Managing Stock (2.4.3)

Question 1

What is Under-utilization?

Answer 1

When resources or assets are not fully utilized to their maximum capacity.

Question 2

Examples of Under-utilization

Answer 2

-Idle Workers
-Capital Spare Capacity

Question 3

What is Over-utilization?

Answer 3

Overutilization refers to a situation where an employee’s workload exceeds their capacity, based on the hours they are contracted to work.

Question 4

Examples of Over-utilization

Answer 4

-Overtime
-Stretched resources

Question 5

What is Stock?

Answer 5

Anything that a business holds that goes into making a product or service.

Question 6

What are the three types of stock?

Answer 6

-Raw Materials
-Semi-Finished Products
-Finished Products

Question 7

What does a stock control/bar graph stock graph show?

Answer 7

The flow of stock (inventory) into and out of a business over time

Question 8

What is a Bar Stock Graph? (Look up for Picture)

Answer 8

-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

Question 9

What is a Bar Stock Graph good for? What happens if don’t have it?

Answer 9

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

Question 10

What are the 4 parts of the Bar Stock Graph?

Answer 10

-Maximum Stock Level
-Minimum Stock Level
-Re-Order Level
-Lead Time

Question 11

What is the Maximum Stock Level?

Answer 11

Total amount of stock a business can hold at one time

Question 12

What is the Minimum Stock Level?

Answer 12

Lowest amount of stock a business should hold

Question 13

What is the Re-Order Level?

Answer 13

The point at which new stock will be ordered

Question 14

What is the Lead Time?

Answer 14

The time it takes for the new stock to arrive

Question 15

What are the Two Methods of Stock Control?

Answer 15

-Just-In-Time
-Just-In-Case

Question 16

What is Just-In-Time?

Answer 16

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.

Question 17

What are the advantages of Just-In-Time?

Answer 17

-Reduced Space needed
-Smaller Investment
-Waste Elimination/Reduction
-More Output
-Lower Unit Costs
-No risk of out-of-date stock

Question 18

What are the disadvantages of Just-In-Time?

Answer 18

-Dependency on reliable suppliers
-Make detailed planning required
-Risk of disruption/No shows stops entire production
-No bulk order discounts

Question 19

What are buffer stocks?

Answer 19

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

Question 20

What is another time for buffer stocks?

Answer 20

Just in Case

Question 21

What is Just-In-Case Production?

Answer 21

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.

Question 22

What are the advantages of Just-In-Case?

Answer 22

-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

Question 23

What are the disadvantages of Just-In-Case?

Answer 23

-Storage Space Requirements/Storage Costs
-Freshness concerns
-Cash tied up in stock
-Reduced Output
-Opportunity Costs
-Cash Flow issues

Question 24

What will Stock Control Systems depend on?

Answer 24

-Fluctuations in Demand
-How reliable supliers are
-The length of lead times
-The economy
-External Shocks

Question 25

Why does waste in a business occur?

Answer 25

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

Question 26

What does this increased waste mean?

Answer 26

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

Question 27

What are ways in which a business can minimise waste?

Answer 27

-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

Question 28

What does Lean Production do?

Answer 28

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

Question 29

What does the use of Lean Production give a business?

Answer 29

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