Inventory Essentials
This is the main reason firms buy materials in bulk.
What is to benefit from bulk discounts?
What is the main goal of inventory control?
Minimise time
What is a potential result of holding too much stock due to spoilage?
Wastage
What is the consequence of holding too much stock?
Wastage / Spoilage / Increased storage costs / Liquidity problems / Stock may become outdated / Increased storage costs.
What is the main principle behind the ‘Just in Time’ inventory model?
Minimal stock holding
Firms keep inventory to ensure this during production.
What is material availability?
What term describes the maximum amount of stock a business can hold?
Maximum stock
What cost increases when excess stock is stored?
Storage
What inventory management system determines when and how much to order?
Economic Order Quantity (EOQ)
What is essential for suppliers in the ‘Just in Time’ system?
Timely delivery.
Holding finished goods allows firms to meet sudden increases in this.
What is demand?
What is the point at which a new stock order is placed?
Reorder level
What financial issue arises when cash is tied up in stock?
Liquidity
What does 'H' represent in the EOQ formula?
Holding cost per unit
What must be standardized for the ‘Just in Time’ method to work effectively?
Raw materials and processes
Firms stock up in anticipation of this future economic change.
What is a price surge?
What term refers to the lowest stock amount the firm wants to maintain?
Minimum stock
What may happen to stock that is held for too long and loses relevance?
Outdated / Obsolete / Expired /Spoiled
What model counts stock at specified intervals for replenishment?
Fixed Time Period Model
What type of certification is important for suppliers in the ‘Just in Time’ system?
Vendor certification
Stock acts as a safeguard if this occurs with the supplier.
What are unforeseen problems?
What term describes the time between placing and receiving an order?
Lead time
Lead time
What business issue can arise from holding too little stock?
Production Hold-ups / Delays / Interruptions / Stoppages/ Disruptions / Shortages
What shape is the total cost curve in inventory management?
.
U-shaped
Name a significant benefit of using the ‘Just in Time’ inventory system.
Reduced stockholding cost