Tuesday 19th November Mr Nicholls Year 11 Business Tuesday 19th November Mr Nicholls

Objectives To understand what we mean by the term “stock Control” and its importance in relation to business.

Reminder Your mock is approaching – as such, you need to make sure that you are revising in your spare time – I am 100% confident in each and every single one of you and your ability to do well.

Today Stock Control – this is all part of our “Meeting Customer Needs” heading so you’ll need to make sure you take appropriate notes throughout please. Remember – notes = revision guide!

Managing Stock Managing stock effectively is important for any business, because without enough stock: production and sales will grind to a halt. Stock control involves careful planning to ensure that the business has sufficient stock of the right quality available at the right time.

What is stock? Stock can mean different things and depends on the industry the firm operates in. It includes: Raw materials and components from suppliers Work in progress or part finished goods made within the business Finished goods ready to dispatch to customers Consumables and materials used by service businesses

Stock levels… In order to meet customer orders, product has to be available from stock – although some firms are able to arrange deliveries Just in Time. If a business does not have the necessary stock to meet orders, this can lead to a loss of sales and a damaged business reputation. This is sometimes called a ‘stock-out’. It is important therefore that a business either holds sufficient stocks to meet actual and anticipated orders, or can get stocks quickly enough to meet those orders.

However… However, there are many costs of holding stock, so a business does not wish to hold too much stock either. The costs of holding stock include: The opportunity cost of working capital tied up in stock that could have been used for another purpose Storage costs – the rent, heating, lighting and security costs of a warehouse or additional factory or office space Bank interest , if the stock is financed by an overdraft or a loan Risk of damage to stock by fire, flood, theft etc; most businesses would insure against this, so there is the cost of insurance Stock may become obsolete if buyer tastes change in favour of new or better products Stock may perish or deteriorate – especially with food products

Quality Control… What do you think we mean by this term? Why might it be important for a business to ensure?

1. Johnny’s mother had three children. The first child was named April 1. Johnny’s mother had three children. The first child was named April. The second child was named May. What was the third child’s name? 2. A clerk at a butcher shop stands five feet ten inches tall and wears size 13 sneakers. What does he weigh? 3. Before Mt. Everest was discovered, what was the highest mountain in the world? 4. How much dirt is there in a hole that measures two feet by three feet by four feet? 5. What word in the English language is always spelled incorrectly? 6. Billie was born on December 28th, yet her birthday always falls in the summer. How is this possible? 7. In British Columbia you cannot take a picture of a man with a wooden leg. Why not? 8. If you were running a race and you passed the person in 2nd place, what place would you be in now? 9. Which is correct to say, “The yolk of the egg is white” or “The yolk of the egg are white?” 10. A farmer has five haystacks in one field and four haystacks in another. How many haystacks would he have if he combined them all in one field?

Answers 1. Johnny. 2. Meat. 3. Mt. Everest. It just wasn’t discovered yet. 4. There is no dirt in a hole. 5. Incorrectly (except when it is spelled incorrecktly). 6. Billie lives in the southern hemisphere. 7. You can’t take a picture with a wooden leg. You need a camera (or iPad or cell phone) to take a picture. 8. You would be in 2nd place. You passed the person in second place, not first. 9. Neither. Egg yolks are yellow. 10. One. If he combines all his haystacks, they all become one big stack.

Quality Ensuring quality means making sure that products are made to a minimum standard or better. The cost of doing this should be covered by extra sales. Quality is about meeting the minimum standard required to satisfy customer needs. High quality products meet the standards set by customers for example, a high quality washing-up liquid can claim that one squirt is sufficient to clean a family's dirty plates after a meal. A poor quality washing-up liquid requires several squirts.

Question… How might Managing Stock and ensuring quality interlink? Why might they rely on one another?

Control V Assurance Producing faulty goods incurs repair costs and damages the reputation of the firm. There are two main approaches to achieving quality: Quality control where finished products are checked by inspectors to see if they meet the set standard. Quality assurance where quality is built into the production process. For example, all staff check all items at all stages of the production process for faults. In this way everyone takes responsibility for delivering quality. Successful quality assurance results in zero defect production.

Total Quality Management Introducing quality assurance requires Total Quality Management (TQM), in which managers try to bring about a change in business culture, convincing employees to care about how products are being made and to do their part to ensure standards are met.

Just In Case The just in case method of stock control is best explained using a diagram called a bar gate stock graph. You need to understand the meaning of: Maximum stock level: the largest amount of items to be stored on site (500). Minimum stock level: the lowest amount of items to be stored on site (100). Reorder level: the amount at which new stock is ordered. 400 items are ordered and it takes two weeks lead time for ordered stock to arrive. There is always a buffer stock of 100 items held in case deliveries are held up or there is an unexpected large order.

Just In Time Just in case stock control is costly. To reduce spending and improve competitiveness, a business can switch to an alternative method of stock control called just in time. With just in time, a business holds no stock and instead relies upon deliveries of raw materials and components to arrive exactly when they are needed. Instead of occasional large deliveries to a warehouse, components arrive just when they are needed and are taken straight to the factory floor.

Important… The benefits of reduced warehouse costs must be balanced against the cost of more frequent deliveries and lost purchasing economies of scale from bulk buying discounts.