Stock Control
Most businesses need stock of some sort. This could be raw materials and parts, work-in-progress (part made products) or even finished goods that haven't yet been sold. The problem is, how much stock should they have and where should they put it.
If they have too much stock, they will need space to store it which costs money (think opportunity cost!) and the stock may also go out of date, especially if it is food.
If they have too little stock, however, they might end up not being able to make the products as they won't have the materials or ingredients needed.
If they have too much stock, they will need space to store it which costs money (think opportunity cost!) and the stock may also go out of date, especially if it is food.
If they have too little stock, however, they might end up not being able to make the products as they won't have the materials or ingredients needed.
A stock control chart shows when a business should re-order some stock so that they don't run out before the new stock arrives. For example, imagine JD selling tennis balls. They only have space for so many tennis balls, so this is the Maximum Stock they can hold. If they wait until they have only a Minimum Stock left, they will run out of tennis balls before new ones arrive from their suppliers. This could be bad, as customers will be left unhappy and may go to another shop for their tennis balls.
The best thing to do is to Re-Order some stock before the stock level gets too low. This way, the suppliers have time to send some more tennis balls before JD runs out. The time it takes for new stock to arrive is called the Lead Time.
The best thing to do is to Re-Order some stock before the stock level gets too low. This way, the suppliers have time to send some more tennis balls before JD runs out. The time it takes for new stock to arrive is called the Lead Time.
Modern businesses try to hold as little stock as possible. This way, they save space in their factory and they can use their money on other things, rather than having it all tied up in stock.
The Japanese came up with a solution called 'Just in Time'. This is where stock is ordered from the suppliers just before it is needed on the assembly line. Of course, you must have an agreement with your suppliers for them to deliver the stock on time, otherwise your whole operation will come to a standstill while you are waiting for the stock to arrive.
Suppliers who provide for companies using a Just in Time process often put their warehouses near to the actual company, to make sure they can get all of the orders delivered in time.
The Japanese came up with a solution called 'Just in Time'. This is where stock is ordered from the suppliers just before it is needed on the assembly line. Of course, you must have an agreement with your suppliers for them to deliver the stock on time, otherwise your whole operation will come to a standstill while you are waiting for the stock to arrive.
Suppliers who provide for companies using a Just in Time process often put their warehouses near to the actual company, to make sure they can get all of the orders delivered in time.