Stock • Stocks are goods which have been produced or are in the process of being produced but which have not been sold yet.
Types of Stock Stocks can take a variety of forms: • Raw materials and components – waiting to be used in the production process • Works in progress or unfinished goods – goods in the process of being manufactured • Finished goods – goods produced and ready to be sold.
Holding stocks Holding stocks is important to firms because they are often needed to maintain production and to meet customers’ demands. • A business can produce at any time and has goods available for customers. However, holding stocks can be expensive and risky. The more stocks a business has: • The greater the warehousing space needed • The more money there is tied up in stocks • The higher the security costs to protect the stocks • The greater the risk
Buffer stock • The buffer stock is the minimum stock a firm wants to hold at any moment. • Several factors influence the level of buffer stocks a business holds: • The rate at which stocks are generally used • The warehousing space available • The nature of the product • The reliability of suppliers • The supplier’s lead time. ( The lead time is the time it takes for an item to arrive from the moment it is ordered.)
The maximum stock that a firm will hold depends on: • How much space a firm has • The opportunity cost of having money tied up in them
Stock Control The management process that makes sure stock is ordered, delivered and handled in the best possible way. An efficient stock control system will balance the need to meet customer demand against the cost of holding stock.
Avoiding the costs of holding large quantities of stock Buying stock in bulk to achieve discount and ensure supply
Managing stock usage • Stock rotation = method of organising stocks so the oldest supplies are used first. • Computer-based stock control • EPOS (Electronic Point of Sale) assists in the tracking of stock. Barcode monitors sales and movements of stock in the store. • Reducing the overall level of stock • Minimise the amount of stock kept to reduce costs of high stockholding