Stock control

Question 1

What are the 3 types of stock?

Answer 1

1. Raw materials and components: stocks purchased from suppliers, held by firm until they are ready to process them
2. Work in progress : incomplete, maybe be because they are moving through the production process, store them to give it some inflexibility to meet customer demand
3. Finished goods : large batches as no buyer wants to buy it, seasonal goods (stockpiling)

Question 2

What is the maximum stock level?

Answer 2

This shows the largest amount that the firm is either willing or able to hold in stock

Question 3

What is the reorder level?

Answer 3

Trigger quantity, when stock falls to this level a new order will be sent to the supplier

Question 4

What is the minimum stock level?

Answer 4

Buffer stock, firm’s will want to keep a certain minimum level of stock so that if suppliers fail to provide they have something to fall back on or if there is a sudden increase in demand

Question 5

What are the advantages of using stock control graphs?

Answer 5

Gives managers a clear picture of how things have changed

Question 6

What are the disadvantages of using the stock control graphs?

Answer 6

• not always neat and have a regular pattern
• orders may arrive late and not in the correct quantity
• rate of usage is unlikely to be constant

Question 7

What does a steep slope of the stock level suggest?

Answer 7

More stock being used than normal

Question 8

what is lead time?

Answer 8

• the time between placing an order and receiving it

Question 9

why do businesses hold stock?

Answer 9

• enable production to take place
• satisfy customer demand
• late deliveries
• allow efficient production
• allow for seasonal changes
• provide a buffer