Inventory management Flashcards
What is centralised storage?
One central location, in a large, purpose-built warehouse
What is decentralised storage?
Storing inventory in smaller warehouses or storerooms
List two advantages of centralised storage.
- Specialised staff employed to maintain inventory
- Can store a massive amount of stock
List two disadvantages of centralised storage.
- Inventory has to be delivered to each department, causing delays
- Increased costs due to specialist equipment
List two advantages of decentralised storage.
- Inventory is always close at hand, therefore no delay
- Smaller warehouses are more responsive to local needs
List two disadvantages of decentralised storage.
- Increased delivery costs due to low amounts of inventory being delivered
- Security may not be as effective
Fill in the blank: Centralised storage may be _______ to store inventory in one warehouse than many smaller storerooms.
[cheaper]
True or False: Centralised storage is in decline due to more efficient methods.
True
What is an example of a centralised storage location?
Dunfermline Fulfillment Center
What is a key factor to consider when deciding on a method of production?
Costs and benefits
What is a potential drawback of having inventory in a centralised storage system?
Delays in inventory delivery to departments
Fill in the blank: Decentralised storage allows for inventory usage to reflect _______.
[production]
List the advantages of centralised warehousing.
- Same procedures for issuing inventory used across the organisation
- Often located close to infrastructure
What is a disadvantage of having no specialist staff in decentralised storage?
Inconsistency across the organisation
List two reasons why centralised storage can reduce costs.
- Suppliers are delivering to one location, reducing delivery charges
- Economies of scale gained due to ordering larger quantities
What is one disadvantage of decentralised storage regarding inventory management?
No specialist staff dealing with stock
Fill in the blank: Centralised storage can lead to an increase in _______ due to storing large amounts.
[wastage]
What is a common characteristic of decentralised storage?
Each department is responsible for ordering and storing their own stock
What type of production does the term ‘capital-intensive’ refer to?
Production methods that rely heavily on machinery and equipment
What is the consequence of overstocking regarding supplies?
Supplies could go out of date
Overstocking can lead to perishable goods becoming unsellable.
What risk is associated with overstocking?
Risk of theft (staff, customers or thieves)
Increased inventory can attract theft.
What are stockholding costs?
Insurance, security
These costs increase with higher stock levels.
What is an opportunity cost in the context of overstocking?
Money being tied up in stock
Excess stock can limit cash flow for other investments.
What is the purpose of a stock management system?
Ensure stock is readily available at any one time
Ensure production continues
Avoid delays to customer orders
Ensure over-stocking does not take place
Avoid stock deterioration
Effective stock management is crucial for operational efficiency.
What does inventory management concern?
Sourcing and storage of raw materials
Supplies of finished goods for resale
Inventory management is vital for both secondary and tertiary businesses.
What are the key roles of the Operations Department?
Purchasing of raw materials
Systems – organising efficient methods of production
Stock Control
Quality Control
Storage and final distribution
The Operations Department ensures smooth production flow.
What measures must be used to keep stock levels manageable?
Setting a maximum stock level
Setting a minimum stock level
Setting a reorder level
Setting a reorder quantity
These measures help prevent overstocking and understocking.
What is a consequence of understocking?
May run out of stock – production halts, no products to sell
Understocking directly impacts a business’s ability to operate.
What is one disadvantage of understocking?
Cannot benefit from bulk buying discounts
Smaller orders lead to higher per-unit costs.
What is Just In Time (JIT) inventory management?
Process of ordering supplies only when they are required
JIT aims to reduce waste and increase efficiency.
What is a key advantage of JIT?
No wastage as all stock used for production
JIT minimizes inventory holding costs.
What is a disadvantage of JIT?
If deliveries are late production may stop
JIT relies on timely deliveries from suppliers.
What should be considered when setting a re-order quantity?
Lead time
Demand fluctuations
Storage capacity
These factors ensure that stock levels are maintained effectively.
What are the advantages of a computerised stock control system?
Inventories can be updated automatically
Can link to EPOS system
Allows for automatic reordering
Managers can track slow moving or best selling items
Computerised systems enhance efficiency and accuracy in inventory management.
What is a feature of an effective inventory management system?
Computerised stock control
Modern inventory systems often rely on technology for efficiency.
