Stock Control

Question 1

What does stock include?

Answer 1

Raw materials, work in progress and finished goods.

Question 2

What are costs of holding stock?

Answer 2

• storage costs.
• security costs (CCTV).
• insurance costs.
• out of stock costs (value of orders missed).

Question 3

What are the advantages of holding stock?

Answer 3

• satisfies demand.
• coping with increased demand.
• buffer stock.
• economies of scale, bulk buying.

Question 4

What are stock control charts used for?

Answer 4

Used to monitor level of stock/ show total cost of annual cost. Steep gradient = faster rate of sales.

Question 5

What is maximum stock level determined by?

Answer 5

• storage capacity.
• product.
• level of sales.
• cost of storage.

Question 6

What is minimum stock level controlled by?

Answer 6

• level of sales, if stock is sold quick, minimum stock will be higher.
• time taken to deliver stock.

Question 7

What is the reorder level determined by?

Answer 7

• lead time (time from reorder to actual delivery.
• distance from supplier.

Question 8

What is buffer stock determined by?

Answer 8

• likelihood of delays.
• speed of production process.
• location/ reliability of suppliers.

Question 9

What is a change in stock level due to?

Answer 9

• growing in size.
• seasonal products e.g. Christmas.
• special events.

Question 10

How do you calculate average stock?

Answer 10

(Maximum stock level + minimum stock level) / 2