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?
Stock Control Charts
What are they and how to create!
By the end of today you’ll understand this!
Stock Control Chart
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. When the stock level reaches the re-order level, it triggers a Stock levels order. The difference between the time of re-order and decline during production. new
The Traditional Stock Control Model
delivery is the ‘lead time’.
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 takes…and 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….
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?
Stock Level
What would this diagram suggest?
Maximum Stock Level
Re-order triggered
Re-order level
Minimum Stock Level Or Buffer Stock
Lead Time
Time
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
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
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
1. Sketch a 12 week stock control chart. 2. Assume the firm starts in week 1 with 50,000 stock 3. What short term problems will they face switching to weekly deliveries? 4. What long term benefits will they gain? • HINTS: when will they have to ‘reorder’? How long does a delivery take? Remember the buffer stock!
Homework
• Read Unit 56 • P396 B2 Data Response – Q 1-3