Stock Control Flashcards

1
Q

What is stock?

A

Represents the raw materials, work in progress and finished goods held by a firm to enable production and meet customer demand

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2
Q

What is buffer stock?

A

An amount of stock held as a contingency in case of unexpected orders so that such orders can be met in case of any delays from suppliers

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3
Q

Key reasons to hold stock

A
  • enable production to take place
  • satisfy customer demand
  • precaution against delays from suppliers
  • allow efficient production
  • allow for seasonal changes
  • provide a buffer between production processes
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4
Q

2 reasons why a business would keep a buffer stock of raw materials

A
  • if deliveries are delayed, buffer stock allows production to continue
  • if a batch of supplies is found to be faulty, the buffer stock can be used to continue production
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5
Q

2 reasons why a business would keep a buffer stock of finished goods

A
  • helps to ensure that the business can always supply customers when they need a product, with the right size or colour
  • allows the firm to accept rush orders from customers
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6
Q

4 impacts of holding too much stock

A
  • opportunity cost: ties up capital, as stock prevents that money from being used in other ways
  • cash flow problems: stock represents cash that has been covered into stock but not yet converted back into cash. Hold too much stock and there is a danger the firm will run short of actual cash
  • increases shortage costs: keeping stock costs money, it needs space, perhaps security
  • increases wastage: too much stock may lead to stock “going off” or becoming obsolete
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7
Q

4 impacts of holding too little stock

A
  • lost customers: of an order or customer arrives, expecting to receive their products immediately and there is none in stock, that customer or order may be lost to competitors
  • delays in production: if there are no materials to process, machinery and workers may be left standing idle until the next delivery arrives
  • loss of reputation: this may occur if word gets around that the business struggles to maintain enough stock to meet customer needs promptly
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8
Q

What is meant by just in time management?

A

Aims to eliminate buffer stock completely. Relies entirely on frequent, small deliveries of materials from suppliers being delivered without felt and without any quality problems

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9
Q

Key issues a business would have to consider when deciding whether to introduce JIT

A
  • suppliers must be willing to deliver frequently (often several times a day)
  • deliveries must be absolutely reliable; missed deliveries leave the firm without stock
  • suppliers may need to relocate close to the company using JIT
  • will smaller, more frequent deliveries lead to loss of bulk buying discounts
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10
Q

What is waste minimisation?

A

Aspect of lean production that focuses on reducing waste in any business process, such as wasted time, labour on materials

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11
Q

3 ways in which JIT production helps

To reduce wastage

A
  • less stock is held, meaning there is far less likelihood of stock wastage
  • cash is not tied up in stock, effectively wasting it
  • removing buffer stock helps to highlight bottlenecks and problems in production processes. These can be ironed out by adjusting the production system
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12
Q

What is lean production?

A

Collective term for a range of Japanese techniques designed to eliminate waste from business processes

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13
Q

4 ways lean production can help a business to run efficiently

A
  • more input from staff
  • a focus on quality
  • fewer wasted resources through JIT and total quality management
  • a focus on reducing wasted time, so speed can become a source of competitive advantage
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14
Q

Japanese production techniques linked to lean production

A

JIT
Kaisen
Cell production
TQM

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