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Question
If the raw materials and other required materials are available freely and continuously, ____ stock levels may suffice.
If the raw materials and other required materials are available freely and continuously, ____ stock levels may suffice.
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Solution
The correct option is A lower
Keeping lots of stock.
This might suit your business if sales are difficult to predict (and it is hard to pin down how much stock you need and when), if firm can store plenty of stock at less cost, the components or materials you buy are unlikely to go through rapid developments or they take a long time to re-order.
The efficient stock control allows you to have the right amount of stock in the right place at the right time. It ensures that capital is not tied up unnecessarily, and protects production if problems arise with the supply chain.
Advantages Disadvantages Easy to manage Higher storage and insurance costs Low management costs Certain goods might perish You never run out of stock Stock may become obsolete before it is used Buying in bulk may be cheaper Your capital is tied up
Keeping lots of stock.
This might suit your business if sales are difficult to predict (and it is hard to pin down how much stock you need and when), if firm can store plenty of stock at less cost, the components or materials you buy are unlikely to go through rapid developments or they take a long time to re-order.
The efficient stock control allows you to have the right amount of stock in the right place at the right time. It ensures that capital is not tied up unnecessarily, and protects production if problems arise with the supply chain.
| Advantages | Disadvantages |
| Easy to manage | Higher storage and insurance costs |
| Low management costs | Certain goods might perish |
| You never run out of stock | Stock may become obsolete before it is used |
| Buying in bulk may be cheaper | Your capital is tied up |
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