Software –generated information
By: Amandeep kaur
Tutor: Charles Pickstone
In a report format look at the advantages and disadvantages of Dinas holding stock. Prepare a spreadsheet for Dinas showing the inventory control, and calculate the economic order quantity. Calculate the economic order quantity.
Annual usage of 10,000 microchips a cost per order of £25, each microchip costs £0.75 to hold each year.
Dinas can use EOQ model which can help to run business more effectively and efficiently because they can do the following things:
Dinas can try and ensure that goods are available in stock to meet customer needs. For example If Dinas did not use the inventory then there can be delays’, for instance if the suppliers were running late on delivery then this will have a knock on effect on his business as it will delay him making microchips especially when there is demand for the microchips. This will result in losing customers and costing money to the company. Having an Inventory control model in place can help overcome this problem as orders can be placed before hand. This all means that there is a clear advantage of having a good level of stock holding in the organisation.
By using an inventory stock model the organization can store resources especially at a time when there is higher demand for the microchips for instance, If there is a high demand of the stock for them they can see the annual ordering costs and save money as the annual ordering costs lowers with higher quantity ordered.
The main advantages of holding high levels of stock of finished products are as follows:
Dinas can keep up with customer demand, For instance high level of holding stock can ensure -Having stock or high levels of stock means you will have happy customers who will repeat purchase as they were able to buy and receive their items ordered. This also means customers did not walk away without getting what they wanted due to it is not being in stock. This show the way to the business being efficient even if they have some stock left over, the key point is that no customer walked away without being able to purchase the item they needed which results in repeat customer. This results in high sales and profits for the Business.
Dinas can also save a lot of costs in the long run business. This can be in so many ways too. For instance, Dinas can save money on buying in bulk as this usually reduces costs for the business and therefore this can then lead to offering consumers competitive prices which can result in more sales and profits. This also can result in Dinas managing to clear off stock quicker due to the cheaper price they are now able to offer. Also in the long term, the costs delivering goods is also much lower when done in bulk so this can result in Dinas being efficient and saving cost in the long run. An example can be delivering 5 small quantities separately will be cheaper than sending it all at once as a bulk.
Another advantage of holding stock is being able to buy and store stock cheaper if it can be bought early by the organization. This is because if it bought any later then inflation rises can mean it will cost them to buy the supplies which will cuts into the organizations money. However, the question here for Dina would depend on the amount that is being bough and if the storage costs are much higher than the inflation rate. If the storage costs are higher than its better for them to buy the supplies, instead of holding onto it.
Having stock in pace for customers than not having in place will mean that customers are getting the service they need and will return to the business. This is especially beneficial to Dinas if they have a relationship with the suppliers where getting stock on time is an issue. Because