Stock control Flashcards
Define the term stock control.
Stock control is the control of the flow of stock in a business, it concerns the ordering and management of: Raw materials Components Work-in-progress Finished goods
What is stock?
Stock can be raw materials, work in progress, finished goods or part of an assembled item.
Explain how stock management diagrams work.
In a business they may need to order more stock when they run out
High stock holding is expensive and adds to the cost of a business which will reduce profits
A business can be left with lots of unwanted stock which makes it more difficult to compete on price due to stock holding costs
Name the different components of a stock management diagram.
Buffer stock Lead time Minimum stock level Reorder level Maximum stock level
What is the lead time?
The time between the reorder level and the minimum stock level.
What are buffer stocks?
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
Some goods cannot hold buffer stocks – due to perishability (it goes off like milk) or due to obsolescence (it goes out of date like technology)
What are the advantages of buffer stocks?
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
What are the disadvantages of buffer stocks?
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
What are the implications of poor stock control?
Stock out costs are the costs of not having stock when it is needed:
Loss of customer goodwill
Loss of sales revenue
Damage to reputation
Disruption to production
What is just-in-time delivery.
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
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
What are the advantages of just in time delivery.
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
What are the disadvantages of just in time delivery?
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
What does waste minimisation help with?
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
Waste minimisation can carry heavy legal fines for non-compliance
What 7 deadly wastes does lean production aim to eliminate?
Over production; stops the smooth flow of materials round the factory and reduces quality of finished goods
Waiting time; lots of lead time ties up waiting for next process to happen
Transportation time; significant costs spent on transporting parts, components and stock to each workstation
Excess processing; Large complex machines used instead of small flexibles one
Excess stock; uses floor space and increases lead time
Excess motion; Too much bending, lifting stretching can be tiring and case accidents
Product quality; scrap, rework, defects all add costs to the manufacturing process
What is lean production?
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; Time Labour Capital Space in the factory Raw materials
