LOGISTICS - STOCK AND THEIR MANAGEMENT . The aim of the lecture is to clarify importance of stock and the essence of their management Šárka Čemerková lecturer Logistics - Stock and their management . Stock and their types Stock creation factors Stock management factors Stock management phases Stock management level indicators Approaches to stock management Structure of the lecture STOCK •current or short-term assets of the company •their characteristic feature is that they are consumed or produced by the enterprise (as a result of the purchasing or production process) •main stock categories: omaterial: vraw materials and basic material vauxiliary and operating substances vfuel vspare parts vpackaging and small assets v ostock of own production: vwork in progress vsemi-finished products vfinished products ogoods •signaling levels of stock: ominimum stock omaximum stock • •functional components of stock: ocurrent stock osafety stock otechnical and technological stock oseasonal stock ospeculative stock oemergency stock Reasons for stock creation: •differences between resources (supply) and needs (demand) in terms of time, place and amount of their origin and use •continuous and flexible production process •differences between forecasted (planned) needs and actual consumption •proper process or completion of the technological process •discount when purchasing in larger delivery quantities •purchase of raw materials at a time when there is enough on the market •trying to avoid the problems caused by the lack of raw materials on the market •delay sales in periods of low demand and allowing speculative profits from sales in later periods of high demand •creation of optimal production or transport batch stock of raw materials stock in production stock of finished products in the production plant stock of finished products at distribution points supplier´s stock consumer stock stock in retail reworking or repacking the product waste and by-products waste disposal STOCK MANAGEMENT •stock level regulation •goal: •to maintain stock in a size and structure that meets the needs of the business while respecting the economic efficiency criteria •logistics stock regulation focuses on 2 conflict areas: operformance that is closely related to delivery readiness oeconomy, thus reducing the cost of stock •basic groups of factors influencing stock management: oexternal factors (factors of the surroundings of the enterprise) - in market and mixed economies are considered primary ointernal factors (business microenvironment factors) •the most important external regulator - the state of supply and demand in the relevant stock market •basic factor of internal regulation - costs of maintaining and securing stock Internal Stock Management Factors: •how the storage of stock works - we have one or more products; stock is drawn periodically or non-periodically •how the storage is replenished - immediately, randomly, gradually, there are delays or not •how goods are taken from the storage - randomly or deterministically •there are some losses in the storage •restrictions - storage size, financing • Stock management levels •strategic stock management - a set of decisions on the amount of financial resources that the company can allocate from the total available resources to cover stock in a given amount and structure •operative stock management okeeping of specific types of stock at the level and structure as appropriate to in-house cost needs obased on the classification of stock according to functional components •phases of stock management in a broader sense: ostock record: vbasic and indispensable source of information on the state and movement of stock vcaptures phenomena signaling a material or value change in stock ostock analysis: vtool for identification and evaluation of structural, quantitative, qualitative, material and value changes in stock vmonitors factors that affect the state and movement of stock ostock inspection: vallows us to identify the levels of stock management vdegree of adherence to certain rules and guidelines of the supervisory authorities for the control and use of stock vinspection of the method of disposal of unnecessary, redundant, event. unusable stock vquality control of stock record and analysis oself regulation: vstock management in a narrower sense vcontinuous monitoring and evaluation of the state and movement of stock on the basis of adopted rules vflexible provision of feedback in case of deviations from the desired state and development v Development of stock in time Size of the stock Supply Supply Supply Supply Delivery cycle Consumption Consumption Consumption Time Delay in delivery Current stock Safety stock Technological stock Stock management level indicators •bearer of a specific amount of stock in an enterprise is a realized supply, the amount of which is converted into stock during the storage process average current stock 1.in conditions of continuous even consumption 2. 2. where D … supply 2. in conditions of uneven consumption 1. 1. 1. where Zmin … minimal level of stock Zmax … maximal level of stock total average stock ZC sum of the average current stock and all fixed components of stock immediate stock oactual physical stock oavailable stock obalance stock turnover (turnover rate) of stock where So … consumption for the period under review [CZK] Zc … total average stock [CZK] stock turnover time In stock management, we always need to know the answers to basic questions: 1.What and when to order? 2.How much to order? 3.What's in stock? 4.How to ensure the accuracy of stock data? Stock management methods and techniques 1.Optimization methods •they follow the theory of stock management + principle of cost optimization •finding a minimum total costs •in the area of purchasing, this principle is used, for example, to calculate the optimum size of supply where c1 … unit storage costs per year c2 … costs of one delivery D … size of one delivery P … annual demand (annual amount of supplies) D/2 … average stock P/D … number of delivery cycles Total cost of ordering and storage Costs Order size Ordering costs Storage costs Total costs optimum supply size optimal (minimal) costs 2.Pull Systems •proactive system triggered by the power of customer demand •Just-In-Time (JIT) + Kanban •originally the automotive industry – Toyota •today global logistics technology 3.Push Systems •characterized by the creation of stock - the amount and structure determined on the basis of forecast demand •traditional supply systems Just-in-Case (JIC) •traditional in European countries and America •possibility of elimination of the risks of timely non-delivery at the expense of increased storage and maintenance costs •existence of safety stock 4.Differentiated stock management system •where stock arises and what are the causes of its formation •selection of the items to achieve the lowest stock levels •application of selected methods of stock management •building of selected contractual supplier-customer relations •creating logistics chains •for risk items there is a need to maintain safety stock (even if using the JIT concept) •basic method for analysis and reduction of maintained stock - ABC analysis: oto sort all delivered items based on delivered volume (number of pieces) and prices of individual items into 3 groups A, B, C: vgroup A: items with a low delivery volume and high value vgroup C: items with a high volume of supply and low value vto achieve the lowest stock for the most expensive items and for items difficult to store v Effect of stock turnover on stock maintenance costs Example: the relationship between average stock level for different number of turnovers, maintenance costs, and savings Turnover Average stock [CZK] Stock maintenance costs [CZK] Cost saving [CZK] 1 750000 300000 - 2 375000 150000 150000 3 250000 100000 50000 4 187500 75000 25000 5 150000 60000 15000 6 125000 50000 10000 7 107142.86 42857.14 7142.86 8 93750 37500 5357.14 9 83333.33 33333.33 4166.67 10 75000 30000 3333.33 11 68181.82 27272.73 2727.27 12 62500 25000 2272.73 13 57692.31 23076.92 1923.08 14 53571.43 21428.57 1648.35 15 50000 20000 1428.57 Number of turnovers Summary of the lecture You can: •Explain the importance of stock creation •Describe the types of stock •Clarify the nature of stock management •List stock management indicators •Characterize individual approaches to stock management •