Stock Control

Question 1

Definition of stock control

Answer 1

• Stock control is the control of the flow of stock in a business, it concerns the ordering and management of

Question 2

What components define stock control

Answer 2

1. Raw materials
2. Components
3. Work-in-progress
4. Finished goods

Question 3

What is stock

Answer 3

Stock is also known as inventory. It can mean any of these; raw materials, work-in- progress, components or even finished goods. So stock does not have to be complete products it can be part made items.

Question 4

How should you be keeping stock

Answer 4

High stock holding is expensive and adds to the cost of a business which will reduce profits e.g. extra storage, insurance, etc.
• A business can be left with lots of unwanted stock e.g. cat food that is out-of-date

Question 5

What are buffer stocks

Answer 5

• Buffer stocks are stocks which are held in case there is unforeseen rise in demand or a problem with supply
• A business will keep buffer stocks to make sure that production is not stopped and that customers are kept happy with supply dates being met

Question 6

Advantages of buffer stocks

Answer 6

• Holding buffer stocks means that a business can easily respond to changes in consumer demands
• Holding buffer stocks means that if the suppliers cannot deliver on time that production will not be affected

Question 7

Disadvantages of buffer stocks

Answer 7

• The cost of storage is high, a business will need to pay for premises, staff and security of the stock
• This can tie up the working capital of a business

Question 8

What are stock out costs

Answer 8

• Stock out costs are the costs of not having stock when it is needed:
1. Loss of customer goodwill
2. Loss of sales revenue
3. Damage to reputation
4. Disruption to production

Question 9

What is just in time delivery

Answer 9

• Just-in-time means that a business does not keep stocks of parts in a warehouse
• Instead they order the parts and get them delivered same day from the supplier
• This means very close links with suppliers

Question 10

What are JIT and suppliers

Answer 10

• To make JIT work the manufacturer needs to have excellent working relationships with their smaller parts suppliers
• JIT does not work when there are delivery or quality issues
• No buffer stocks are held in a JIT system so if delivery does not arrive the product cannot be made

Question 11

Where is JIT most suitable

Answer 11

• Just in Time Manufacturing (JIT) - also known as “lean manufacturing” refers to a system of manufacturing in which products are not built until the product is ordered and paid for

Question 12

What is JIT+waste+lean management

Answer 12

• JIT’s main philosophy is to eliminate waste - wasted inventory, wasted stock and wasted time
• By creating and delivering products quickly when consumers request them excess inventory is eliminated, customers receive their orders quicker and the manufacturer doesn’t need to keep a large inventory of stock parts

Question 13

Advantages of JIT

Answer 13

• As parts are ordered as they are needed there is no wastage
• Parts are not warehoused which is a massive cost saving in terms of premises and staff
• Stock is less likely to go out of date
• The business will improve their cash flow, as their money is not tied up in stock

Question 14

Disadvantages of JIT

Answer 14

• The business won’t be able to meet unpredicted surges in demand
• The business won’t be able to quickly replace damaged parts
• If the delivery does not turn up in time this can stop the whole production line, which is costly

Question 15

What is the definition of waste

Answer 15

• Any activity or result that the customer doesn’t value and is not willing to pay for. These activities that don’t add value for the customer between the inputs and the outputs must be removed or minimised.

Question 16

What is waste minimisation

Answer 16

• Waste minimisation can help improve efficiency and reduce the unit costs of production
• Waste minimisation can also improve the public image of the business – if they are seen to be more eco friendly

Question 17

What are the 7 deadly wastes

Answer 17

1. Over production
2. Waiting time
3. Transportation time
4. Excess processing
5. Excess stock
6. Excess motion
7. Product quality

Question 18

What is over production

Answer 18

• Over production means that the business is making more than required and maybe running at over capacity (Just-in-case)
• Over production can stop the smooth flow of materials round the factory and reduces quality of finished goods

Question 19

What is waiting time

Answer 19

• The waste of waiting can take two forms;
• Waiting because the next step in the process is not ready
• Waiting because there are not enough inputs necessary to complete the next process
• E.g. garden company waiting for delivery of trees and grass

Question 20

What is transportation time

Answer 20

• There can be significant costs spent on transporting parts, components and stock to each workstation or between sites
• It wastes energy and resources of an employee that could be better used
• It wastes fuel for forklifts and lorries
• Anytime that materials have to be moved from one place to another is an opportunity to reduce wasteful transportation

Question 21

What is excess processing

Answer 21

• Excess processing can mean any extra processes which take the original raw material further and further from its natural state
• This is fine if it meets customer needs, but if the customer doesn’t want these extra processes then this is wasteful

Question 22

What is excess stock

Answer 22

• If a product is over produced then it must be stored somewhere until it is needed. This means warehousing, tracking and monitoring.
• It risks the products becoming obsolete, going off or going out of style (depending on hat it is) and it is incurring costs

Question 23

What is excess motion

Answer 23

• Excess motion can mean unnecessary activities within the workspace
• Too much bending, lifting stretching can be tiring and case accidents
• Examples might be printers or photocopies that are not in a convenient location and require staff to have to walk to them

Question 24

What is product quality

Answer 24

• If product quality is inferior then this will cause scrap and rework, these defects all add costs to the manufacturing process
• Mistakes can cause waste, for example when you order a chicken legend meal with no lettuce and no mayo from the drive through and it arrives wrong, this may have to be thrown away – causing waste

Question 25

What is lean production

Answer 25

• Lean production is a Japanese approach top production first adopted by Toyota.
• The aim is to reduce resources used in production, to use less of everything;
A. Time
B. Labour
C. Capital
D. Space in the factory
E. Raw materials

Question 26

What is lean production cost savings

Answer 26

• Toyota can develop a car in 18 months, it takes general Motors (who make Ford) three years.
• It takes GM 50% longer to assemble their cars than Toyota do.
• So there are impressive cost savings to be made from introducing lean production

Question 27

Benefits of lean production

Answer 27

• Improved customer service through delivering exactly what is required when they want it (think cars)
• Improved productivity in terms of output per worker per time period
• Quality improvements through reduction in defects and reworking faulty goods

Question 28

What is opportunity cost

Answer 28

The cost of missing out on the next best alternative when making a decision

Question 29

What is stockholding cost

Answer 29

The overheads resulting from the stock levels held by a firm

Question 30

What is competitiveness

Answer 30

The extent to which a firm can stand up or beat its rivals

Question 31

What is competitive advantage

Answer 31

A feature that gives one business an edge over its rivals