2 LEARNING INTENTIONS AND SUCCESS CRITERIA LEARNING INTENTIONS: I understand what is involved in effective stock management.SUCCESS CRITERIA:I can describe the DIFFERENTSTOCKS a business may hold.I can explain the costs ofOVERSTOCKING.UNDERSTOCKING.I can describe the differentactivities that are involved inthe STOCK CONTROLPROCESS.
3 WHAT IS STOCK MANAGEMENT? STOCK MANAGEMENT is all about trying tomake sure that the business has a STOCK LEVELthat prevents OVERSTOCKING PROBLEMS andUNDERSTOCKING PROBLEMS.Let’s find out what some business expertsthink about stock management:
4 WHAT IS STOCK? Stock in any business is an UNUSED AMOUNT of something, and the main types of stock are:RAW MATERIALS (basic parts still to be used in production)WORK IN PROGRESS (products that have been started but not yet finished)FINISHED GOODS (products that are complete and ready to be sold to consumers)
5 OVERSTOCKING Overstocking means that a business has bought in MORE stock than it regularly needs and so will face the followingproblems due to extra unnecessary stock:High labour costs for security staff to prevent theft of stockHigh labour costs for warehouse staff to manage stocksHigh storage costs for large premises to store stockHigh costs of insurance for large amounts of stockLess chance of wastage or theft being noticed and dealt withRisk of losing money on stock that becomes obsolete eg if trends change (social factor)Money is tied up in stock that could be used for other purposes within the business eg buying new equipment to increase production
6 UNDERSTOCKING Understocking means that a business has NOT bought in enough stock to continue with its ordinary activities and sowill face the following problems from a lack of stock:Production may have to stopStockouts may occur (this means there is no stock for customers) leading to decreased sales and profits, less customer loyalty and a damaged business reputationUnexpected customer orders cannot be met
7 STOCK CONTROL Once a business has decided how much stock to have (to prevent over or understocking), then it will have to make sure thatstock is re-ordered when necessary and islooked after to prevent wastage or theft.Businesses will do this through a processknown as STOCK CONTROL.
8 STOCK CONTROL SYSTEMS The work to keep track of what is happening to stocks can be done either MANUALLY(by hand using a record known as a STOCKCARD) or by COMPUTER eg using a simpleSpreadsheet or sophisticated stock controlsoftware.
9 STOCK LEVELS A MAXIMUM STOCK LEVEL is set in line with consumer demand and storage space available. This should preventoverstocking.A MINIMUM STOCK LEVEL is set in line with normaldemand and lead times from suppliers. This should preventunderstocking.A RE-ORDER LEVEL is set between the maximum andminimum levels taking account of the minimum level, leadtime and normal demand. This should prevent stock-outs.
10 STOCK DIAGRAMStock levels can be shown in a chart asfollows:
11 ADVANTAGES OF COMPUTERISED STOCK CONTROL Computers can accurately calculate stock figures quickly and these can be updated continually if the system is linked to an EPOS sales systemComputers may be able to replace staff in stock control which saves on wagesComputers can automatically remind staff when the reorder level has been reachedReminding staff of when to reorder should lower the chance of running out of stockComputers can automatically reorder stock to prevent any chance of staff forgettingThe information gathered from computerised stock records can help with decision making about stock eg if products are not selling well, use a special promotionThe need for physical stock checks is minimised, although they still need to be done at least once a year to check the accuracy of the computerised data which will not show events such as theft or damaged stock.
12 USE OF BAR CODES Bar codes are now used to identify products and the contents of boxes of products being delivered.This makes the checking of stock when it isdelivered much quicker as the bar code will bescanned and this will automatically update thecomputerised stock records.When items are sold or removed from stock, theycan be scanned again to automatically reduce theamount in the stock records.
13 JUST-IN-TIME STOCK CONTROL Some manufacturers use the Just-in-Time system of stockcontrol eg car manufacturers. Here there is no storage ofstock at all, thus saving money on warehousing and all itsAssociated costs. Stock is ordered just in time for when itis needed in the manufacturing process. This system couldnot work without very reliable suppliers that are locatedclose to the manufacturing base.Although money is saved on warehousing, due to frequentsmall orders, bulk-buying discounts will be unavailable andadministration costs will be higher.
14 JUST-IN-TIME STOCK CONTROL Let’s watch a video clip about how JIT stockcontrol works in practice:
15 Complete Worksheet 33 in your jotters. TASKComplete Worksheet 33 in your jotters.