Inventory control

Question 1

What is inventory control

Answer 1

Inventory Control: The management of an organisation’s stock, to enable it to match supply to demand.

Question 2

What is another word for inventory

Answer 2

stock

Question 3

What does stock include

Answer 3

Raw materials (The base products that are crafted into finished goods)

Work in progress (Raw materials that are in the process of being turned into finished goods)

Finished goods (Raw materials that have been transformed into the finished goods, and are ready for sale)

Question 4

What are some benefits of holding high levels of inventory

Answer 4

Meet unexpected changes in demand (If demand increases, you’ll be able to fulfil the order that come through)

Deal with issues with suppliers (If a supplier goals on strike, or is having troubles producing raw material, you have time to sort things out, and still fulfil orders)

Able to benefit from bulk buying raw materials (Economies of scale)

Question 5

What are the benefits of holding low levels of inventory

Answer 5

Lower costs incurred in storing and securing raw materials (Don’t have to spend money on freezing goods or paying for security to make sure no stock goes missing even rent, it your stock is quite bulky)

Less money tied up in working capital - Money used for the day to day running of the business (Wages, buying stock)

More money to improve operations (Marketing, service delivery etc)

Less chance of obsolescence (stock going out of date or technology