Managing Stock (2.4.3) Flashcards
What is Under-utilization?
When resources or assets are not fully utilized to their maximum capacity.
Examples of Under-utilization
-Idle Workers
-Capital Spare Capacity
What is Over-utilization?
Overutilization refers to a situation where an employee’s workload exceeds their capacity, based on the hours they are contracted to work.
Examples of Over-utilization
-Overtime
-Stretched resources
What is Stock?
Anything that a business holds that goes into making a product or service.
What are the three types of stock?
-Raw Materials
-Semi-Finished Products
-Finished Products
What does a stock control/bar graph stock graph show?
The flow of stock (inventory) into and out of a business over time
What is a Bar Stock Graph? (Look up for Picture)
-Great Tool for Mapping out Stock Levels and never leaving yourself without products to sell
-No products will mean unhappy customers and bad reviews
-This will damage brand loyalty now as well as lowering future sales due to the bad word-of-mouth
What is a Bar Stock Graph good for? What happens if don’t have it?
Great for mapping out stock level and never leaving without products to sell. No produce= unhappy customers= Bad reviews= Damage Brand Loyalty= Sales decrease due to word-of-mouth of bad sales
What are the 4 parts of the Bar Stock Graph?
-Maximum Stock Level
-Minimum Stock Level
-Re-Order Level
-Lead Time
What is the Maximum Stock Level?
Total amount of stock a business can hold at one time
What is the Minimum Stock Level?
Lowest amount of stock a business should hold
What is the Re-Order Level?
The point at which new stock will be ordered
What is the Lead Time?
The time it takes for the new stock to arrive
What are the Two Methods of Stock Control?
-Just-In-Time
-Just-In-Case
What is Just-In-Time?
Materials are delivered when they are needed and so arrive Just-in-time to go on the production line and products are sent out straight away after they’ve been made. System enables a firm to produce only what is required, in correct quantity and at correct time. Zero stock is held and materials as and when needed.
What are the advantages of Just-In-Time?
-Reduced Space needed
-Smaller Investment
-Waste Elimination/Reduction
-More Output
-Lower Unit Costs
-No risk of out-of-date stock
What are the disadvantages of Just-In-Time?
-Dependency on reliable suppliers
-Make detailed planning required
-Risk of disruption/No shows stops entire production
-No bulk order discounts
What are buffer stocks?
Buffer stock is a quantity of goods/raw materials kept in case of stock shortages. This can provide a competitive edge over rivals unable to meet demand
What is another time for buffer stocks?
Just in Case
What is Just-In-Case Production?
Inventory strategy where companies keep large inventory on hand. Aims to minimize probability that product will sell out of stock. Holding buffer stock as a precaution.
What are the advantages of Just-In-Case?
-Increased Customer Satisfaction
-Reduced chances of running out of stock
-Benefit from Bulk-Buy Discounts
-Lower risks of missed deliveries
-Brand image
-Lower risk of changing demand
What are the disadvantages of Just-In-Case?
-Storage Space Requirements/Storage Costs
-Freshness concerns
-Cash tied up in stock
-Reduced Output
-Opportunity Costs
-Cash Flow issues
What will Stock Control Systems depend on?
-Fluctuations in Demand
-How reliable supliers are
-The length of lead times
-The economy
-External Shocks
Why does waste in a business occur?
Waste in a business can occur for a number of several reasons:
-Stock becomes obsolete unless used by a particular date
-Perishable stock (food + medicines) that is not used before they deteriorate will need to be thrown away
-Stock may be damaged as a result of poor storage conditions and may not be suitable for use in the production process
What does this increased waste mean?
Allowing food to go unchecked will increase the unit costs of production and reduce both efficiency and productivity. Businesses may take a range of steps to minimise waste
What are ways in which a business can minimise waste?
-Storage- Refrigeration + protection from damage, effective security, careful stock rotation
-Planning- Diligent forecasting, Staff Training, Computerized stock control
-Sales Tactics- Reduce prices to encourage purchases, Alternative uses for obsolete stock
What does Lean Production do?
Involves the minimisation of the resources used in production and so less time is required as the production process is organised in the most efficient way, fewer materials are used as lean production is capital intensive, Less labor is needed due to capital and space required for production is reduced as a result of just in time stock management
What does the use of Lean Production give a business?
A competitive advantage as lower unit costs are achieved due to minimal wastage, so prices may be lower than those offered by competitors. Better quality of output is likely as a result of supplier reliability and carefully managed production process
