2.4.3 Stock Control

Question 1

Define stock

Answer 1

●Stock is a current asset held by business to help meet the demand of customers

Question 2

What 3 forms can stock be held in

Answer 2

Raw materials
Work in progress
Finished products

Question 3

The amount of stock held depend upon

Answer 3

●the business’ attitude to risk
●the importance of speed of response as an operational objective
●speed of change within the market
●nature of the product e.g. perishable or long lasting

Question 4

Define stock control diagrams

Answer 4

A management tool used to control and monitor the flow of stock , this gives a visual representation of lead time , re order level and buffer stock level

Question 5

Define lead time

Answer 5

The time it takes between placing an order and receiving delivery

Question 6

Describe lead time

Answer 6

• The greater the lead time the higher the minimum stock level
• Lead time can be measured on the horizontal axis of an stock control diagrams as the distance from re-order level to minimum stock level

Question 7

Define re order level

Answer 7

The level of stock which triggers an order

Question 8

Describe re order level

Answer 8

•The re-order level will be determined by both the lead time and the minimum stock level

Question 9

Define buffer stock

Answer 9

Stock held by a business to cope with unforeseen circumstance e.g. sudden increase in demand, break down in supplies

Question 10

Describe buffet stock

Answer 10

• When a business reaches its minimum stock level it is left just with buffer stock
• A business operating a just in time system will have zero buffer stock

Question 11

Define re order quantities

Answer 11

• The point at which an order for new stock is placed, this will be dependent on buffer level of stock and lead time
• A computerised stock control system will automate this process so that when stock reaches this level an order is automatically sent to a supplier

Question 12

Buffer stock ads

Answer 12

• Can meet customer demand
• Quickly respond to increases in demand
• Continue with production even if a problem with stock deliveries

Question 13

Buffer stock disadvantages

Answer 13

• Money tied up in holding stock
• Costs associated with stock holding e.g. storage, staff, insurance
• Risk of waste e.g. out of date, damaged or obsolete

Question 14

Implications of poor stock control

Answer 14

• Waste of resources
• Unable to meet customer needs
• Damaged reputation
• Under utilisation of other resources e.g. labour and machinery standing idle
• Loss of competitiveness
• Difficulty in valuing stock

Question 15

Lean production techniques are working practises derived from Japan that focuses on

Answer 15

Cutting waste while maintaining or improving quality

Question 16

Lean production techniques include

Answer 16

Just in time

Kaizen

Question 17

Just in time management of stock advantages

Answer 17

• Less costs in holding inventory
• Less working capital required
• Less obsolete or ruined inventory
• Lower associated costs e.g. security and insurance
• Avoids having unsold stock

Question 18

Just in time management is stock

Disadvantages

Answer 18

• Little room for error
• Very reliant on suppliers
• Unexpected orders harder to meet
• Any delays in deliveries due to unforeseen circumstance can cause production to come to a halt
• High initial set up costs
• Complex systems have to be put in place and understood

Question 19

Stock control can lead to

Answer 19

• efficient stock control can reduce waste
• less obsolete or damaged stock
• Lowe costs of holding stock
• leading to competitive advantage
• better able to meet needs of customers
• cost savings can be passed on in the form of lower prices

Question 20

Describe just in time

Answer 20

Management of stock - a technique used to minimise stock holding at each stage of the production process , helping minimise costs

Question 21

Describe kaizen

Answer 21

A technique used that concentrates on small but frequent improvements in every aspect of the production process