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Study Notes

Inventory (Stock) Control Charts

AS, A-Level
AQA, Edexcel, OCR, IB

Last updated 22 Mar 2021

The overall objective of inventory (stock) control is to maintain inventory levels to that the total costs of holding stocks is minimise. A popular method of implementing stock control is through the use of inventory (stock) control charts and algorithms that automate the process.

An example of a traditional stock control chart is shown below:

The key parts of the stock control chart are:

Maximum level

  • Max level of stock a business can or wants to hold
  • Example chart: 800 units

Re-order level

  • Acts as a trigger point, so that when stock falls to this level, the next supplier order should be placed
  • Example chart: 400 units

Lead time

  • Amount of time between placing the order and receiving the stock
  • Example chart: just under a week

Minimum stock level

  • Minimum amount of product the business would want to hold in stock.
  • Assuming the minimum stock level is more than zero, this is known as buffer stock

Buffer stock

  • An amount of stock held as a contingency in case of unexpected orders so that such orders can be met and in case of any delays from suppliers

Factors Affecting When / How Much Stock to Re-order

Lead-time from the supplier

  • How long it takes for the supplier to deliver the order
  • Higher lead times may require a higher re-order level

Implications of running out (stock-outs)

  • If stock-outs are very damaging, then have a high re-order level & quantity

Demand for the product

  • Higher demand normally means higher re-order levels

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