What Do You Understand By Stock Out?

This article is focused on STOCK OUT, its definition, the consequences of Stock out, effects of late delivery of materials in a manufacturing company, the procedure for control of surplus and the ways of disposing of left over materials.

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What Do You Understand By STOCK OUT?

A stock out is an event or situation that cause the inventory required for production to be exhausted. Stock out might be caused due to the shortage of working capital, poor cash flow management, too much cash tied-up in high excess of stock, etc.

Consequences of Stock Out In A Manufacturing Industry.

  1. When an organisation experiences stock out customers might look elsewhere to purchase their required items. Thus, it leads to decrease in customers.
  2. It reduces the sales volume of an enterprise.
  3. The consumer loses confidence in the organization to meet their needs.
  4. It might lead to labour turnover.
  5. It causes stoppage of production.
  6. It increases the idle time cost.
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Effects of Late Delivery of Materials.

  1. Loss of business goodwill and reputation.
  2. Customers might be forced to buy an item from other manufacturers.
  3. Loss of market share.
  4. Disruption of production.
  5. Customer dissatisfaction.

Procedures For Control of Surplus And Obsolete Materials?

The procedures to control surplus or left-over materials are:

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  1. Keeping minimum stock for daily operational activities.
  2. Be constantly aware of technological developments and changes in the industry.
  3. Maintain smooth and interruption of communication system among the functional units especially to purchasing and production departments.
  4. Take necessary and appropriate measures for disposal of leftover items.
  5. Organize an efficient stock review system.
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Ways of Disposing Left-over Materials.

The methods for disposing of obsolete or left-over materials are outlined as follows:

  1. The left-over or obsolete materials like offcuts blanks and sub-standard parts can be re-used for other purposes to avoid purchases to avoid purchases of similar items
  2. The obsolete items can be sold as scrap material to other organizations.
  3. The surplus materials can be resold to supplier affordable price.
  4. The items left-over may be donated to educational institutions for use.
  5. The redundant machinery and equipment may be useful to users. In this case, purchasing manager finds suitable buyer or supplier for the redundant facilities.
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