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? 2 things
The storage space available
Kind of product
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
