Theme 2 - 2.4.3 - Stock Control

Question 1

What is Stock control ?

Answer 1

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

Question 2

What are the different types of stock ?

Answer 2

Raw materials
Components
Work-in-progress
Finished

Question 3

What is stock also known as ?

Answer 3

Inventory

Question 4

What can Stock management be carried out as ?

Answer 4

Stock management can be carried out by using a stock management diagram ( bar gate ).

Question 5

What are buffer stocks ?

Answer 5

extra inventory kept on hand in case of
manufacturing delays or an unexpected increase in demand.

Question 6

What happens when you go below the minimum stock level ?

Answer 6

Then you go into the buffer stocks which aren’t supposed to be gone into - because then there is a chance of running out of stock altogether

Question 7

Why is it bad to hold stock ?

Answer 7

High stock holding is expensive and adds to the cost of a business which will reduce profits -e.g. extra storage, insurance etc

A business can be left with lots of unwanted stock - e.g. cat food that is out of date

Makes it difficult to compete on price due to stock holding costs

Question 8

What does the re-order level mean on the diagram ?

Answer 8

The re-order level is the level where the business triggers an automatic response where they buy more stock

Question 9

Why will businesses keep buffer stocks ?

Answer 9

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

Question 10

Why can’t some goods be buffer stocks ?

Answer 10

Because some products go out of date or it goes out of date like technology

Question 11

What are the advantages and disadvantages of buffer stocks ?

Answer 11

Advantages:

• 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

Disadvantages:

• 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 the business

Question 12

What are the stock out costs ?
And give examples

Answer 12

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

Question 13

What does JIT stand for ?

Answer 13

Just in time management of stock

Question 14

What does JIT mean ?

Answer 14

JIT 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

This means very close links with suppliers

Question 15

What do you have to do in order to make JIT work ?

Answer 15

The manufacturer needs to have excellent working relationships with their smaller parts suppliers

Question 16

When does JIT not work ?

Answer 16

JIT does not work when there are delivery or quality issues

Question 17

Are buffer stocks held in a JIT system ?

Answer 17

No buffer stocks are held in a JIT system so if delivery does not arrive the product cannot be made

Question 18

What is JIT also known as ?

Answer 18

Lean manufacturing - which refers to a system of manufacturing in which products are not built until the product is ordered and paid for

Question 19

Whats is JITs main philosophy ?

Answer 19

JITs main philosophy is to eliminate waste - wasted inventory, wasted stock and wasted time

BY creating and delivering products quickly, when consumers request them - excess inventory is eliminated - customers receive their orders quicker and the manufacturer doesn’t need to keep a large inventory of stock parts

Question 20

What are the advantages and disadvantages of JIT ?

Answer 20

Advantages:

• As parts are ordered as they are needed there is no wastage

• Parts are not warehoused which isa 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 - their money is not just sitting in stock and nobody is buying it

Disadvantages:
• 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

Question 21

What is the definition of waste ?

Answer 21

Any activity or result that the customer doesn’t value and is not willing to pay for.

These activities that don’t add value for the customer between the inputs and the outputs must be removed or minimised.

Question 22

What are the pros of waste minimisation ?

Answer 22

Pros:
• 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

Question 23

What does lean production aim to eliminate ?

Answer 23

Lean production aims to eliminate the7 deadly wastes

Question 24

What are the 7 deadly wastes ?

Answer 24

1. Over production
2. Waiting time
3. Transportation time
4. Excess processing
5. Excess Stock
6. Excess motion
7. Product quality

Question 25

What is lean production ?

Answer 25

IT means eliminating unnecessary minimising wastage

Question 26

What is overproduction ?

Answer 26

It means that the business is making more than required and maybe running at over capacity ( just in case )

Over production can stop the smooth flow of materials round the factory and reduces quality of finished goods - as if you are just making lots of products and not concentrating on making them really well then the quality of the finished product might go down

Over production could also mean something like overstaffing which is not good as you are just wasting money on staff that you dont even need

Question 27

How is the waiting time a deadly waste ?

Answer 27

The waste of waiting time can take 2 forms:

• Waiting because the next step in the process is not ready
  • Waiting because there are not enough inputs necessary to complete the next process