This document discusses stock control and operations. It defines stock as raw materials, work in progress, and finished goods. It notes the benefits of holding stock such as discounts on large orders and avoiding running out. However, it also lists the costs of holding stock like opportunity costs and storage costs. The document also discusses choosing reliable suppliers based on price, quality, and availability. It states that poor purchasing can lead to overstocking or understocking. Finally, it defines economic stock level as the optimal level to minimize holding and running out costs, and lists factors that influence determining stock levels like demand, seasonality, and cash flow.

1. Operations
Stock Control

2. Stock refers to unused
quantities of
 Raw Materials
 Work in progress
 Finished Goods

3. Benefits of having stock
 Large order can mean discounts
 Less chance of running out of stock
 Work is never delayed or stopped due
to lack of raw materials which would
have meant no sales

4. Costs of Holding Stocks
 Opportunity Cost – other uses for
money tied up in stock
 Storage Costs
 Spoilage Costs

5. Choosing Suppliers
 Price
 Quality
 Availability
 Location

6. A poor purchasing mix results
in
 Over or understocking
 Increased costs
 Poor quality stocks

7. Deciding on level of stock to
hold
 Economic Stock Level – a stock level that will
minimise both stock holding and running out of
stock costs
 To calculate ESL the following information is
required
 maximum stock level to be held
 minimum stock level to be held
 delivery time for stock to arrive
 stock level when new order should be placed
 stock amount that should be ordered

9. Values for figures depend on
 Demand for finished product
 Seasonal Factors
 Amount of cash available to buy stock
 Type of stock – eg perishable,
fashionable
 Space available to hold stock

10. Past Paper Qus
 Discuss why it’s important to set your Re-order
level correctly (5)
 What does the term lead time mean? (1)