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.
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
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.