Theme 2 Topic 3 - Stock Control Flashcards
What are the three types of stock?
Raw materials, Work-in-progress, Finished goods
What are two factors which determine how much stock is held?
Demand for product, Amount of storage space
Define Buffer Stock
An emergency minimum level of stock held
What are two reasons a business might hold buffer stock?
Protects against the risk of disrupted production and workers having to wait for stock to arrive, Can offer competitive advantage if they can respond to customers orders quickly
Define Maximum Stock Level
The largest amount that a firm is willing or able to hold in stock
Define Re-Order Level
When stock falls to this level, a new order is sent to the supplier
Define Order Quantity
The amount ordered by a business each time
What are two examples of stock holding costs?
Opportunity cost (money is tied up in stock so can’t be used for anything else), Spoilage and obsolescence (stock can perish and go out of date)
What are two problems of holding too little stock?
Can’t cope with sudden surges in demand, Production may have to stop leading to idle labour and machinery
Define Just-in-Time (JIT)
Stock control system that attempts to operate with zero buffer stock. Stock is delivered when it is needed
What are two advantages of JIT?
Reduces stockholding costs, Space previously used for storage can be used more productively
What are two disadvantages of JIT?
If suppliers are unreliable production will be stopped as there is no buffer stock, May not gain bulk price discounts from suppliers as orders are smaller
Define Lean Production
A philosophy which attempts to eliminate all forms of waste from the production process to decrease unit costs and improve efficiency
Lean production consists of…
Using ideas of staff through Kaizen groups, Maintaining high levels of quality throughout production, JIT, Quicker speed of production and development of products
