Stock Control

Question 1

What is the disadvantage of having not enough stock and too much stock

Answer 1

Cannot satisfy orders - loses out on revenue

Too much stock- poor efficiency and cash flow problems

Question 2

What are the benefits of holding stock in matters of demand

Answer 2

Satisfying demand-creating demand that can’t be satisfied potentially breaks customer loyalties with your business

Coping with fluctuations in demand - coping with sudden increased demand - orders may increase because of businesses ability to meet demand - production costs go down because of economies of scale

Question 3

What are the cost savings benefits of holding stock

Answer 3

Purchasing large quantities of stock may allow for cost savings because of bulk buy discounts

If the cost of holding stock is not greater than the savings of buying buy bulk this could save the business money, as long as there is enough space

Question 4

What are the storage costs of holding stock

Answer 4

Warehouse space is expensive- whole are house or rent
Storage facilities even only shelves can be costly
Stock storage may be automated and computerised - expensive
If perishable goods - heating or freezing costs

Question 5

What are the opportunity costs of holding stock

Answer 5

Paying for stock prevents the business from investing into other areas of business

Question 6

What are depreciation/obselete costs in holding stock

Answer 6

Stock may depreciate over time- especially if perishable
Stock may become redundant as consumer preferences change or a better product is now on market

Question 7

What are the security , administrative and insurance costs of holding stock

Answer 7

Goods will require security - CCTV or security guards are expensive

Costs of obtaining stock , raising orders , agreeing transport delivery times and checking stock on arrival all incur costs

As the risk of holding stock increase , the cost of insurance will increase- insuring the stock is an unavoidable cost

Question 8

What are out-of-stock costs or Stock-out costs

Answer 8

Costs of not having enough stock- if a business runs out of stock and can’t produce goods - inability to satisfy order - cost of to at order and cost of future orders which may not be made as a result of the reputational damage

Question 9

What are stock control charts usually used for

Answer 9

To monitor the levels of stocks and show the total cost of the stock on an annual basis

Question 10

How to work out average stock level

Answer 10

Maximum stock level +minimum stock level
——————-——————————-
2

Question 11

What is the lead time in stock control graphs

Answer 11

How long it takes for stock to arrive

Question 12

What is the reorder level in stock control graphs

Answer 12

Acts as a trigger point for when stock needs to be ordered

Question 13

What is buffer stock in stock control graphs

Answer 13

The amount of stock held in case of unexpected orders

Question 14

What is Just-In-Time (JIT)

Answer 14

A method where stock levels are kept low in order to reduce the amount of space required for storing stock

Small quantities are ordered but with more frequent deliveries

Question 15

What are the benefits of JIT

Answer 15

Storage costs reduced- less cash flow problems as there is less working capital
Less likely that stock becomes less obsolete and perishable goods go off

Question 16

What are the disadvantages of JIT

Answer 16

Very reliant of suppliers delivering the right amount and on time
Little room for error in computer codes that order the stock
Difficult to meet unexpected increases in demand

Question 17

Hat is the economic order quantity and when is it usually necessary in matters of demand

Answer 17

Economic order quality- the order quantity that minimizes total inventory holding costs and ordering costs

When demand for a product is constant

Question 18

What is LIFO and FIFO

Answer 18

Last product in first out
First product in first out

Question 19

What is EPOS

Answer 19

Electronic point of sale - every product has a unique bar code number and the information is sent to a computer via electronic data exchange which will automatically re order stock