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Unit 3.2 Meeting customer needs > Chapter 7 Managing stock > Flashcards

Chapter 7 Managing stock Flashcards

1
Q

Chapter 07

What is the formula used to calculate how many weeks it will take for stock to arrive after re-ordering?

Edexcel 2BS01 Business Studies GCSE Unit 3.2

A

Stock arrival date – Re-order date = Lead time

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2
Q

Chapter 07
What is meant by maximum stock level?

Edexcel 2BS01 Business Studies GCSE Unit 3.2

A

Used in traditional “Just in Case” stock control.

The highest amount of stock to be kept by a business

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3
Q

Chapter 07

Explain how just-in-time stock control might not benefit a business.

Edexcel 2BS01 Business Studies GCSE Unit 3.2

A

Possible points:
• Requires close relationships with suppliers in order to work
• Systems will need to be developed so may increase costs
• Having a JIT system means that all members of the workforce need to be committed

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4
Q

Chapter 07

How does stock control work in theory?

Edexcel 2BS01 Business Studies GCSE Unit 3.2

A

It works by ensuring the following:

Holding too little stock can mean not satisfying customer needs on time and damaging reputation.

This is needed because:

Having larger amounts of stock can mean taking advantage of economies of scale through bulk buying.

Holding stocks creates costs such as storage, monitoring and insurance.

Stock also ties up capital (money) that could be used elsewhere.

If a good is perishable then holding too much can be very costly and impractical.

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5
Q

Chapter 07

How is the bar gate stock graph used to calculate buffer stock?

Edexcel 2BS01 Business Studies GCSE Unit 3.2

A

By identifying the minimum stock level line

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6
Q

Chapter 07

How should a bar gate graph be interpreted?

Edexcel 2BS01 Business Studies GCSE Unit 3.2

A

When the stock level reaches the re-order level, it triggers a new order. This helps a business to ensure it doesn’t run out of stock.

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7
Q

Chapter 07

What are the advantages of adopting a Just in Time (JIT) method of stock control?

Edexcel 2BS01 Business Studies GCSE Unit 3.2

A 
Possible advantages:
•	Lower levels of stock = reduced costs
•	Higher profit
•	Lower costs
•	Excellent relationships with suppliers can help solve problems quicker
•	Increases efficiency
•	Increases cash flow
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8
Q

Chapter 07

What are the disadvantages of adopting a Just in Time (JIT) method of stock control?

Edexcel 2BS01 Business Studies GCSE Unit 3.2

A

Possible disadvantage:
Not being able to meet demand
Suppliers may not be reliable
Cannot respond to changes in the market

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9
Q

Chapter 07

What are the drawbacks of holding large stocks?

Edexcel 2BS01 Business Studies GCSE Unit 3.2

A 
Possible points:
•	Additional costs (storage, insurance)
•	Can be left with unwanted stock = Higher risk of having to de-stock
•	Makes it difficult to compete on price
•	Money tied up in stocks
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10
Q

Chapter 07

What are the key factors of effective stock management?

Edexcel 2BS01 Business Studies GCSE Unit 3.2

A
  • The necessity for a thorough stock check at regular intervals
  • The effective training of all staff involved in stock handling
  • The need for the right level of buffer stock
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11
Q

Chapter 07

What are the possible benefits of effective stock control to a business?

Edexcel 2BS01 Business Studies GCSE Unit 3.2

A

Possible points:
• Reduction in costs as less stock is held
• Opportunity to spend resources on something else
• Less need for space to hold stocks
• Less capital tied up in stocks

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12
Q

Chapter 07

What are the possible disadvantages of holding a large stocks?

Edexcel 2BS01 Business Studies GCSE Unit 3.2

A 
Possible points:
•	Additional costs (storage, insurance)
•	Can be left with unwanted stock = Higher risk of having to de-stock
•	Makes it difficult to compete on price
•	Money tied up in stocks
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13
Q

Chapter 07

What are the reasons why a business such as might decide to hold buffer stocks?

Edexcel 2BS01 Business Studies GCSE Unit 3.2

A

Possible points:
• To avoid running out of stock
• To prevent missing out on extra sales
• Supplier reliability problems

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14
Q

Chapter 07

What is meant by a bar gate stock graph?

Edexcel 2BS01 Business Studies GCSE Unit 3.2

A

Used in traditional “Just in Case” stock control.

A graph which enables a business to manage its stock levels

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15
Q

Chapter 07

What is meant by buffer stock (or minimum stock level)?

Edexcel 2BS01 Business Studies GCSE Unit 3.2

A

Used in traditional “Just in Case” stock control.

The lowest amount of stock to be kept by a business

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16
Q

Chapter 07

What is meant by Just in Case (JIC)?

Edexcel 2BS01 Business Studies GCSE Unit 3.2

A

This is the traditional stock control method.

Just In Case comprises of maximum and minimum levels of stock and a re-order level. It also has a buffer stock level.

Buffer stocks are needed to cope with unexpected demand or uncertainty.

Traditional stock control can be illustrated using a ‘bar gate’ diagram.

17
Q

Chapter 07

What is meant by Just in Time (JIT)?

Edexcel 2BS01 Business Studies GCSE Unit 3.2

A

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.

Relationships between suppliers and firms must be good and many firms have worked on building these relationships to the advantage of all.

18
Q

Chapter 07

What is meant by re-order level?

Edexcel 2BS01 Business Studies GCSE Unit 3.2

A

Used in traditional “Just in Case” stock control.

The amount of stock held by a business at which an order for new stock is placed with suppliers

19
Q

Chapter 07

What is meant by stock control?

Edexcel 2BS01 Business Studies GCSE Unit 3.2

A

How a business manages the amount of stock it holds

20
Q

Chapter 07

What is meant by stocks?

Edexcel 2BS01 Business Studies GCSE Unit 3.2

A

Materials that a business holds. Some could be materials waiting to be used in the production process and some could be finished stock waiting to be delivered to customers

21
Q

Chapter 07

Why is there a need for the use of Just In Time (JIT) stock control?

Edexcel 2BS01 Business Studies GCSE Unit 3.2

A

Businesses do not want to hold large amounts of stock, of either raw materials or finished goods because:

  • It’s expensive
  • It wastes resources
  • It affects cash flow
  • Goods may go out of date / fashion

To be successful JIT requires:

  • Good relationships between customers and suppliers
  • Excellent communication between customers and suppliers
  • Good transportation links

Unit 3.2 Meeting customer needs (6 decks)

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