Stock management 2.4.3

Question 1

what are stocks

Answer 1

the raw materials, work-in-progress, and finished goods that are held by a business to enable production and meet consumer demand

Question 2

what are the 3 types of stock (give each a brief description)

Answer 2

1. raw materials - used in the production process for assembly
2. works in progress - semi-finished parts of production
3. finished goods - ready for sale or distribution

Question 3

give 4 reasons why business’ hold stock

Answer 3

1. enables production to take place
2. can satisfy customer demand
3. can prepare for delay from suppliers
4. can allow for seasonal changes

Question 4

describe the maximum level element in a stock control chart

Answer 4

the maximum levels of stock a business can or wants to hold

Question 5

describe the re-order level element in a stock control chart

Answer 5

when stock reaches this point, it acts as a trigger to order the next supply

Question 6

describe the lead time element in a stock control chart

Answer 6

the amount of time it takes between placing an order and receiving the stock

Question 7

describe the minimum stock level element in a stock control chart

Answer 7

the minimum amount of a product the business would want to hold as stock

Question 8

describe the buffer stock element in a stock control chart

Answer 8

the amount of stock that is held as an emergency in case of unexpected orders of delayed suppliers

Question 9

what do vertical gaps or changes on stock control diagrams refer to

Answer 9

the quantity of stock

Question 10

what do horizontal gaps or changes on stock control diagrams refer to

Answer 10

timings

Question 11

benefits of holding low stock levels (3)

Answer 11

1. lower stock holding costs in storage
2. lower risk of stock obsolescence
3. allows the business to operate in a lean way

Question 12

benefits of holding high stock levels (3)

Answer 12

1. production is fully supplied so there are no delays
2. potential lower unit costs
3. easier to handle changes

Question 13

what is lean production

Answer 13

a managing approach which focuses on cutting down waste whilst ensuring quality remains high

Question 14

what is just-in-time stock management

Answer 14

a managing approach that aims to eliminate buffer stock

Question 15

what issues must be taken into consideration if a business is considering switching to -just-in-time stock management (3)

Answer 15

1. are suppliers willing to ship multiple times a day
2. will deliveries be 100% reliable?
3. will suppliers need to relocate closer?