Inventory Management.pptx - Inventory Management Session 6 Activity \u25e6 In groups think of as many reasons as you can for the following two questions

Inventory Management.pptx - Inventory Management Session 6...

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Inventory Management Session 6
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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?
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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.
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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.
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Stockholding costs Varies from industry to industry and business to business.
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