Managing Inventory Flashcards
What does a business’s stock involve?
Raw materials and the store of finished goods
What is opportunity cost?
the cost of investing money in stock instead of something else
What is buffer stock?
A minimum level of stock so it won’t run out of raw materials or finished goods.
What does the amount of buffer stock depend on? 3 things
The storage space available
Kind of product
The lead time
What is lead time?
The time it takes for stock to arrive after ordering them from the supplier.
What is the re-order quantity?
The amount the company orders from its supplier
What is the re-order level?
The stock level at which a re-order is placed
How do you calculate re-order level?
Lead time x average daily usage + buffer stock level
What do inventory control charts allow managers to do?
Analyse and control stock over a period of time
