Stock Control recap

1
Stock Control recap

• What are the 3 main types of stock?
• What are the costs of holding stock?
• What could be seen as inefficient stock
  management?
• How can a business reduce stock wastage?

2
Stock Control Charts

• What are they and how to create!

3
Stock Control Chart
By the end of today youll understand this!
Stock Level
Maximum Stock Level
Re-order triggered
Re-order level
Minimum Stock Level Or Buffer Stock
Lead Time
Time
Maximum stock levels achieved after stock
delivery. Stock levels decline during production.
When the stock level reaches the re-order level,
it triggers a new order. The difference between
the time of re-order and delivery is the lead
time.
The Traditional Stock Control Model
4
Key concepts

• Stock levels usually fall from left to right
• Delivery made makes the line jump vertically
• Maximum stock level this is the physical
  amount that the cupboards can hold!
• Reorder level the TRIGGER quantity which takes
  into account how long a delivery of stock
  takesand how many resources the company uses in
  that time..before running out of stock
• Buffer stock the minimum amount the company
  needs in reserve just in case.

5
Problems with this are

• No account taken of seasonal changes in demand
• No account taken of possible delays in delivery
• No account taken of possible changes to the
  production line

What problems might each of these cause if no
adjustments are made during the year?
6
What would this diagram suggest?
Stock Level
Maximum Stock Level
Re-order triggered
Re-order level
Minimum Stock Level Or Buffer Stock
Lead Time
Time
7
Automated Stock control

• An alternative version of this is computerisation
  used in supermarkets through bar codes
• A constant flow of computerised information is
  sent to suppliers using bar codes to identify
  stock levels

8
Stock control examples

• Nissan operates on just 1.6 days stocks and deals
  with one supplier only
• Computer links to suppliers send coded messages
  to suppliers about exactly which models are being
  made so that the right components can be
  delivered eg right colour and size of carpets

9
Your Turn. P 396 B1

• A firm sells 40,000 units a month.
• It receives monthly deliveries.
• Max stock 50,000
• Min stock 10,000
• After 2 months (8 weeks) it decides to change to
  weekly deliveries

• Sketch a 12 week stock control chart.
• Assume the firm starts in week 1 with 50,000
  stock
• What short term problems will they face switching
  to weekly deliveries?
• What long term benefits will they gain?
• HINTS when will they have to reorder? How long
  does a delivery take? Remember the buffer stock!

10
Homework

• Read Unit 56
• P396 B2 Data Response Q 1-3