2.4.3

• stock 


  a current asset held by a business to help meet the demand of customers
• 3 types of stock

  raw materials and components

  work in progress

  finished goods
• raw materialas and components 


  brought from suppliers

  used in production process
• work in progress stock

  semi or part-finished production
• finished goods 


  completed products ready for sale or distribution
• label

  A-

  B-

  C-

  D-

  E-

  A) A

  B) B

  C) C

  D) D

  E) E
• factors effecting stock re-order level

  lead time form suppliers

  implications of stock running out

  demand for the product
• key reasons to holding stock

  enable production to take place

  satisfy customer demand

  precaution against delay from suppliers

  allow efficient production

  allow for seasonal change
• advantages of holding buffer stock

  can help meet fluctuating customer demand

  quickly respond to increases in demand

  continue with production even if a problem with stock delays
• disadvantages of holding buffer stock

  money ties up in maintaining costant levels of stock

  costs associated with stock holding

  risk of wasteage
• advantages of holding low stock levels


  lower stock holding costs

  lower risk of stock obsolescence

  less capital tied up in working capital

  consistent with operating lean
• advantages of holding high stock levels

  production fully supplier- no delays

  potential for lower unit cost by ordering in bulk

  able to handle unexpected change in demand or need for higher output

  less liklihood of 'stock outs'
• amount of stock held depends on

  space available

  finance available

  speed of change in the market

  speed of response needed

  attitudes to risk

  nature of the product
• main influences on the amount of stock held

  need to satisfy demand

  need to manage working capital

  risk of stock losing value
• implications of poor stock control

  waste

  unable to meet customer needs

  damaged reputation

  under-utilisation of other resourcers

  loss of competitivnesss

  difficulty in valuing stock
• lean production 


  techniques are working practices derived from japan that focus on cutting waste whilst maintaining or improving quality
• lean production techniques 


  Just in time

  Kaizen
• concept of JIT


  stock required for production just as it is needed
• implications of stock control and JIT production

  no need for buffer stocks

  stock holding costs are minimised

  lead times are very short

  required highly reliable suppliers and sophisticated IT systems to work properly
• advantages of JIT 


  less cost in holding inventory

  less working capital required

  less obsolete ot ruined inventory

  lower associated costs

  avoid waste
• disadvantages of JIT

  little room for error

  very reliant on suppliers

  unexpected orders are hard to meet

  any delays can cause production to stop

  high initial set up costs

  needs complex systems to work
• how does lean production produce a competitive advantage?

  stock managment and control is key part of operating efficiently

  efficient stock can control waste

  leading to a competitive advantage