Clever Grades

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Inventory and Stock Control

Core Definition

What is Stock Control?

Stock control is the process of managing a business’s inventory levels. It ensures that the right quantity of stock is available at the right time to meet customer demand while minimising storage costs and losses due to waste or obsolescence.

Control Methods Outline

These strategies are crucial for maintaining efficiency and minimizing storage expense.

1

Stock control charts

Visual tools to monitor stock levels, ensuring timely reordering.
2

Just in Time (JIT)

Minimises stock by receiving goods only as needed for production.
3

Kanban

A signalling system (e.g., cards) to trigger stock replenishment.
4

Fixed reorder stock level

Stock is reordered when it reaches a predetermined minimum.
5

Fixed time reordering

Stock is ordered at regular intervals regardless of level.
6

Economic Order Quantity (EOQ)

Calculates the optimal order size that minimises total inventory costs.
7

Electronic methods

Use of software and barcodes to track stock in real time.

Stock Calculation Glossary

Understanding these core terms is essential for effective inventory management.

⛑️

Buffer stock (safety stock)

Extra inventory held to prevent stockouts due to delays or errors. Buffer stock ensures production or sales continue despite delays.
🎯

Reorder level

The stock quantity at which a new order is placed.
⏱️

Lead time

Time taken between placing an order and receiving it.

Reorder Level Formula

Reorder level = Average usage per day × Lead time + Buffer stock
This formula determines the quantity at which an order must be placed to prevent stock depletion during the lead time.

Calculation Example

Scenario: Business uses 10 units a day, Lead time is 4 days, Buffer stock is 20 units.

Component Calculation Result
Daily Usage × Lead Time (10 × 4) 40 units
Plus: Buffer Stock 20 units
Reorder Level 60 units
Conclusion: When stock falls to 60 units, an order is placed.

Evaluation: Benefits vs. Costs

✅
The Benefits
  • Reduces holding costs
  • Avoids stockouts
  • Improves cash flow
  • Minimises waste.

Stakeholder impact: Customers benefit from product availability; employees face less pressure from stock shortages; suppliers get consistent orders.

❌
The Costs
  • Stock monitoring systems
  • Training of personnel
  • Possible ordering errors.

Relation to Production Methods: JIT suits lean production by reducing excess stock and waste. Mass production may require higher buffer stocks for continuous production.

Stock Control Deck
Term
Stock Control

What is stock control?

Answer
Definition

Managing inventory levels to have the right stock at the right time at minimal cost.

Term
Importance of Stock Control

Why is stock control important?

Answer
Reason

To meet customer demand, reduce storage costs, and minimise waste or obsolescence.

Term
Just in Time (JIT)

What is Just in Time (JIT)?

Answer
Definition

A method of receiving goods only as needed for production.

Term
Stock Control Chart

What does a stock control chart do?

Answer
Function

Visual tool to monitor stock levels and determine when to reorder.

Term
Buffer Stock

Define buffer stock.

Answer
Definition

Extra inventory held to avoid stockouts due to delays or errors.

Term
Reorder Level Calculation

How is reorder level calculated?

Answer
Calculation

Average usage per day × Lead time + Buffer stock.

Term
Lead Time

What is lead time?

Answer
Definition

Time between placing an order and receiving stock.

Term
Economic Order Quantity (EOQ)

What is Economic Order Quantity (EOQ)?

Answer
Definition

The optimal order size to minimise total inventory costs.

Term
Kanban

What is Kanban?

Answer
Definition

A signalling system to trigger stock replenishment.

Term
Costs of Stock Control

Name two costs of stock control.

Answer
Examples

Monitoring systems and training expenses.

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📦 Stock Control Quiz

1. What is the main goal of stock control?

Stock control ensures the right quantity of stock is available to meet demand while minimising costs.

2. How is the reorder level calculated?

This formula accounts for usage during lead time plus extra stock to prevent shortages.

3. Which method involves ordering stock only when it is needed for production?

JIT minimises inventory by ordering materials exactly when required for production.

4. What is buffer stock used for?

Buffer stock acts as a safety net to ensure continuous operation despite delivery delays.

5. Which of the following is NOT a benefit of stock control?

Stock control aims to reduce costs, not increase them.

📊 Results

  • Notes and Quiz
  • Business
  • AS Level
  • Business Operations
  • OCR