HL OPERATIONS MANAGEMENT PRODUCTION PLANNING . IB BUSINESS & MANAGEMENT - A COURSE COMPANION: P275-279. Traditional Methods of Stock Control. As the debate over whether to use JIT or JIC goes on, many businesses continue to use the more traditional methods of stock control.
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HL OPERATIONS MANAGEMENTPRODUCTION PLANNING
IB BUSINESS & MANAGEMENT - A COURSE COMPANION: P275-279
Cost of Holding Stock
Cost of Stock Out
Together with the EOQ, the process of controlling stock is shown by using the following terms:
The initial Order
The Maximum Stock Level
The Minimum Stock Level
The Reorder Level
The Reorder Quantity
A Typical Stock Control Diagram
Explanation of Diagram
In a 12 month period a paint shop completes the following transactions:
In order for a business to calculate the optimal level of stock, there are a number of factors that need to be taken into account.
Production managers often want to know:
breakdown affects the work done.
Capacity Utilization =
Productive Capacity x 100
A school might have as its core activity – the teaching, but it then can outsource such services as:
All of these could probably be provided at a lower cost and with a better result than if the school tried to complete all the tasks itself.
Cost to Buy (CTB)
P x Q
Cost to Make (CTM)
FC + (VC x Q)
(P) 20 x $10,000 = $200,000
CTM = FC + (VC x Q)
$100,000 + ($10,000 x 20) = $300,000.
In this case CTB < CTM so the school should outsource.
An airline must decide whether or not to run its own catering division or sub-contract out this responsibility to a third party for a 5 year contract. The following information is available.