managing stock
Learning Objectives:
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Specification:
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2.2_managing_stock.pptx | |
File Size: | 2209 kb |
File Type: | pptx |
2.2_managing_stock_starter_activity.docx | |
File Size: | 36 kb |
File Type: | docx |
Most businesses hold stocks. These can be three main types:
- Stocks of materials bought from other businesses
- Semi-finished stock - used to complete other products
- Finished goods waiting to be delievered
One way in which a businesses determines when to buy in new stocks or raw materials is to set maximum, minimum and re-order levels of stock. This sometimes called a 'Just in Case' method of stock control.
Key term: MAXIMUM STOCK LEVEL - The highest amount of stock to be kept by a business.
Key term: RE-ORDER LEVEL - the amount of stock held by a business at which an order for new stock is placed with suppliers.
Key term: BUFFER STOCK LEVEL or MINIMUM STOCK LEVEL - The lowest amount of stock to be kept by a business.
Key term: MAXIMUM STOCK LEVEL - The highest amount of stock to be kept by a business.
Key term: RE-ORDER LEVEL - the amount of stock held by a business at which an order for new stock is placed with suppliers.
Key term: BUFFER STOCK LEVEL or MINIMUM STOCK LEVEL - The lowest amount of stock to be kept by a business.
stock_graph_activity_mcr.pptx | |
File Size: | 397 kb |
File Type: | pptx |
In practice, stocks and production don't always work in the way you can see in your diagram. It can vary from week to week how much stock is used. Also, deliveries do not always arrive on time. What is happening in the diagram below?
Advantages:
Disadvantages:
- Holding too little stock could lead to a loss of production and sales therefore having a reserve of stock means businesses can deal with last-minute orders and boost revenue
- Suppliers sometimes fail to make deliveries on time so reserves of stock can be used instead
- Bulk-buying discounts (economies of scale) can be gained by a business if they order large quantities
Disadvantages:
- Stocks cost money to hold (this could be through storage, or borrowing money to pay for stock)
- Stock costs businesses money for staff to process and handle
- Stock can perish (food products). This means money can be wasted holding onto large amounts of stock
Key term: JUST IN TIME (JIT) - A stock management system where stocks are only delivered when they are needed by the production system, and so no stocks are kept by a business.
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Just-in-time
Just-in-time production means producing to order - the business only makes an item when there is a customer for it. This reduces waste caused by throwing unwanted items away. When a customer places an order, the business orders from suppliers and starts producing. For this to work, suppliers must be able to respond quickly to orders and make deliveries.
Just-in-time production means producing to order - the business only makes an item when there is a customer for it. This reduces waste caused by throwing unwanted items away. When a customer places an order, the business orders from suppliers and starts producing. For this to work, suppliers must be able to respond quickly to orders and make deliveries.
Advantages
- Lower stock holding means a reduction in storage space
- Less working capital is tied up in stock
- Less likelihood of stock perishing
- Avoids the build-up of unsold finished product
- Less time is spent on checking quality
- Cost of holding stock is minimised
- Little room for mistakes as minimal stock is kept
- Production is very reliant on suppliers
- There is no spare finished product available to meet unexpected orders
- May lose out on bulk buying discounts (Diseconomies of scale)
stock_control_worksheet.docx | |
File Size: | 11 kb |
File Type: | docx |