Inventory Managment

Question 1

what is one of the most important tasks for an inventory manager?

Answer 1

One of the most important tasks for inventory management is to ensure that organisations have the correct level of stock for their day-to-day operations.

Question 2

what can too much stock mean?

Answer 2

can be difficult to manage and expensive to store

Question 3

what can to little stock mean?

Answer 3

too little stock can mean running out – losing out on sales.

Question 4

because too little or too more stock can cause major problems therefore what need to happen?

Answer 4

The optimum inventory needs to be maintained.

Optimum level – storage costs are at a minimum but there is enough inventory to meet requirements.

Question 5

what are the disadvantage of understocking?

Answer 5

• Production could stop – machinery and staff sit idle.
• Customer complaints due to not receiving order on time (business has to wait on more inventory being delivered)
• Business could gain bad reputation and image.
• Fewer smaller orders can increase administration costs and economies of scale can be lost.

Question 6

what are the disadvantage of overstocking?

Answer 6

• Increased costs for storage.
• Waste of stock due to it becoming obsolete or out of date.
• Higher risk of stock being stolen.
• Cash-flow problems, less cash available as too much stock has been purchased.

Question 7

what is the purpose of inventory systems?

Answer 7

• Ensure there is enough stock available when needed.
• Ensure production does not stop.
• Avoid delays due to lack of inventory.
• Ensure over-stocking does not happen.
• Avoid stock deteriorating/ becoming obsolete.

Question 8

inventory systems can be what?

Answer 8

manual or computerised

Question 9

why is computerised inventory systems better?

Answer 9

it is more reliable

Question 10

inventory systems have the following features?

Answer 10

• Minimum stock level
• Maximum stock level
• Lead time
• Re-order level
• Re-order quantity
• Buffer inventory

Question 11

what is minimum stock level?

Answer 11

the lowest amount of stock that should be stored a one time. There is a danger at this level that inventory can fall too low and production would cease.

Question 12

what is maximum stock level?

Answer 12

the highest amount of inventory that can be stored at one time. At this level costs will be at the minimum per unit as storage is at its full capacity.

Question 13

what is lead time?

Answer 13

time that passes between ordering stock and it is arriving at the warehouse.

Question 14

what is re-order level?

Answer 14

the quantity at which more inventory is ordered.

Question 15

what is re-order quantity?

Answer 15

the quantity of inventory that is ordered to bring levels back up to the maximum.

Question 16

what is buffer inventory?

Answer 16

a ‘safety’ supply of around 100 items that are held in case deliveries are delayed or there is an unexpected large order.