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Working with suppliers and stock
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Businesses need the right stock at the right time. Managing stock and suppliers well saves money and keeps customers happy.
Bar gate stock graphs
A bar gate stock graph shows stock levels over time.
Maximum stock: the most the business wants to hold.
Buffer stock: the minimum kept in case of delays.
Reorder level: the stock level at which a new order is placed.
Lead time: time between ordering and delivery.
Reorder quantity: how much is ordered (often maximum minus buffer).
Maximum stock: the most the business wants to hold.
Buffer stock: the minimum kept in case of delays.
Reorder level: the stock level at which a new order is placed.
Lead time: time between ordering and delivery.
Reorder quantity: how much is ordered (often maximum minus buffer).
Just in time (JIT)
JIT means stock arrives exactly when it is needed, so little or no stock is held.
Advantages: less money tied up in stock, less storage space, less waste.
Disadvantages: depends on reliable suppliers; a late delivery can stop production; no bulk-buying discounts.
Advantages: less money tied up in stock, less storage space, less waste.
Disadvantages: depends on reliable suppliers; a late delivery can stop production; no bulk-buying discounts.
Procurement and logistics
Procurement is finding and buying supplies. Choose suppliers on quality, delivery (cost, speed, reliability), availability, cost and trust.
Logistics is getting goods to the right place at the right time. Good supply decisions lower costs, protect reputation and improve customer satisfaction.
Logistics is getting goods to the right place at the right time. Good supply decisions lower costs, protect reputation and improve customer satisfaction.
Maximum stock is 1000 units and buffer stock is 200 units. Deliveries arrive when stock reaches the buffer. What is the reorder quantity?
- Reorder quantity = maximum − buffer
- 1000 − 200
Answer: 800 units
Bar gate graphs show maximum, buffer, reorder level, lead time and reorder quantity. JIT holds little stock but needs reliable suppliers. Choose suppliers on quality, delivery, availability, cost and trust.
The interactive lesson includes the diagrams for this topic.
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