#Immediacy on speech making

With a 100-carton consumption the first load would be ordered for delivery ...

With a 100-carton consumption the first load would be ordered for delivery at the beginning of week 1, and this would last to the end of week 3, to be followed by another delivery, and so on. Two other factors must still be taken into account to get the system right. The first is the 'lead time' that the supplier needs from receiving the order to delivery, and the second a safety margin to cover delays, strikes or other contingencies. In practice, therefore, orders must be placed at the appropriate time ahead of delivery, and timed so that consumption does not reduce stocks right down to zero.

Depending on experience of suppliers' reliability, a safety margin should be built in. SHIFTING THE COST TO THE SUPPLIER Sometimes arrangements can be made to place a large forward Order with a supplier which will be 'called-off as required in varying quantities or delivered on prearranged dates. This system is popular with many sup pliers as it enables them to plan their own production in advance and, if invoicing follows delivery, cuts down the buyer's stock-holding costs as these stay with the suppliers.

If quantity discounts can be obtained at the same time then the best possible deal has been achieved.

GOODS IN PROCESS Since goods in process also represent money which can neither be used nor invested, they too should be kept to a practical minimum. This is a function of production planning and, in the context of distribution, goods in process should be considered as a -supply source for finished products which must be placed with the customer. The quantity of goods in process, and the speed with which they can be converted into finished product, must be taken into account when deciding the right level of finished product to hold.

FINISHED PRODUCTS Probably the most important consideration in determining stock levels of finished product is the level of customer service required. However, once again it is important to be realistic. There -will always be a temptation to hold maximum possible stocks of every product sold in order to meet every order with a prompt delivery.

If this can be economically achieved then all is well, but it should be realized that the costs of providing a 100 per cent service are much greater than providing, say, a 95 per cent service.

This is particularly so when several products are offered, since it will be necessary to hold sufficient stocks of all of them to meet any orders which may come along. It will be seen that the costs of meeting 95 per cent of orders immediately from stock are substantially greater than if 90 per cent are met. It is necessary to balance the service needs of the business with the cost of stock holding and the speed with which products can be provided from the production queue. Ideally, all orders will be met from production with no intermediate storage, as in a jobbing production situation.

There is no joy to be had from providing the world's fastest service if the business goes bust as a result. Where to store the finished product Yet again, in considering the location of stocks, we are looking for a balance between customer service and costs.

In some cases the nature of the business severely limits the choice ...

In some cases the nature of the business severely limits the choice of location a retailer stores his goods at least to some extent.

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The answer is to decide realistically again. the level of service needed ...

The answer is to decide realistically again. the level of service needed and to work through methodically the costs of the alternatives. The

What are my overhead costs? b. What percentage of my total expenditure ...

What are my overhead costs? b.

What percentage of my total expenditure goes on overheads? c. Are my overhead expenses growing disproportionately? d. Are all my overheads absolut