Stock Control Flashcards

1
Q

3 types of stock

A

Raw materials, work-in-progress, finished goods

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2
Q

Raw materials as stock

A

theses are the stock that the business has purchased from other suppliers
it is held by firm until it is ready to process them into finished output

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3
Q

Work-in-progress as stock

A

At any given moment a firm will have some items it has started to process but are incomplete

  • may be currently moving through production process
  • may be that the firm stores unfinished goods to have some flexibility to meet customer demand
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4
Q

Finished goods as stock

A

Once a product is complete, the firm may hold it

- may be it sells goods in large batches or no buyer has bought product yet

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5
Q

Why do some business stock-pile?

A

A firm that produces seasonal goods will have most of the years production building stock in preparation for the busy season

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6
Q

If a firm holds high level of stock…

A

Costs increase

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7
Q

Stock level line - what does it show?

A

This shows how stock levels have changed over this time period.
As stock is up, the level of stock gradually falls from left to right

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8
Q

What does the maximum stock level line show?

A

The amount that a firm is willing or able to hold in stock

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9
Q

What does the re-order level line show?

A

The amount that when stock fall to this level, a new order will be sent to the supplier
The re-order line is reached some time before the delivery due to the lead time to process the order and make the delivery.

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10
Q

What is the minimum stock level?

A

The level of stock that the firm wants to keep so it has something to fall back on if suppliers fail to arrive or if there is a sudden increase in demand

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11
Q

Why aren’t stock level graphs always accurate?

A

Orders may arrive late
Orders may not be the right quantity
The rate of demand and sales in unlikely to be constant

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12
Q

What are the implications of poor stock control? (holding too much)

A
Too much stock
Cash flow problems 
Increased storage costs 
Increased finance costs 
Increased stock wastage
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13
Q

What are the implications of poor stock control? (holding too much)- cash flow problems

A

There is an opportunity cost of holding too much stock. Holding the firms money/wealth in stock prevents it using capital in other ways such as investing in new technology, research and development on a new product which could effect the competitiveness of the business

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14
Q

What are the implications of poor stock control? (holding too much) - Cash flow problems

A

Holding wealth in the form of stock may cause cash flow problems if they can’t sell, insufficient working capital to pay suppliers

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15
Q

What are the implications of poor stock control? (holding too much) - Increased storage costs

A

Rental costs of the space is needed and the higher the stock value, the higher the cost of insurance against fire and theft

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16
Q

What are the implications of poor stock control? (holding too much) - increased finance costs

A

If the capital for the extra stock needs to be borrowed, the cost of that capital (interest rate) will be a significant added annual overhead

17
Q

What are the implications of poor stock control? (holding too much) - Increased stock wastage

A

The more stock that is held, the greater the risk of it going out of date - obsolete

18
Q

How do you boost cash by destocking?

A

Cut order supplies or boost sales to customers

19
Q

How does destocking boost cash - cut order supplies?

A

Cut order supplies - cash outflows decrease - net cash flow improves

20
Q

How does destocking boost cash? - boost sales to customers

A

Boost sales to customers - cash flow increases - net cash flow improves

21
Q

What are the costs of holding too little stock?

A

Lost orders
worker downtime
loss of reputation

22
Q

What are the costs of holding too little stock? - Lost orders

A

urgent customer orders may not be met because there is too little finished stock