will hold back and the meeting will be pointless.
What’s fe get pros and cons of a quality circle
Pros
• Management hear about the problems or issues in the business as they happen and so they can be resolved quickly
• Workers feel flattered to be asked their opinions and so morale is raised
• The issues raised by the workers are often relevant to the successful running of the firm and so the meetings are effective
• It improves the relationship between management and workers as they are pulled together in the meetings.
Cons
When workers are attending quality circles then they are NOT making pizzas, for example, so output will fall.
• Managers have to be trained on how to run quality circles, which costs the firm money
• The ideas raised by workers should be responded to by management, otherwise staff will not take it seriously.
Pros and cons of introducing quality methods to a firm
Pros
Mistakes are minimised which saves the firm money on getting rid of wastage
• The firm gets a good reputation for producing quality products which allows the firm to raise the price
• The firm will beat their competition if their product is seen as being of a better quality
• The customer is less likely to return faulty products to the firm which saves the firm money
• The firm is able to charge a high price and so maximise profits
• It is easier to build up customer loyalty to quality products
Cons
Workers are taken away from their work during initiatives, such as quality circles – lost production
• Introducing quality into a firm costs money such as staff have to be employed to check quality and a Quality Manager is often hired
• Cost of training to get workers familiar with systems such JIT
• Cost of designing the system, installing checks of production lines
• Better raw materials may cost extra
• Extra paperwork required to validate quality checks etc
Pros and cons of technology
Pros
Human error is removed which reduces mistakes
• Technology allows for the product quality to be more consistent, ie all products are the same. Machines don’t have injuries.
• Less labour is needed and so costs are saved
• The firm avoids problems with staff ie sick days, strikes or slowdowns
• Machines are more able to perform repetitive tasks that might be boring to a worker
Cons
Set up can be expensive
Staff have to be trained to use tecknology
Benefits of a electronic control system
Human error is removed
All stock is loaded onto a data base making it easier to identify top sellers.
Less chance of running out of stock
Less stock is stolen as is easier to track.
