To establish the level of stock investment it is necessary to understand the basis upon which this is calculated. This will be determined by the policies, methods and techniques used in the management and control of inventory,
The first of the contributors to stock investment is that which results from the ordering policies related to quantity and frequency i.e. the replenishment or cycle stock. The basis of the calculation is the order quantity and the level of stock resulting from the receipt of an order.
The second of the contributors to stock investment is that which results from the protection of uncertainty in supply and demand, together with the service level to be provided i.e. safety stock.
Calculate the value of the average stock of Dependable.
If we changed our actual stockholding to the theoretical stockholding as calculated in Task 1, what is the impact of this change of stock levels on our profits, balance sheet, cash flow and Return on Capital Employed?
Please do not forget to include examples based on the current Bi-Flo financial accounts that demonstrate these effects.
To start your research into this subject, you might find the following information useful:
Basic Concepts of Inventory Management also Management/ Tactical Management/ The Business Plan