Stock Control
L1 Define
•The management process that makes sure stock is ordered, delivered and handled in the best possible way.
Types of stock
- Raw materials
- Work in progress
- Finished goods
What to consider when deciding how much stock to hold
- Storage space
- Storage costs
- Demand
- Deterioration of stock
- Transport Costs
- Lead time
- Cash flow problems
- Reliability of suppliers
L3 Holding too much stock
•Opportunity Cost
•Liquidity Problems
•Increased storage costs
•Increased finance costs
•Increased stock wastage
L4 Holding too little stock
•Workers and machines standing idle
•Lost orders
•Orders not being fulfilled
•The loss of reputation through bad customer service.
JIT (Just-in-Time)
L1 Define
A Japanese method of minimising stock holding by ordering stock when needed.
L3 Advantages of JIT
Improves cash flow
Reduces cost of holding stock
Less waste (obsolete stock - think changes in fashion, perishable goods, etc)
- leads to lower cost per unit ---> Higher profit margins
More flexible to changes in customers needs
- leads to increased customer satisfaction ---> brand loyalty
L4 Limitations of JIT
Needs reliable suppliers (good relationship)
High level of managerial skill
Lead-times may cause problems
Time consuming (need to constantly re-order)
Loss of Economies of Scale (can not bulk buy ---> increased cost per unit)
Fixed re-order stock level
L1 Define
A Stock control system that relies on stock being ordered when stock reaches a set level.
•The management process that makes sure stock is ordered, delivered and handled in the best possible way.
Types of stock
- Raw materials
- Work in progress
- Finished goods
What to consider when deciding how much stock to hold
- Storage space
- Storage costs
- Demand
- Deterioration of stock
- Transport Costs
- Lead time
- Cash flow problems
- Reliability of suppliers
L3 Holding too much stock
•Opportunity Cost
•Liquidity Problems
•Increased storage costs
•Increased finance costs
•Increased stock wastage
L4 Holding too little stock
•Workers and machines standing idle
•Lost orders
•Orders not being fulfilled
•The loss of reputation through bad customer service.
JIT (Just-in-Time)
L1 Define
A Japanese method of minimising stock holding by ordering stock when needed.
L3 Advantages of JIT
Improves cash flow
Reduces cost of holding stock
Less waste (obsolete stock - think changes in fashion, perishable goods, etc)
- leads to lower cost per unit ---> Higher profit margins
More flexible to changes in customers needs
- leads to increased customer satisfaction ---> brand loyalty
L4 Limitations of JIT
Needs reliable suppliers (good relationship)
High level of managerial skill
Lead-times may cause problems
Time consuming (need to constantly re-order)
Loss of Economies of Scale (can not bulk buy ---> increased cost per unit)
Fixed re-order stock level
L1 Define
A Stock control system that relies on stock being ordered when stock reaches a set level.
Stock control graph
L3 Advantages
- Stock is available when needed
- Easy to respond to increases in demand
- Can benefit from Economies of Scale (Bulk buy)
L4 Limitations
- Difficult to respond to changes in customers needs
- Can result in high waste
- Stock is available when needed
- Easy to respond to increases in demand
- Can benefit from Economies of Scale (Bulk buy)
L4 Limitations
- Difficult to respond to changes in customers needs
- Can result in high waste