Define stock
Items that are needed to manufacture products
Give the main categories of stock
Raw materials
Components
Consumables
Sub-assemblies
Fasteners/fixings
Work in progress
List some questions a company may need to ask itself regarding its stock
Where will it be kept and for how long?
Who is responsible for it?
How do we monitor stock levels so we know when to order more?
What should be done with surplus?
Bread is kept in warm conditions, whilst fish is kept in cold conditions. Why does some stock require specific environmental conditions?
To make sure the stock doesn’t get damaged or goes off
A company is making components for a fridge-freezer. What will the company need to decide?
The amount of stock required
Where the stock will be stored
Duration of keeping the stock
How much will it cost to hold the stock
What does stock/inventory management?
It involves assessing the amount of stock, costs and duration of storage time
What is stock turnover?
How efficiently sells and replaces its inventory over a specific period
Give an example of a fast-moving consumer good
Mobile phones, milk, soda
Give an example of bespoke equipment
Tailored suits, personalised jewellery, hand-painted ceramics
Give the formula for stock turnover
Stock turnover = Cost of goods sold/average inventory
Give reasons why it’s bad having a high turnover rate
Unequal inventory levels, stock shortages, potentially leading to loss of business
Give reasons why it’s bad having a low turnover rate
Overstocking, obsolete stock, low sales
Define “writing down”
Used to record the reduction of an inventory’s value, required when inventory’s market value drops below its value
Define minimum stock level
A threshold value that indicates level below which inventory of an item shouldn’t be allowed to fall.
Give three ways minimum stock levels are calculated
Production requirements
Time needed to order supplies
Average rate of consumption
Reorder level
Minimum quantity of materials
State how Just In Time stock management works
Works by only supplying enough orders to supply actual demand for a company’s products
State the advantages of JIT
Reduces inventory costs
Improves efficiency
Reduces wasted time and materials
State the limitations of JIT
No extra stock to fill unexpected orders
Risk that a supply chain shock stops production
Requires skill and precision to implement
Define Made to Stock
Where producers make and store items on a large scale in anticipation of consumer demand, based on forecast of sales
Define Made to Order
Stock strategy that allows consumers to purchase products customised to their specifications
State the advantages of MTO
Allows customisation for customers
Reduces stock obsolescence
Reduces waste and finished goods inventory
State the limitations of MTO
Increases costs
Increases wait times for finished products
Define Material Requirements Planning (MRP)
Production and inventory control system used to manage manufacturing processes
What is MRP software designed to do?
Confirm raw materials are available for production
Maintain lowest possible product levels in stock
Plan manufacture, delivery schedules and purchasing
