Stock Management and JIT
Too much stock ties up cash; too little stops production. Read a bar gate stock graph, learn how just-in-time control works, and see why a business lives or dies by its suppliers.
Use it, the way the marks are given
Free interactive practice at using the material, which is what the marks are for.
Start revising freeWhat you'll cover
Just enough, just in time
A business needs the right materials at the right moment. Too much stock ties up cash and fills the warehouse; too little stops production dead. This module reads a stock graph, meets just-in-time control, and sees why a firm lives or dies by its suppliers.
The language of stock
Four ideas run through this module:
Two ways to manage stock
A business can hold a cushion of stock, or bring it in just in time. Each has a cost.
Just in time
What does just-in-time (JIT) stock control mean?
- Holding little or no stock, with materials arriving as needed
- Holding as much stock as possible at all times
- Never ordering from suppliers again
- Storing stock unused for years
Read the stock graph
On this bar gate stock graph, stock starts at 100 units and is used up at 20 units per day. The points (0, 100), (1, 80) and (2, 60) are marked, where x is the day and y is the stock level. Plot the stock level on day 3.
How much is left?
A shop starts the week with 500 units and sells 50 units a day. How many units are left after 4 days?
Choosing a supplier
A business chooses and keeps its suppliers on their quality, delivery reliability, availability, cost and trust. A reliable supplier keeps production flowing, which matters most of all under just-in-time, where there is no buffer to fall back on.
Buffer stock and lead time
- Maximum stock level
- Buffer stock
- Reorder level
- Lead time
- The most stock a business holds
- A safety cushion kept in reserve
- The point at which a new order is placed
- The gap between ordering and delivery
Why choose JIT?
Select the TWO benefits of just-in-time stock control.
- Lower storage costs
- Less money tied up in stock
- A large safety cushion of stock
- No need for reliable suppliers
The reorder cycle
Put the stages of the stock reorder cycle into order.
- Stock is used up in production
- Stock falls to the reorder level
- A new order is placed with the supplier
- The lead time passes while waiting
- The delivery arrives and stock rises again
Stock in words
A business holds _____ to keep production running. A _____ stock level is a safety cushion in case of delays. When stock falls to the _____ level a new order is placed, and the _____ time is the wait for it to arrive. _____ stock control holds little or no stock, cutting storage costs.
Stock control
Tap the TWO statements that are TRUE.
- Just-in-time stock control holds little or no stock.
- Lead time is the gap between placing an order and the delivery arriving.
- Buffer stock means holding no stock at all.
- JIT works best with unreliable suppliers.
- Holding too much stock is always free for a business.
Advise the business
Decide what suits each business best.
- A supermarket wants fresh food that will not sit in storage going off. Which stock approach suits it?
- A factory's supplier is unreliable and sometimes delivers late. What should the factory keep to avoid stopping production?
- Late deliveries to customers are damaging a firm's reputation. Which of its decisions caused this?
Should they switch to JIT?
A manufacturer is thinking about switching to just-in-time stock control. Explain the benefits and drawbacks of JIT, and give a recommendation with a reason.
- Explain what just-in-time stock control is
- Give one benefit of JIT for the manufacturer
- Give one drawback of JIT and why it matters
- Give a recommendation with a reason