Managing stock Flashcards
7 Rs of logistics
- Right product
- Right customer
- Right time
- Right place
- Right condition
- Right quantity
- Right cost
The process of managing stock involves ensuring sufficient: (3)
- Stocks of raw materials required to produce the finished goods are available
- Stocks of finished goods needed are available to meet demand
- Staffing in service industries, e.g. checkout operators in a supermarket, is accurate to ensure a quality service is provided to customers
JIT
Just in time:
Minimum amount of stocks of raw materials and finished goods are held by the business
JIC
Just in case:
The business holds buffer stocks of raw materials/finished goods just in case there is a problem with deliveries or there is an unexpected surge in demand
Just in time stock control (2)
- Careful planning is required as raw materials arrive at the production line as they are required. JIT works well when demand is consistent.
- Good relationships with suppliers are essential; suppliers are therefore usually located nearby.
Benefits of JIT (4)
- Stock levels can be kept to a minimum
- Reduced storage and other costs, such as insurance
- Less waste
- Improved cash flow
Drawbacks of JIT (5)
- Reliant on a good relationship being formed with suppliers
- Vulnerable to disruptions in transport
- Careful planning required; no spare buffer stock is held
- Benefits from bulk buying may be lost
- More administration/paperwork as many orders are placed
Just in case stock control
The alternative approach to just in time stock control is the situation when a business chooses to hold stock within the business. This is often referred to as just in case stock control.
- It is often used when demand is unpredictable, suppliers are not nearby and storage is not expensive, as buffer stock is held.
- It is not suitable for products which perish, become obsolete or go out of date quickly.
Bar gate stock graph
If a business chooses to hold stock of different products, it can use a bar gate stock graph to show and track stock levels of each product over a period of time.
Benefits of JIC (4)
- Stock is available for re-working faulty products or to meet sudden increases in demand
- Production is less reliant on suppliers and if stock is not delivered on time, the whole production schedule need not be delayed
- Spare finished products are available to meet unexpected orders, which can increase the level of customer service
- Economies of scale are possible from bulk purchasing stock
Drawbacks of JIC (4)
- Higher stock holding means a need for more storage space, which increases rent and insurance costs
- Money is tied up in stock and is therefore unavailable for other purposes
- Stock might go out of date, prices may need to be reduced to sell excess stock
- Build up of unsold finished products leading to higher stockholding costs
Bar gate graph (4 lines)
- Max stock level
- Buffer stock level (the lowest)
- Stock level of product over time
- Re-order level - the point when a new order is
triggered
Lead time represents the time difference between
placing an order and receiving it
