1. 3.2.2 Managing Stock and Quality

2. Product – good/service S
Point
Explain
Expand
Therefore
Could lead to
As a result
Context
Competitors
USP
Product – good/service S
One advantage is that customers will keep coming back (1 mark). Therefore IHG will become more competitive compared to Travelodge (1 mark). As a result, IHG will gain more sales (1 mark).
3.2.2 Managing Stock and Quality

3. Key terms to learn customer expectations repeat purchase
the design mix
product differentiation
stock management
quality management
productivity and efficiency
3.2.2 Managing Stock and Quality

4. 3.2.2 Managing stock and quality
Have you seen these labels or stickers in the shops?
How does the customer feel?
How does the business manager feel?
What is the problem?
3.2.2 Managing stock and quality
3.2.2 Managing Stock and Quality

5. Stock Control What happens if a business holds too little stock?
What happens if a business holds too much stock?
There are two stock control methods:
Buffer stock
Just in Time
3.2.2 Managing Stock
and Quality

6. STOCK
Stock is classed as the raw materials, work in progress and finished goods a company currently holds
Companies need to be very careful how much stock they hold. They can’t hold too much, but they also can’t hold too little!

7. Interpreting bar gate stock graphs
3.2.2 Managing Stock and Quality
Interpreting bar gate stock graphs
Maximum stock level
Stock
Level
Stock levels fall as it is used
New stock is delivered
Re-order level
Lead time – the time from placing the stock order to getting the delivery
Buffer stock – held in case there is a problem with delivery of new stock or a sudden increase in demand
When it reaches this level more stock is ordered either manually or automatically
Minimum stock level
Number of Weeks

8. Buffer stock ADVANTAGES AND DISADVANTAGES Draw table with headings and split statements under correct heading
The buffer stock method of stock control is sometimes called “Just in Case”.
Can you explain why?
Can meet customer demand
Quickly respond to increases in demand
Risk of waste e.g. out of date, damaged or obsolete
Costs associated with stock holding e.g. storage, staff, insurance
Money tied up in holding stock – impact on cash-flow
Continue with production even if a problem with stock deliveries
3.2.2 Managing Stock and Quality

9. Buffer stock
Advantages of holding buffer stock
Can meet customer demand
Quickly respond to increases in demand
Continue with production even if a problem with stock deliveries
Disadvantages of holding buffer stock
Money tied up in holding stock – impact on cash-flow
Costs associated with stock holding e.g. storage, staff, insurance
Risk of waste e.g. out of date, damaged or obsolete
Should all businesses hold buffer stock or does it depend on the nature of the business?
3.2.2 Managing Stock and Quality

10. What might happen? Supermarket PC Manufacturer Bike Shop
In your books, think about the following companies.
Consider what the effects might be of having too much or too little stock. The first one has been done for you.
Company
Too much stock
Too little stock
Supermarket
Need to store it
It might rot
People may not like it
Store will look empty - unattractive
PC Manufacturer
Bike Shop
Local butchers
May become obsolete
Fire/flood could be disastrous
Get broken/stolen
Not be able to fulfil orders
Customers might go elsewhere
Poor reputation
Might not have room to order new bikes when they come out
Not enough to replenish displays
Customers go to rivals
Food might rot
Might not sell as many as you thought
Limited product range
Loose sales
Customers go to rivals
Poor customer service

11. Just in Time Stock Control
Read the sheet on ‘Just In Time’ stock control. When you have read it write about it in your own words in your books. Use the following writing frame to lay it out
Just in Time stock control is…
An example would be…
A benefit of Just in Time stock control is…
A drawback of Just in Time stock control is…

12. What is JIT?
JIT aims to minimise the costs of holding unnecessary stocks of raw materials, W-I-P and finished goods.
What does this mean?
Stock delivered as and when required.
Business hold minimum stock at any point in time.

13. Work in pairs to identify two advantages and disadvantages of JIT.
3.2.2 Managing Stock and Quality
Just in time (JIT)
Just in time is a stock control method that involves holding zero or very limited stock. Raw materials are delivered as they are needed for production and finished goods completed ready to meet the demand of customers.
Advantages
Disadvantages
Improves cash flow as money is not tied up in stocks
Delivery delays can halt production
Incur costs on ordering and delivery
Frees up space for more productive use.
Improves quality, reduces waste, obsolete, damaged stock
lose out on bulk buying discounts offered by suppliers
Work in pairs to identify two advantages and disadvantages of JIT.

14. Exam question June 11
3.2.2 Managing Stock and Quality

15. Question time
SuperDenim is an online retailer of designer Japanese denim. It imports jeans directly from Japan and sells them over the internet. SuperDenim prides itself on a high level of customer service.
What is meant by the term “stock”? (2)
Using the diagram opposite, what is the:
number held as buffer stock
reorder quantity
lead time (3)
Explain one possible benefit of SuperDenim operating this method of stock control. (3)
State one advantage and one disadvantage to SuperDenim of switching to a Just in Time (JIT) method of stock control. For each, explain one likely effect on the business. (8)
Max. level
Re-order level
Stock levels
Min. level
No. of weeks

16. Question time
SuperDenim is an online retailer of designer Japanese denim. It imports jeans directly from Japan and sells them over the internet. SuperDenim prides itself on a high level of customer service.
Using the diagram opposite, what is the:
number held as buffer stock
reorder quantity
lead time
Max. level
Re-order level
Min. level
50 pairs of jeans
100 pairs of jeans
Stock levels
2 weeks
No. of weeks

17.   Explain one drawback to Portakabin Limited of using a ‘Just In Time’ method of stock control. 3
Possible drawbacks include:
• Loss of revenue/profit if unable to supply at short notice.
• Loss of productivity if components do not arrive.
• Damage to the brand if unable to supply at short notice.
• Increased costs of raw materials by not placing bulk orders.
Portakabin Limited prides itself on being able to build quickly (1 mark). Therefore, if supplies do not arrive on time production may be halted (1 mark). As a result, Portakabin Limited might lose sales (1 mark).
3.2.2 Managing Stock and Quality

18. IMPORTANCE OF Quality Reliability Appearance Functions Durability
After sales service
IMPORTANCE OF Quality
Customer satisfaction
Differentiation
Reputation
Added value
Brand image
Unique selling point (USP)
Competitive advantage
Value for money
3.2.2 Managing Stock and Quality

19. Identify Quality Problems
Produce a spider diagram to show the costs associated with quality problems
Italian fashion brand Gucci once used the slogan
“Quality is remembered long after the price is forgotten.”
Do you agree?
Jonathan talks to BBC World TV news about Toyota's brand faux pas
Can quality problems effect the long term brand image of a company?

20. Does this Toyota plant use quality control or quality assurance?
Quality control is the process of checking the quality of a product at the end of the manufacturing process
A specialist is employed to check the end product
Focus on identification
Reactive
Quality assurance is the process of checking the quality of a product at every step along the manufacturing process from the receipt of raw materials to the final output
Each employee is responsible for self inspection
Focus on prevention and zero defects
Pro active
Does this Toyota plant use quality control or quality assurance?
Lean Manufacturing Example Toyota Plant Kentucky
3.2.2 Managing Stock
and Quality

21. Quality control v Quality assurance
Advantages
Disadvantages
Which one is better? Justify your view.
Work in pairs to complete the table opposite.
3.2.2 Managing Stock and Quality

22. Benefits of drawbacks Quality control
Individuals not encouraged to take responsibility for the quality of their own work
Giving workers responsibility for their own work helps increase motivation
High cost of wastage due to:
Rejected product is expensive for a firm as it has incurred the full costs of production
Some rejected products can be re- worked, but may be scrapped – either way rejects incur more costs
Benefits
Inspection used to prevent faulty products reaching the customer
trained inspectors used to detect problems
3.2.2 Managing Stock and Quality

23. Benefits & drawbacks of Quality Assurance
Increased Customer Satisfaction
Reduced waste
Reduced costs
Increased sales and market share
Improved reputation
Increased employee motivation
Drawbacks
Cost to implement - training
Time
Quality control or quality assurance?
Both can play an important role in managing quality. However, unlike QC, QA is proactive and involves all workers taking responsibility for the quality of their own work and focuses on zero defects and this should enable cost savings in the long term. This also motivates workers as they are given training and more responsibility and therefore, they should be more productive.
3.2.2 Managing Stock and Quality

24. Total Quality Management (TQM)
This is a specific approach to quality assurance that aims to develop a quality culture throughout the firm.
Where each employee is responsible for the quality of their work and aims for a target of 'right first time' or zero defects.
3.2.2 Managing Stock and Quality

25. Question time
3.2.2 Managing Stock and Quality
Pret-a-Manger operates 295 sandwich shops worldwide. 210 of these have their own kitchens so sandwiches can be made on-site. Pret are proud of the freshness of their food, their website tells customers “We get vans to drop off good, natural ingredients every day. Our chefs get cracking early in the morning, making our stuff fresh so we can sell it fresh. This is absolutely, completely and utterly essential to the quality of our food.”
“We get vans to drop off good, natural ingredients every day”. What is this an example of?
Buffer stock
Just in time
Quality control
Quality assurance (1)
The first job of the chefs is to check the raw ingredients. What is this an example of?
What is meant by the term “quality”? (2)

26. Possible benefits include
Improved branding.
More repeat purchases.
Increased customer loyalty.
Ability to charge higher prices.
Having high quality bricks and sets will differentiate Lego (1 mark) from those of MEGA Bloks (1 mark). As a result more children will want to purchase Lego sets at Christmas. This would lead to an increase in revenue for The Lego Group (1 mark).
3.2.2 Managing Stock and Quality

27. Team Activity – Quality Assurance
In teams prepare a poster to be displayed in your classroom that addresses the following points
What is a quality exam answer?
Who is responsible for achieving a quality answer?
What steps can be taken to maintain quality?
Individual activity: How could you improve the quality of your
Exam answers?
Class work?
Home work?

28. Question time
3.2.2 Managing Stock and
Quality
Pret-a-Manger operates 295 sandwich shops worldwide. 210 of these have their own kitchens so sandwiches can be made on-site. Pret are proud of the freshness of their food, their website tells customers “We get vans to drop off good, natural ingredients every day. Our chefs get cracking early in the morning, making our stuff fresh so we can sell it fresh. This is absolutely, completely and utterly essential to the quality of our food.”
Explain one possible disadvantage to Pret of not holding a buffer stock. (3)
Explain one possible benefit of a quality product to Pret. (3)
Improving the quality of a product and improving productivity are two ways in which a business like Pret-a-Manger might become more competitive.
Which of these two methods do you think would be most effective in improving
the competitiveness of a business such as McDonald’s and why? (6)