operations: inventory management

Question 1

just in time stock control

Answer 1

this is where the supplier holds onto the stock and delivers them to the firm just in time for them to be used on the production line.

Question 2

advantages of just in time stock control

Answer 2

• reduces storage costs which improves cash flow
• no deterioration of stock as the supplier is responsible for freshness
• the firm can expand production by using the warehouse which originally stored the stock
• less vulnerable to fashion changes as they can change the product at any time

Question 3

disadvantages of just in time stock control

Answer 3

• delivery costs will increase as they are more frequent
• production may halt if supplier is late which is costly to restart
• firm loses out on bulk buying opportunities
• quality checks become the supplier’s responsibility so risky

Question 4

centralised storage

Answer 4

Centralised storage is when a company chooses one central location to store all the stock for the organisation. The stock will be distributed to departments as required from the central warehouse.

Question 5

benefits of centralised storage

Answer 5

• suppliers are delivering to one location which reduces delivery costs
• economies of scale are gained due to bulk ordering
• Reduces duplication of stock and administration costs
• Standardised procedures can be implemented

Question 6

costs of centralised storage

Answer 6

• High costs incurred due to specialist equipment and large storage facilities
• May incur increased delivery times and delays in receiving stock to departments
• Storing large amounts of stock may increase the chance of wastage
• Increased wage costs as specialist staff are required to manage the storage and distribution of stock

Question 7

de-centralised storage

Answer 7

De-centralised storage is when each department within the organisation is responsible for ordering and storing their own stock.

Question 8

benefits of de-centralised storage

Answer 8

• Inventory is accessible so no delay in receiving required goods
  -Small amounts of stock being held prevents wastage
• Departments are more responsive to local needs and changes in the market

Question 9

costs of de-centralised storage

Answer 9

• Increased delivery costs due to low amounts of inventory being delivered to multiple locations
• Security may not be as effective leading to increased theft
• No specialist staff dealing with stock may lead to disorganisation and delays

Question 10

what factors does a logistics manager consider?

Answer 10

• method of transport
• channels of distrubution
• external factors
• finance

Question 11

methods of transport

Answer 11

• air
• road
• sea

Question 12

what logistics management do?

Answer 12

• looks at the goods being transported
• looks at where they are being transported
• decides the most secure and cost-effective way to transport them

Question 13

channels of distribution

Answer 13

Understanding and organising the most effective channel of distribution

Question 14

external factors

Answer 14

Logistics need to consider external factors that may affect the movement and storage of inventory.
Legislations can influence the delivery of goods.

Question 15

finance

Answer 15

The budget that a business has for storage and delivery of inventory can affect the choices that are made by the logistics manager