2nd Semester Inventory Management Ch7 Pt1

• What is inventory?


  Goods kept for storage to sell when required.
• Why do retailers like VW or KOO foods need to stock various types of inventory?

  They need to stock raw materials, semi-finished goods, or finished goods for their operations.
• What is the aim of inventory management?

  • To have the right balance of stock
  • Not too much stock to avoid extra costs
  • Not too little stock to avoid stock outs
• What are the benefits of proper inventory management?

  1. Customer satisfaction

  2. Reduced expenditure

  3. Improved cash flow

  4. Increased sales

  5. Opportunity costs
• How does proper inventory management lead to customer satisfaction?

  If there are no stock outs, customers are happy.
• How does reduced expenditure relate to inventory management?

  Less stock you buy means less you spend.
• What is the impact of improved cash flow in inventory management?

  If goods are moving quickly, money comes back into the business.
• How does having the right goods at the right time affect sales?

  It means increased sales.
• What does opportunity cost mean in the context of inventory management?

  Retailers can invest money elsewhere if it is not tied up in stock.
• What are the purposes of keeping inventory?

  1. To protect for uncertainty (safety stock)

  2. To save money (economies of scale)

  3. To provide seasonal or anticipation stock

  4. To ensure smooth production processes
• Why do retailers keep safety stock?

  To protect against supplier shortages and sudden increases in consumer demand.
• How does buying in bulk save money for retailers?

  It reduces ordering costs and takes advantage of economies of scale.
• What is anticipation stock?


  Extra stock bought for a known increase in demand.
• Why do retailers need to ensure they have all raw materials and components in stock?

  To ensure smooth production processes.
• What does inventory turnover mean?

  • It refers to how quickly stock is sold.
  • Retailers need to buy, sell, and replace stock.
  • Slow inventory turnover can lead to high costs.
• What happens if goods sell fast in terms of inventory turnover?

  It results in fast inventory turnover.
• What are the consequences of too slow inventory turnover?

  It can result in high costs.
• What can happen if inventory turnover is too fast?

  It can result in stock-outs.
• How can retailers measure stock turnover?

  By assessing how long it takes to sell all of the retailer's stock within a given time.
• Why is it important for retailers to avoid too fast stock turnover?

  Goods may not be available for customers, leading to dissatisfied customers.
• What are some reasons for slow stock turnover?


  • Retail buyers buy too much stock.
  • Poor forecasting.
  • Temptation by sales.
  • Products being fads.
  • Competition having better products.
• What are the dangers of keeping too much stock?

  It costs money to store goods and can lead to goods getting old or damaged.
• How can keeping too much stock affect a retailer financially?

  It adds to costs due to storage and interest on credit purchases.
• What are the consequences of keeping too little stock?

  It can result in stock-outs and dissatisfied customers.
• What does keeping the "right level" of stock ensure?

  • Less stock can be sold quicker.
  • Cash moves in as goods move out.
  • Fresh stock is continuously available.
• What are the benefits of quicker selling of stock?

  • Newer products are available.
  • Minimizes discounts to customers.
  • Staff are enthusiastic to sell new products.
• What are the types of stock?

  1. Cycle stock

  2. Buffer stock

  3. Anticipation stock

  4. Seasonal stock

  5. Promotional stock

  6. Dead stock

  7. Non-conformance stock
• What is cycle stock?

  It is the normal stock that a retailer buys to satisfy its customers.
• What is buffer stock?

  It is a safety stock that a retailer keeps to avoid stock-outs.
• What is anticipation stock?


  It is extra stock bought for a known increase in demand.
• What is seasonal stock?

  It is stock kept or increased due to different times of the year.
• What is promotional stock?

  It is stock carried by retailers when planning a sale or promotion.
• What is dead stock?


  It is inventory that has not been sold in a long time and does not have a likelihood of being sold in the future.
• What is non-conformance stock?

  It refers to items that are not expired but may not be at their best quality.