Inventory Control

• Why do businesses use inventory control charts?

  Is to maintain stock levels so that the total costs of holding stocks is minimised
• What is a re-order level?

  Acts as a trigger point, so that when stock falls to this level, the next supplier order should be placed
• What is lead time?

  Amount of time between placing the order and recieving the stock
• What are the factors affecting when and how much stock to re-order?

  • Lead time from supplier - higher lead time may require a higher re-order level
  • Implications of running out
  • Demand for the product - higher demand means higher re-order level
• How might the lead time by the supplier affect how much to re-order?

  Higher lead times may require a higher re-order level
• How might the demand affect how much to re-order?

  Higher demand normally means higher re-order level
• What are the benefits of low stock levels?

  • Lower stock holding costs
  • Lower risk of stock obsolescence
  • Consistent with operating 'lean'
• What are the benefits of high stock levels?

  • Production fully supplied - no delays
  • Potential for lower unit costs by ordering in bulk
  • Better able to handle unexpected changes in demand
• What is buffer stock?

  An amount of stock held as a contingency in case of unexpected orders so that such orders can be met and in case of any delays from suppliers