Inventory Management and Supply Chain
Inventory Management and Supply Chain tests stock control, reorder decisions, receiving, storage, and the flow of goods from supplier to shelf. Questions often ask you to calculate a reorder level or choose the correct stock method.
Core rules
- Reorder level = demand during lead time + safety stock.
- Lead time is the time from placing an order to receiving usable stock.
- Use FIFO for general stock and FEFO (first-expiry-first-out) for perishables.
- A GRN records quantity and condition received; discrepancies must be reported before stock is accepted.
- Stock turnover shows how quickly inventory sells; high turnover is not always good if it causes stockouts.
Worked example
Daily demand is 30 units, lead time is 7 days, and the store keeps 60 units as safety stock. Demand during lead time = 30 × 7 = 210 units. Reorder level = 210 + 60 = 270 units. If stock on hand is 240 units and no order is already due, the store is below reorder level and should order. A common order quantity is the gap to the target level plus expected demand, but the exam usually tests the reorder point first.
Marks traps
Do not multiply annual demand by a lead time stated in days. Do not omit safety stock when the question mentions it. Do not use FIFO for milk or medicines when expiry dates matter; use FEFO. Do not accept damaged cartons without noting the shortfall on the GRN.