Stock Control

Buffer stock - goods kept in case of stock shortages

Advantages:

• Competitive advantage over rivals who are unable to meet demand

• Stability in supply

• Price stabilisation

  • Avoids extreme fluctuations as there are no shortages

• Raw materials security

• Positive reputation upheld

Disadvantages:

• Cost

• Risk of goods becoming obsolete

• Opportunity cost as capital is tied up

Holding too much stock:

• Storage cost

• Opportunity cost

  • Unsold stock

  • Price reduction

• Obsolete stock

Holding too little stock:

• Increases in demand can’t be met

• Loss of potential sales

JIT

Advantages:

• Minimises storage costs

• Cash flow improved

• Teamwork

Disadvantages:

• Bulk buying usually causes economies of scale

• Inability to respond to unexpected changes in demand

• Heavily reliant on suppliers

Waste minimisation

• Protection from damage

• Training

• Forecasting

• Reduce prices to encourage purchases

• Alternative uses for obsolete stock

Lean production

Involves the minimisation of resources used in production

• Less time required as production is efficient

• Less labour as it is usually capital intensive

• Small number of trusted suppliers

Pros

• Lower unit costs

• Better quality