Stock and Quality Control

Stock Control

Stock refers to products that the business has produced but have not been sold

They incur the following costs:

• Storage costs
• Depreciation costs
• Administration cost

There is also an opportunity cost of holding stocks, when a business is holding their products as stock they are not earning any revenues on them and are incurring costs

Businesses keep stocks to ensure they have enough products to meet customer demand

Buffer Stocks

• Buffer stocks are the minimum level of stock a business wants to hold at any one time
• These are additional stocks which allow a business to cope with unplanned changes in demand

Lead time

• This measures how long it takes to for an item to arrive once its ordered
• By keeping stocks a business means it is less vulnerable to changes in lead time

Maximum stock levels

This is the greatest amount of stock that a business is able to hold.

This depends on:

• The amount of space a business has
• The opportunity cost of holding stocks

Stock rotation

• Stock rotation organises stocks so the oldest products are used first
• This is used in supermarkets where they put the new stock behind the old stock on the shelves

Stock wastage

• Stock rotation aims to decrease stock wastage If too much stock is held some may go off causing wastage for the firm
• This is a specific problem for perishable goods

Quality Control

Quality control is the process of ensuring that products have standard or uniform quality. It aims to reduce any problems before a product reaches the end of the production cycle.

All employees have to be committed to controlling the quality for it to be effective. One form of quality control is TQM (Total Quality Management)

Features of TQM

• Quality Circles – Workers meet to discuss issues relating to quality in the business, this can also act as a motivator to employees that are involved
• Zero defects – these are systems that make sure no products leave the business with defects
• Statistical Process Control – this describes statistics which are generated to enable the business to evaluate their quality procedures

Quality Assurance

• This looks at guaranteeing all stages in the production process leading to high quality products
• The emphasis is on preventing mistakes

Self checking

• Is a key part of quality assurance
• Self checking is where workers check their own work