stock management Flashcards
(21 cards)
Define made to order
a production strategy where products are manufactured only after a
confirmed order is received from a customer. This approach minimises excess inventory and
aligns production closely with customer demand.
advantages of made to order
- Reduced Inventory Costs: Since products are made only when ordered, there is less
need for storage space and capital tied up in unsold goods. - Customisation: Allows for greater customisation of products to meet specific customer
requirements. - Lower Waste: Minimizes waste as products are not produced until there is a demand.
- Improved Cash Flow: Cash is not tied up in inventory, improving overall cash flow for
the business.
Limitation of made to order
- Longer Lead Times: Customers may experience longer wait times for their orders to
be fulfilled. - Production Scheduling Challenges: Difficulty in scheduling production can arise due to
varying order sizes and timelines. - Demand Uncertainty: Fluctuations in demand can lead to challenges in managing
production capacity. - Higher Production Costs: Customisation can lead to higher production costs
compared to mass production.
define made to stock
Made to Stock (MTS) is a production strategy where products are manufactured in
anticipation of customer demand and stocked in inventory for immediate sale.
advantages of made to stock
. Quick Availability: Products are readily available for customers, leading to faster
fulfilment times.
2. Economies of Scale: Producing in bulk can reduce per-unit costs.
3. Predictable Production: Easier to plan production schedules based on forecasted
demand.
4. Reduced Lead Times: Customers can receive products immediately without waiting
for production.
limitation of f made to stock
- Risk of Overproduction: Excess inventory can lead to increased holding costs and
potential waste. - Obsolescence: Products may become outdated or unsellable if demand decreases.
- Storage Costs: Requires significant storage space, which can increase operational
costs. - Less Flexibility: Limited ability to customise products based on individual customer
needs
define assemble to order
Assemble to Order (ATO) is a production approach where products are assembled only after
an order is received, using pre-manufactured components.
advantages of assemble to order
- Customisation: Allows for some level of customisation while still maintaining
- efficiency. Reduced Lead Times: Faster assembly times compared to full production.
- Lower Inventory Costs: Only components are stocked, reducing the need for finished
goods inventory. - Flexibility: Can quickly adapt to changing customer preferences.
limitations of made to order
Assembly Time: While faster than full production, assembly still takes time compared
to MTS.
3. Dependency on Component Suppliers: Delays in component supply can affect overall
delivery times.
4. Limited Customisation: Customisation options may be limited to available
components.
define engineer to order
Engineer to Order (ETO) is a production strategy where products are designed and
manufactured specifically to meet unique customer specifications after an order is received.
advantages of made to order
- High Customisation: Products are tailored to meet specific customer needs.
- Unique Offerings: Ability to offer unique products that competitors may not provide.
- Higher Profit Margins: Custom projects often command higher prices.
- Stronger Customer Relationships: Engaging customers in the design process can
enhance loyalty.
limitations of made to order
- Long Lead Times: Custom design and production can lead to extended delivery times.
- Higher Costs: Customization can increase production costs significantly.
- Complex Project Management: Requires careful coordination of design, engineering,
and production. - Demand Uncertainty: Fluctuations in demand can complicate resource allocation.
define just in time
Just-in-Time (JIT) is an inventory management strategy that aims to reduce waste by receiving
goods only as they are needed in the production process
advantages to using just in time
- Reduced Inventory Costs: Minimises the costs associated with holding inventory.
- Increased Efficiency: Streamlines production processes and reduces waste.
- Improved Cash Flow: Less capital is tied up in inventory.
- Enhanced Quality Control: Focus on quality as products are made to order.
limitations of using just in time
- Supply Chain Vulnerability: Disruptions in the supply chain can halt production.
- Requires Accurate Forecasting: Demand must be accurately predicted to avoid
stockouts. - Limited Flexibility: Difficulty in responding to sudden changes in demand.
- High Dependency on Suppliers: Relies heavily on suppliers for timely deliveries.
define batch production
Batch Production is a manufacturing process where products are produced in groups or
batches rather than in a continuous stream.
advantages of batch production
- Flexibility: Can produce different products in varying quantities.
- Reduced Setup Costs: Economies of scale can be achieved within batches.
- Quality Control: Easier to monitor quality within smaller batches.
- Less Waste: Can adjust production based on demand for different batches.
limitations of batch production
- Longer Lead Times: Transitioning between batches can lead to delays.
- Inventory Holding Costs: Requires storage for both raw materials and finished goods.
- Complex Scheduling: Requires careful planning to manage batch sizes and timings.
- Potential for Overproduction: Risk of producing more than needed for a specific
batch
define Make to Forecast
Make to Forecast (MTF) is a production strategy where products are manufactured based on
predicted customer demand rather than confirmed orders.
advantages of Make to Forecast
- Quick Availability: Products are ready for immediate sale based on forecasts.
- Economies of Scale: Producing in bulk can lower costs.
- Streamlined Production: Easier to plan and schedule production runs.
- Market Responsiveness: Can quickly respond to market trends based on forecasts.
limitations of Make to Forecast
- Risk of Inaccurate Forecasts: Poor forecasting can lead to excess inventory or
stockouts. - Holding Costs: Increased costs associated with storing unsold goods.
- Obsolescence Risk: Products may become outdated before they are sold.
- Less Customisation: Limited ability to cater to individual customer preferences.
