1. LO: To know how this is managed and controlled
Stock Control
LO: To know how this is managed and controlled

2. Purchasing
Essential part of the business, need to order stock for manufacturing or retail. MUST ENSURE -
Sufficient quantity is ordered (not too much)
It is the right quality
Available where they are needed in the factory
Price must be competitive
Good relationships built with suppliers

3. Suppliers – Things that must be considered
Quality checked through samples or visit to factory
Do they have ISO 9000?
Price can be negotiated especially when purchasing in bulk
Can discuss credit periods
Will they be consistent and on time?
Is the financial position of the firm safe?
If the needs of the buyer changes, can the supplier react?
Should we place large orders occasionally or small orders frequently?
Should we accept lower quality stock at a lower
cost?
Should we use only one supplier?

4. Types of stock
Raw materials and components – comes from outside suppliers and will help to make the finished product
Work in progress – Things that have been started to be processed
Finished goods – May keep goods for a while after they are made as they have to be sold, may be in batches or individually. Especially true with the stockpiling before Christmas.

5. Stock management
Stock rotation – Use oldest stock first, makes sure nothing is out of date or obsolete.
Stock wastage – Loss of stock in production or process, main causes:
Materials wasted and thrown away
Reworking of items not made correctly
Defective products that cannot be corrected
Damaged due to handling or storage
Stealing by customers or staff
Passing use by dates

6. Stock control charts
Look at the level of stock over time to help to manage it
Charts show the following things:
Stock levels – vertical line when a delivery is made but then slowly goes down
Maximum stock level – Shows the largest amount you can store
Re-order level – A trigger point when the new order should be sent to the supplier
Minimum stock level – Need to keep a certain minimum level as a buffer so you have something should you need it

8. The costs of stock – Too much
Opportunity cost – Holding stock means money is wrapped up and cannot be used elsewhere
Cash flow problems – Less money to pay things
Increased storage costs – larger premises needed, more labour, security etc.
Increased finance costs – If capital needs to be borrowed
Increased stock wastage – More
chance of stock getting damaged
or turning bad

9. The costs of stock – Too little
Workers and machines may stand idle
Lost orders as the orders cannot be fulfilled in time
Orders not being fulfilled on time causing a bad relationship with customers
Loss of the firms reputation and goodwill from customers
Need to balance these costs for optimum stock control

10. IT and stock control Stock control made easier by the use of IT
Databases used to hold details about stock
Systems control stock so it is re-ordered as soon as it is used – usually done using barcodes
RFID (radio frequency identification) often used today to see exactly where the stock is in the warehouse
Allows you to know exactly what you store

11. JIT – Just in Time Allows firms to hold very little stock
Stock is to arrive at the factory just as it is needed so that it does not have to be held
Must have a very good relationship with the suppliers
Deliveries must be made frequently
Would only be established over time as holding no stock is a massive risk

12. Advantages and Disadvantages of JIT
Improves liquidity
Costs of holding stock reduced
Storage space converted into something more useful
Stock wastage and rotation are less of an issue
Response times are speeded up as components can be ordered instantly
DISADVANTAGES
Break in supply causes problems to production
Costs of processing orders may be increased
The reputation of the manufacturer is placed in the hands of the supplier

13. Some questions
What businesses may rely the most on good stock control?
How will internet shopping change stock control?
When might it be good for a firm to run out of stock?
Where does the idea of JIT come from
Should all firms use JIT?

14. Revision exercises
Page 263
Answer the B revision exercises