Maximum stock level
| Maximum stock level |
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| See also |
Maximum Stock level is amount that cannot be exceeded in planning supply, one of the control parameters in the ordering system based on a periodic review, understood as the sum of demand in the replenishment cycle and the review cycle plus the safety reserve. (maximum stock) Stock level planned as a quantity to which the stock can grow without the need to take intervention measures. It is expressed in quantitative or valuable units [1].
Calculation
It is calculated basing on storing cost, average size and amount of orders, consumption of materials possibility of the product becoming dated, insurance cost. Limited warehouse space also needs to be added to calculation as per good which need to be storage in special conditions such as low temperature, humidity of the room etc. [2]. Once we storage rather minor and inexpensive products that are not highly likely to become dated, our maximum stock level will be high. Obversely, the level of products stored will be low if we hold larger and expensive offerings with short durability. That is why maximum storage level for fashionable, expensive clothes, high technology etc. will be much lower. Maximum stock level is mostly affected by available space, funds, risk and chances of loss, ratio of lead time and usage frequency, pedictable market, law, price and season changes. When defining maximum stock level, we need to observe at which point stock level decline to Re-order level. Then we make an order as per Re-order quantity. As we need to consider delivery time and that during this time, products will be consumed, the daily usage and delivery Leadtime are taken into account [3].
- Maximum Stock level = ROL + ROQ - (Daily usage x Leadtime in days)
Inventory control
It is a process aiming to maximize profit and use of stock available in warehouses etc. with minimalizing costs if storage. Except current resources, inventory control tries to predict future changes[4]. Inventory control is essential to efficient stock management.
Stock Management
It is managing orders, storing, tracking and controlling stock. Stock control takes into account availability of raw materials, finished goods, work in process, reorder point, bottleneck enhancement, and all the stages up to finished goods. In order to hold stock at efficient level, minimize costs of storage and maximize profit the demands and supply on market need to be controlled as well [5].
- Types of stock management
We distinguish two main kinds of stock management systems.
- Periodic stock management- based on physical check at particular intervals. This option is highly recommended for small businesses as advanced electronic tracking system is not required per small inventory.
Big companies may find it awkward as per time consumption and difficulty in physically accessing all the goods.
- Perpetual stock management- oppositely to periodic stock management this type consists in electronic tracking systems and constantly logs and track storage. It is more expensive but more accurate, time saving and risk minimizing than the previous method.
Just in Time
As per increasing pressure to reduce storage JiT method is thriving in popularity . Just-in-time establish that the exact amount of good ordered by customer is produced and delivered to him. This aims to minimizing waste of time within production, money for storing and space required for inventory [6].
Footnotes
References
- Davenport T. H., & Glaser, J. (2002). Just-in-time delivery comes to knowledge management. "Harvard business review", 80(7), 107-11.
- Filippini R. Forza C. (2016). The Impact of the Just-in-Time Approach on Production System Performance: A Survey of Italian Industry. A Review and Outlook. "Springer International Publishing Switzerland", 19-39.
- Graves, S. C., & Willems, S. P. (2000). Optimizing strategic safety stock placement in supply chains. "Manufacturing & Service Operations Management", 2(1), 68-83.
- Haijema R. (2013). A new class of stock-level dependent ordering policies for perishables with a short maximum shelf life, "International Journal of Production Economics", 434-429.
- Houtum G., Kranenburg B. (2006). Spare Parts Inventory Control under System Availability Constraints, "Springer International Publishing Switzerland", 11-39.
- Patel J., Shah S., Thakkar P., Kotecha K. (2015). Predicting stock and stock price index movement using Trend Deterministic Data Preparation and machine learning techniques, "Expert Systems with Applications", 259-268.
- Zhou Y., Yang S. (2005). A two-warehouse inventory model for items with stock-level-dependent demand rate, "International Journal of Production Economics", 215-228.
Author: Anna Zalewska
