Inventory management

Question 1

What is centralised storage?

Answer 1

One central location, in a large, purpose-built warehouse

Question 2

What is decentralised storage?

Answer 2

Storing inventory in smaller warehouses or storerooms

Question 3

List two advantages of centralised storage.

Answer 3

• Specialised staff employed to maintain inventory
• Can store a massive amount of stock

Question 4

List two disadvantages of centralised storage.

Answer 4

• Inventory has to be delivered to each department, causing delays
• Increased costs due to specialist equipment

Question 5

List two advantages of decentralised storage.

Answer 5

• Inventory is always close at hand, therefore no delay
• Smaller warehouses are more responsive to local needs

Question 6

List two disadvantages of decentralised storage.

Answer 6

• Increased delivery costs due to low amounts of inventory being delivered
• Security may not be as effective

Question 7

Fill in the blank: Centralised storage may be _______ to store inventory in one warehouse than many smaller storerooms.

Answer 7

[cheaper]

Question 8

True or False: Centralised storage is in decline due to more efficient methods.

Answer 8

True

Question 9

What is an example of a centralised storage location?

Answer 9

Dunfermline Fulfillment Center

Question 10

What is a key factor to consider when deciding on a method of production?

Answer 10

Costs and benefits

Question 11

What is a potential drawback of having inventory in a centralised storage system?

Answer 11

Delays in inventory delivery to departments

Question 12

Fill in the blank: Decentralised storage allows for inventory usage to reflect _______.

Answer 12

[production]

Question 13

List the advantages of centralised warehousing.

Answer 13

• Same procedures for issuing inventory used across the organisation
• Often located close to infrastructure

Question 14

What is a disadvantage of having no specialist staff in decentralised storage?

Answer 14

Inconsistency across the organisation

Question 15

List two reasons why centralised storage can reduce costs.

Answer 15

• Suppliers are delivering to one location, reducing delivery charges
• Economies of scale gained due to ordering larger quantities

Question 16

What is one disadvantage of decentralised storage regarding inventory management?

Answer 16

No specialist staff dealing with stock

Question 17

Fill in the blank: Centralised storage can lead to an increase in _______ due to storing large amounts.

Answer 17

[wastage]

Question 18

What is a common characteristic of decentralised storage?

Answer 18

Each department is responsible for ordering and storing their own stock

Question 19

What type of production does the term ‘capital-intensive’ refer to?

Answer 19

Production methods that rely heavily on machinery and equipment

Question 20

What is the consequence of overstocking regarding supplies?

Answer 20

Supplies could go out of date

Overstocking can lead to perishable goods becoming unsellable.

Question 21

What risk is associated with overstocking?

Answer 21

Risk of theft (staff, customers or thieves)

Increased inventory can attract theft.

Question 22

What are stockholding costs?

Answer 22

Insurance, security

These costs increase with higher stock levels.

Question 23

What is an opportunity cost in the context of overstocking?

Answer 23

Money being tied up in stock

Excess stock can limit cash flow for other investments.

Question 24

What is the purpose of a stock management system?

Answer 24

Ensure stock is readily available at any one time
Ensure production continues
Avoid delays to customer orders
Ensure over-stocking does not take place
Avoid stock deterioration

Effective stock management is crucial for operational efficiency.

Question 25

What does inventory management concern?

Answer 25

Sourcing and storage of raw materials Supplies of finished goods for resale ## Footnote Inventory management is vital for both secondary and tertiary businesses.

Question 26

What are the key roles of the Operations Department?

Answer 26

Purchasing of raw materials Systems – organising efficient methods of production Stock Control Quality Control Storage and final distribution ## Footnote The Operations Department ensures smooth production flow.

Question 27

What measures must be used to keep stock levels manageable?

Answer 27

Setting a maximum stock level Setting a minimum stock level Setting a reorder level Setting a reorder quantity ## Footnote These measures help prevent overstocking and understocking.

Question 28

What is a consequence of understocking?

Answer 28

May run out of stock – production halts, no products to sell ## Footnote Understocking directly impacts a business's ability to operate.

Question 29

What is one disadvantage of understocking?

Answer 29

Cannot benefit from bulk buying discounts ## Footnote Smaller orders lead to higher per-unit costs.

Question 30

What is Just In Time (JIT) inventory management?

Answer 30

Process of ordering supplies only when they are required ## Footnote JIT aims to reduce waste and increase efficiency.

Question 31

What is a key advantage of JIT?

Answer 31

No wastage as all stock used for production ## Footnote JIT minimizes inventory holding costs.

Question 32

What is a disadvantage of JIT?

Answer 32

If deliveries are late production may stop ## Footnote JIT relies on timely deliveries from suppliers.

Question 33

What should be considered when setting a re-order quantity?

Answer 33

Lead time Demand fluctuations Storage capacity ## Footnote These factors ensure that stock levels are maintained effectively.

Question 34

What are the advantages of a computerised stock control system?

Answer 34

Inventories can be updated automatically Can link to EPOS system Allows for automatic reordering Managers can track slow moving or best selling items ## Footnote Computerised systems enhance efficiency and accuracy in inventory management.

Question 35

What is a feature of an effective inventory management system?

Answer 35

Computerised stock control ## Footnote Modern inventory systems often rely on technology for efficiency.