4AS.3

Inventory Management Objectives – What is inventory? – Why do companies need to keep inventory? – What are the costs of not having inventory? – What are the costs of having too much inventory?

Inventory Management Inventory = materials or goods required to allow for the production and supply of products to the customer. (Sometimes called stock). 3 types of inventory: – Raw materials – Work in progress. – Finished goods.

The Production Process Inputs Resources Land Capital Labour Enterprise Production Processes Outputs Finished goods and services Waste Value added reinvested into inputs or marketing, research and administration

Inventory Management What type of stock does Cambridge College keep?

What are the costs of holding inventory Warehousing Opportunity cost Theft Damage Obsolescence And others……

Why do companies have inventory? Avoid lost sales Avoid idle production Special (emergency) orders are expensive Purchasing economies of scale. There are others…….

Total Stock Holding Costs

Controlling Stock

Activity 22.2 Page 425 Revision questions page 427 – 1,3,4,5,6.

Just-in-time (JIT) Objectives – What is Just-in-time? – Why do companies use it? – Goods and bads. – What do companies need to use it?

Just-in-time (JIT) What is Just-in-time? – Stock control method aims to avoid holding inventory by requiring suppliers to deliver just as parts are needed. Why do companies use it? – Aims to reduce inventory holding costs by not holding any inventory, whilst at the same time avoiding the costs of not holding stock.

Just-in-time (JIT) GoodBad No costs of holding stock. Expensive to set up. If anything goes wrong the whole manufacturing operation can stop dead!

Just-in-time (JIT) Needs of Just-in-Time – Excellent relations with suppliers. Suppliers to be reliable and committed. Located nearby. Communication with suppliers to be excellent – IT – Accurate forecasts of demand Which parts do we need and how many? – IT Computers to control ordering.

Just-in-time (JIT) Needs of Just-in-Time (continued) – Machinery Flexible to switch between products – Quality is essential No spare parts so all parts must be perfect. – Staff Skilled and trained Committed Good relations between management and employees

Activity 22.3 page 426