Stock Control and Resource Management

Just In Time is a lean production technique, It involves ordering a product right as it is about to run out, but before the business has to stop manufacture, this allows a business to work effectively when creating a product that requires a lot of parts and accessories.

Raw MaterialsWork in ProgressFinished Goods
Bought from suppliers   Supplier may not be able to meet demand   Supplier could not raise prices   Used in assembly or as ingredients   Parts for assembly Not Sellable   Costs business money to make into product   May be a slow process   Wine   May cost staff hours if long time delays i.e. building houses Needs moving for social events   Christmas Gifts

This table shows the disadvantages of holding stock at different levels of the stock control process.

Why hold stock?

  • Fundamentally holding stock allows production to take place
  • To satisfy customer demand
  • As a precaution against delays from suppliers
  • It allows efficient production
  • It allows for seasonal changes
  • It provides buffer between production process

Main influences on Stock

  • The need to satisfy demand such as demand influxes or lower commodity prices.
    The a need to manage working capital, stock control for example could mean a product is depleted without being replaced.
    Risk of losing value, such as the stock market price. Food and vegetables such as flowers may also decrease in value over time.

Low stock levels

  • Lower stock holding posts.
  • Lower risk of obsolescence.
  • Less capital tied up in stock. So the business is more liquid.
  • Consistent with operating on lean production.

High stock levels

  • Production is always fully supplied so there are never any delays as the product never runs out.
  • Potential for lower costs by ordering in larger quantities.
  • The business is better able to handle unexpected changes in demand or the need for higher output as they will have the stocks available.

Aidan Crane

I am a software engineer with a passion for business and information systems, FMCG, management and electronics.