Inventory Management Session 6
Activity ◦ In groups think of as many reasons as you can for the following two questions: ◦ 1. Why hold stock? ◦ 2. What are the costs involved in holding stock?
Why Hold Stock? Cost of purchasing ◦ The more orders that are placed, the greater the costs in terms of administration. ◦ Typically, the larger the order the bigger the discount. Variability of demand ◦ Stock needs to be carried to avoid stock outs. Variability of supply ◦ Suppliers lead times can vary (time from receipt of order to delivery). Speculation ◦ Stock is sometimes purchased against anticipated price rises, industrial action, sudden demand changes, etc.
Why Hold Stock? Work in progress ◦ Semi-finished stock moves between different sections of the manufacturing process. Economies of production ◦ Low unit costs are achieved through long production runs. ◦ This results though in short term inventory peaks. ◦ Balance therefore needs to be struck. Costs of not holding stock ◦ Includes cost of losing customers if stock is not available.
Stockholding costs Varies from industry to industry and business to business.
- Summer '13
- Dr. Amer
- Supply Chain Management, CYCLE INVENTORY, Cost