Transcript Document

Organisational Issues
Stock and Stock Control
(special thanks to Geoff Leese)
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Objectives
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To explain some of the main issues related to the
management of stock
To list some of the main approaches to stock
management including JIT, Fixed time etc.
To describe the concept of Economic Order
Quantity (without the calculations)
To introduce the term Supply Chain Management
To describe the role of IT in the management of
materials in an organisation
These objectives relate to LO 1 – Concepts, theories and principles
related to the use of computing in business, and Indicative content –
Functional areas of business, marketing sales and production etc.
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What is stock?
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‘stock’ can refer to
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We need to control stock because
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Raw materials required for production of goods
Part finished goods - Goods in Progress
Finished goods
A lot of money can be tied up
We are obliged to produce financial reports
It is the key to efficient customer service
Costs of holding Stock
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Value of materials
Space
Staff costs
Financing costs
Effect on cash flow
Deterioration / shelf life / obsolescence
Price movements
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NB – costs associated with placing orders
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Who decides how much stock to
hold?
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Various Interested parties
Finance limit holdings and restrict the
claim on company capital
 Sales: Want to fill orders promptly so as
not to lose sales through a ‘stock-out’
 Production: Want to maintain sufficient
stocks so as to avoid bottlenecks
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Supplier considerations
Reliability
 Price
 Bulk discounts
 Lead time
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 This
is time lapse between order and
delivery
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Economic Order Quantity
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i.e. what is the best quantity to buy
Accountants have worked on this for a long time!
Think about buying milk – trip to shop for one carton
per day? Or buy 7 cartons on Saturday – trade off?
Think about cost of purchasing( car, petrol, labour)
cost of storage (electricity, fridge) may buy too many,
may run out
Seasonal businesses – How many Christmas trees
should Tesco buy in? is it better to run out than to
throw away?
EOQ is mathematical approach to calculating best
trade off between costs
Formula best left to the mathematicians!
Stock Control Systems
1. Fixed re-order stock
level
 The business decides
the minimum level of
stocks it can tolerate,
and then re-orders
before the stocks reach
this level. The exact
timing will depend on
lead time.
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2. Fixed time re-ordering
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The firm re-orders stocks at a fixed time each
month or week.
Advantage - it represents a routine for the
firm and ensures that stocks are regularly
supplemented. Disadvantage - may well
mean the level of stocks fluctuating quite a bit
depending on the rate they are used up.
Inflexible as a system as well unless used
very carefully
JIT – Just in Time
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Started in Japan in 50’s
Changed the ‘philosophy’ of production
VERY briefly…
Traditional production worked on forecasts, built components,
stored excess as ‘inventory buffers’ – called ‘push’ system
JIT seeks to eliminate excess items, and make items only when
needed – called ‘pull’ system
This means workforce must be flexible / multi skilled – adapt
work to which items are needed
JIT manufacturing is assisted by technologies such as:
Electronic Data Interchange (EDI), Computer Integrated
Manufacturing (CIM), Optimal Production Technology (OPT)
etc.
JIT needs strong supplier relationships - selection of only those
suppliers who are prepared to meet production specifications
and delivery requirements
Supply Chains
A SUPPLY CHAIN is a network of
 supplier,
 manufacturing,
 assembly,
 distribution, and
 logistics,
that work together to perform the functions of
 procurement of materials,
 transformation of these materials into intermediate and finished
products, and the
 distribution of these products to customers.
Supply chains arise in both manufacturing and service
organizations.
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SUPPLY CHAIN MANAGEMENT
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(SCM) is a systems approach to managing
the entire flow of information, materials, and
services from raw materials suppliers through
factories and warehouses to the end
customer. (SCM is different from SUPPLY
MANAGEMENT which emphasizes only the
buyer-supplier relationship.)
Supply chain management has emerged as
the new key to productivity and
competitiveness of manufacturing and service
enterprises.
Two elements of SCM
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The second is called called the ‘front-end function’. This is where IT systems
play a key role, for example to
facilitate the back-end operations. Key technologies here include: EDI (for
exchange of information across different players in the supply chain)
Electronic payment protocols
E-logistics; Continuous tracking of customer orders through the Internet;
Internet-based shared services etc.
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You will study SCM in more detail on any Electronic Commerce module.
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The first refers to the ‘back-end functions’ such as:
Procurement
Manufacturing
Distribution
Simple Stock Records – what
data is needed?
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Write down at least 10 attributes for a stock record
Write down at least 6 activities that will cause this
stock record to be updated (or altered in any way)
Write down at least 10 management reports that
might be produced from the information in your stock
records
How might automated Sales Invoicing interact with a
stock file?
How might automated Re-Ordering interact with a
stock file?
What software is available?
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Huge numbers of packages
Locate with google search (or similar) e.g.
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Accounting
Material management
Inventory control
Sales Order Processing
Automated Invoicing
Many are expensive – check freeware first
Look for small to medium company first
Look for demos, or screenshots
Take a few minutes to
reflect….
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Why is the efficient management of materials
so crucial to all organisations?
Why do companies spend vast sums of
money on IT designed to support this
function?
What are the major components of these IT
systems?
What advantages are gained when the
systems work well (think Tesco, etc)
What happens if the systems don’t work so
well (think Sainsbury etc)