There are two types of stock control you need to know about Traditional (bar gate) Just in time You are likely to be asked about the advantages and disadvantages of both You also need to know how to read a stock control diagram – minimum stock level, maximum stock level and lead time
BAR GATE Stock Control Diagram Maximum stock levels achieved after stock delivery. Stock levels decline during production. Stock Level Maximum Stock Level When the stock level reaches the re-order level, it triggers a new order. The difference between the time of re-order and delivery is the ‘lead time’. Re-order triggered Re-order level Minimum Stock Level Lead Time Difference between time of ordering and order arriving Time
JUST IN TIME STOCK CONTROL Holding buffer stock can be expensive – so some businesses use a Just in Time System. This means stock arrives only when it is needed. To be successful with this you need to have good relationships with your suppliers and trust them to deliver on time
Disadvantages of each system Disadvantages of Just In Time Disadvantages of Buffer stock May have to turn customers if you have not anticipated a period of high demand Costs of keeping stock can be high May not be able to achieve discounts for large orders Storage can be expensive Increased carbon footprint due to more delivery's being required Some items could perish and are wasted
If you don’t have the stock to please your customers – you may get a bad reputation
Too much stock could attract burglars and increase insurance costs
Storing stock can be expensive – high fixed costs
Too much stock and you may have to sell it off cheaper before it goes out of sell by date or out of fashion
Too little stock and customers will go elsewhere