Impact of stock control

Question 1

What are the problems of holding too much stock?

Answer 1

-Stock incurs costs. Storage, insurance, deterioration, handling costs.
-Occupies space in the premises. Space that could be used for production or other uses.
-High opportunity costs. The business could spend the money on fixed assets.
-May not sell all of the stocks. Unsold stock incurs initial land running costs.

Question 2

What is Just In Time (JIT)?

Answer 2

-Negates the issues associated with holding too much stock by introducing the required supplies at the moment they are needed.
-No stock rooms, no issues with holding stocks etc.

Question 3

What are the advantages of JIT?

Answer 3

-As parts are ordered as they are needed, there is no wastage which fits the TQM theory of zero wastage.
-Parts are not warehoused which is a massive cost saving in terms of premises and staff.
-Less capital tied up in stock, therefore reduced average costs of production.

Question 4

What are the disadvantages of JIT?

Answer 4

-Businesses may not be able to cope with unexpected increases in demand.
-If deliveries are late the firm may need to halt production.
-Will not gain discount for bulk purchase.
-Higher admin costs as business needs to place more orders.

Question 5

How might JIT impact on other stakeholders? (Suppliers)

Answer 5

-To make JIT work the large manufacturer needs to have excellent working relationships with their smaller parts suppliers.
-JIT does not work when there are delivery or quantity issues.
-No buffer stocks are held in a JIT system so if delivery does not arrive, the product cannot be made.
-Cannot take advantage of bulk purchases, cannot store them.
-Theft. An issue what most if not all businesses face.

Question 6

How might JIT impact on other stakeholders? (Employees)

Answer 6

Employees of the business may need training to hep them work with a JIT system.

Question 7

What is lean production?

Answer 7

An approach to management that focuses on cutting out waste, whilst ensuring quality.
-Aim to reduce resources used in production, uses less;
-Time
-Labour
-Capital
-Space in the factory
-Raw materials

Question 8

What are the benefits of lean production?

Answer 8

-Competitive advantage
-First mover advantage
-Short lead-times from design to final products means that a business can respond quickly to new trends..