2.4.3. Stock control Flashcards
(6 cards)
stock definition
items held by business for future sales such as raw materias/ work in progress/ finished products
= inventors
factors influencing stock control
demand
stockpiling
costs of stockholding
amout of working capital
type of stock
lead time
external factors
interptretation of stock control diagram
maximum stock level: most amount of stock a business can and wants to hold
re-order level: levwl of current stock when new orders are placed before stock is out
re-order quantity: amount of stock ordered when ordering
lead time: amount of time between placing an order and receiving the stock
minimum stock level /buffer stock level: minimum amout of product business would want to hold in stock - held in reserve to prptect against surges in demand or late delivery by suppliers
buffer stock pros and cons
+ prevents stockouts- keep selling if delivery late
+ maintains customer satisfaction
+ avoids production halts
+ responds to demand spikes
+ gives competitive advantage
-high costs - rent space, insurance, security
-risk of waste - expire and unsellable
-ties up capital
-poor stock management risks - e.g. overordering
implications holding too much stock
storage costs - space expensice, pay for lightning, heating, security
opportunity costs - money on stock for other things (expand)
spoilage costs - perishables and also electronics and fashion
administrative and financial costs - more stock=more paperwork and pay higher prices
unsold stock - demand drops - wastes space and money
shrinkage (theft or loss) - easier to go missing (employees might steal small amounts)
However EOS
implications holding too little stock
inability to meet demand - increase demand - customers leave and not come back
delays in deliveries - late run out of stock, wastes time money and labour
material shortage- lost sales, unhappy customers and idle workers
higher ordering costs - if small quantities as not EOS
