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Stock Control by

Operat­ional decisions and stocks

Materials management involves:
-the purchasing of stocks and their delivery
-the storing and control of stocks
-the issue and handling of stocks
-the disposal of surpuses
-the provision of inform­ation about stocks

Stock Levels

Affected by
-Demand; buffer stock is used to describe stock held for unforeseen rises in demand or breaks in supply
-Stockpile goods
-Cost of stock holding
-Amount of working capital available
-Type of stock
-Lead time the amount of time if takes for a purchase to be placed, received, inspected and made ready for use
-External factors

Stock Control

Economic order quantity Calculate the level of stocks which minimize costs; it takes into account the costs of holding stock which rise with the amount of stock held and the average costs of ordering stock which fall as the size of the order is increased
Fixed re-order interval This method ignores the economic order quantity, but ensures that stocks are "­topped up" on a regular basis
Fixed re-order level This method involves setting a fixed order level which is repeated at varying time intervals
Two bin system Method involved dividing stock into two bins
Methods focus on:
1. Re-order quantity how much stock is ordered when a new order is placed
2. Re-order level the level of stock when an order is placed

The Nature of Stocks

Raw Materials and Components
Finished Goods
Purchased from suppliers before production
Partly finished goods
To cope with changes in demand and stock
Helps stop delays in production
(happens in batch or flow produc­tion)
Helps avoid the need to step up production rates quickly if needed.
Back-up plan in case suppliers are sucky
Assembly line
Stock take involves recording the amount and value of stocks which the firm is holding; security reasons and to determine the value of total purchases during the year for a firm's accounts.

Comput­arized stock control

Having the business's entire stock on computer databases helps the company because it is an easy, fast and useful way of managing stock since different details may be reviewed fast in a computer

Cost of holding stocks

It can help improve business perfor­mance
Having too much stock may mean money is tied up unprod­uct­ively, but inadequate stock can lead to delays in production and late deliveries
-There may be an opport­unity cost in holding stocks.
-Storage can also prove costly.
-Spoilage costs (quality, outdated, deteri­orate)
-Admin­ist­rative and Financial costs (placing and processing orders)
-Out-o­f-stock costs are costs of lost revenue. (loss of goodwill)

Too much or too little stock

Too Much
Too Little
High costs
Not being able to cope with unexpected changes
Running out of stock
Opportuity cost
Not being able to cope with shortages of materials
May result in unsold stock
Lost production
May result in theft by employees
Placing orders may raise total ordering costs

JIT and Stock Rotation

Just In Time Manage­ment; Stock Rotation is the flow of stock (FIFO and LIFO)


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