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1. Operations
Stock Control

2. Stock refers to unused
quantities of
 Raw Materials
 Work in progress
 Finished Goods

3. Benefits of having stock
 Large order can mean discounts
 Less chance of running out of stock
 Work is never delayed or stopped due
to lack of raw materials which would
have meant no sales

4. Costs of Holding Stocks
 Opportunity Cost – other uses for
money tied up in stock
 Storage Costs
 Spoilage Costs

5. Choosing Suppliers
 Price
 Quality
 Availability
 Location

6. A poor purchasing mix results
in
 Over or understocking
 Increased costs
 Poor quality stocks

7. Deciding on level of stock to
hold
 Economic Stock Level – a stock level that will
minimise both stock holding and running out of
stock costs
 To calculate ESL the following information is
required
 maximum stock level to be held
 minimum stock level to be held
 delivery time for stock to arrive
 stock level when new order should be placed
 stock amount that should be ordered

9. Values for figures depend on
 Demand for finished product
 Seasonal Factors
 Amount of cash available to buy stock
 Type of stock – eg perishable,
fashionable
 Space available to hold stock

10. Past Paper Qus
 Discuss why it’s important to set your Re-order
level correctly (5)
 What does the term lead time mean? (1)

11. Stock Control – Part 2

12. Deciding on the best way to
store stock
 Centralised Storage – All stock kept
together in one place
 Decentralised Storage – Stock kept in
separate places

13. Advantages of centralised
 Better security as stock is stored in one
place and is usually controlled by
specialist staff.
 Efficiency is improved because it is run
by dedicated staff.
 Specialist staff will follow agreed
procedures.

14. Disadvantages of centralised
 Setting up a dedicated storage facility
could be expensive
 Depending on the location of the stock,
employees may “waste” time travelling
to and from the location when they
need a resource

15. Advantages of decentralised
 Stock is always ‘at hand’ when required
 Order of new stock reflects actual
production usage or sales levels for
individual areas

16. Disadvantages of
decentralised
 Storage space is required in a number
of locations for stock
 The level of security is harder to
maintain across a number of locations

17. TASK
 RESEARCH JJUUSSTT IINN TTIIMMEE
 Provide a description with advantages
and disadvantages

18. Just in Time
 Holding zero or few stocks and
purchasing materials only when
required

19. Benefits of JIT
 More cash available
 Less costs associated with holding
stocks
 Less wastages and obsolescence
 All the above results in increased profits

20. Drawbacks of JIT
 Difficult to respond to changes in
demand
 Higher transport costs
 No opportunity for economies of scale
by buying in bulk
 Requires reliable suppliers
 Delivery problems

21. Logistics/Distribution Mix
 Reliability of other firms in the process
 Legal restrictions
 Availability of finance
 The product being distributed
 The image associated with the product
 The stock management system being used
 The distribution capability of the
manufacturer

22. TASK
 RESEARCH LLOOGGIISSTTIICCSS
 Provide a description with advantages
and disadvantages for ROAD, SEA,
RAIL and AIR transportation