Theme 2 - 2.4.3 - Stock Control Flashcards
What is 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 are the different types of stock ?
Raw materials
Components
Work-in-progress
Finished
What is stock also known as ?
Inventory
What can Stock management be carried out as ?
Stock management can be carried out by using a stock management diagram ( bar gate ).
What are buffer stocks ?
extra inventory kept on hand in case of
manufacturing delays or an unexpected increase in demand.
What happens when you go below the minimum stock level ?
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
Why is it bad to hold stock ?
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A business can be left with lots of unwanted stock - e.g. cat food that is out of date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
What does the re-order level mean on the diagram ?
The re-order level is the level where the business triggers an automatic response where they buy more stock
Why will businesses keep buffer stocks ?
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
Why can’t some goods be buffer stocks ?
Because some products go out of date or it goes out of date like technology
What are the advantages and disadvantages of buffer stocks ?
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
What are the stock out costs ?
And give examples
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 does JIT stand for ?
Just in time management of stock
What does JIT mean ?
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
What do you have to do in order to make JIT work ?
The manufacturer needs to have excellent working relationships with their smaller parts suppliers
When does JIT not work ?
JIT does not work when there are delivery or quality issues
Are buffer stocks held in a JIT system ?
No buffer stocks are held in a JIT system so if delivery does not arrive the product cannot be made
What is JIT also known as ?
Lean manufacturing - which refers to a system of manufacturing in which products are not built until the product is ordered and paid for
Whats is JITs main philosophy ?
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
What are the advantages and disadvantages of JIT ?
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
What is the definition of waste ?
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.
What are the pros of waste minimisation ?
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
What does lean production aim to eliminate ?
Lean production aims to eliminate the7 deadly wastes
What are the 7 deadly wastes ?
- Over production
- Waiting time
- Transportation time
- Excess processing
- Excess Stock
- Excess motion
- Product quality
What is lean production ?
IT means eliminating unnecessary minimising wastage
What is overproduction ?
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
How is the waiting time a deadly waste ?
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
