Just In Case and Just In Time stock control

JIT

:) Low levels of stock because stock is only ordered as needed

:) Reduces costs of storage and wastage

:) Reduces the chance of holding unsellable/obselete stock

:) Less chance of ruined/damaged stock

:) Creates more space for new production plans

:) Creates good relationship with suppliers

:( break in supply chain causes immeadiate problems- lose customers

:( Cost of processesing order may increase (charge more lose customers)

:( Reputation in suppliers hands

JIC

There is a buffer stock if needed

Reduces pressure on cash flow

Purchasing economies of scale

Can meet sudden changes in demand

Provides spare parts

No last minute delivery issues

No charge from suppliers for stock holding

Cost of holding stock- cost rises as more and more units are held in storage.

Cost of Stock out- Small amount of stock then the cost of having a sudden change in demand will be big, this decreases the more stock you hold.

Total costs- by combining both sets of costs we can see that the minimum point of the total cost is whats called the ECONOMIC ORDER QUANTITY, this is the amount that should be ordered in a given time period (usually annually)

Initial order- 1st amount of stock ordered

Usage pattern- how much stock is used over a given period

Maximum stock level- maximum amount of stock held at any one time.

Minimum stock level- stock kept as a reserve

Reorder level- once this point is crossed stock is reordered

Reorder quantity- amount of stock ordered each time

Lead time- how long the stock takes to be delivered.

Factors affecting the optimal stock level:

Market- growing, increase in sales, new competitors

Final product- type, price, single use, high volume, complex

Stock- perishable, out of date, big (take up space)

Finance- enough funds at the right time, credit from suppliers, purchasing economies of scale

HR- implication of changing amount of stock held

Infrastrucure- will the condition of roads/ weather affect delivery?

Is the facility being used to its maximum capacity?

Capacity Utilization= (actual production/ productive capacity)x100

         First In First Out- assumes stock for production is issued in the order that it is delivered.

 date stock recieved stock issued  goods in stock   stock valuation

LIFO- last in 1st out