Stock Control -holding stock, its costs, max and minimum stock, reorder levels, buffer stock Flashcards
the 3 types of stock
- raw material
- work in progress
- finished goods
finished goods
the most liquid form of stock - you can sell it quicker and easier
- if you lose it then you lose the added value of it
what are the benefits of holding stock
- can satsify demand
(loss of goodwil if you cant satisy the demand with loss of revenue if you cant satisfy customers) - cope with fluctuations of demand
(dealing with surges, order increase as they can meet big demand then can reduce costs - EOS) - cost savings due to EOS purchases
(buying in bulk but the cost of stock is lower than the savings you make) - buffer stock able to meet late deliveries
(ensures sufficient stock available before delivery is due so theres no disruption to the production line or downtime)
costs/problems of holding stock
- storage costs
(warehousing is expensive, has to be covered, storing shelves needed with automative stock and distributing as extra costs too)
-opportunity costs
(paying for stock limits expenditure somewhere else)
- security costs
(CCTV + security guards that will depend on the nature of the product and the raw materials involved) - insurance costs
(risks of holding stock increase then insurance increase - an unavoidable cost) - administrative costs
(related to the costs of obtaining the stock, raising orders, agreeing transport delivery times and checking stock on arrival) - out of stock costs
(costs of holding stock are referred to as out-of-stock costs, runs out + unable to produce goods so unable to meet the order, will usually hold due to ‘just in case’ so finding the optimum level is ideal) - depreciation/obselese costs
(stock will depreciate over time - especially if its terrible or have a sell-by date, can also be redundant/obsolete as tastes change - hard to generate that into revenue)
stockpiling
becoming more and more of an issue as each arrow can be more and more of a geographical distance
supplier > process A > process B > process C > customer
^^^^ C to customer can be half the world away
why dont you want stock
ensuring supply of raw materials for production (globalisaiton)
ensuring enough finished goods are ready for demand
too much stock
- storage
- insurance
- lighting
- handling
- space
- opportunity cost
- fall in demand leaves unsold stock
- waste/theft/damage = perishable or out of fashion
too little stock
- cant cope with demand - lose on profits
how predictable is demand? - customers - supply problems where you run out of supply - stock management
- purchasing EOS not achieved if you buy ins amll quantities
JIT
CANNOT HAVE 0 STOCK
concerns can be lost by implementing JIT
controlling stock
other than JIT
obvious method of controlling stock levels is by careful stock rotation
- LIFO
- FIFO
- EPOS
LIFO
last in first out
- used for accounting valuations
- related to the order in which stock is sold and how restocking takes place
- better system for controlling stock if you want to avoid or reduce waste
- stops stock going past their sell-by date and being sold
- system can break down if staff arent on top of the old stock
FIFO
first in first out
- new stock placed infront of old stock - long shelf life products i.e. paint or canned food
- not good for perishable short-shelf-life goods
- success of FIFO relies on employee efficiency
EPOS
electronic point of sale
- ensuring stock levels and the reordering of stock is done efficiently
- each product with a unique bar code number - read electronically at the checkout and passed electronically to a computer that automatically reorders stock at the required level
average stock level formula
maxmimum + minimum stock level
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