Learning objective
Explain the benefits and costs of holding spare stock and buffer stock.
Read the explanation, check the common trap, then practise with flashcards and questions.
At a glance
0
Flashcards
0
Questions
Topic
The role of procurement
Subtopic
Managing stock
Study support
Understand this objective
Quick explanation
Explain the benefits and costs of holding spare stock and buffer stock
- This point belongs to The role of procurement, especially Managing stock.
- You need to be able to explain the benefits and costs of holding spare stock and buffer stock.
- The key ideas to know are stock and buffer stock.
- Use the linked flashcards and practice questions to check recall, then practise applying the idea in an exam-style answer.
Key concepts
Why it matters
This objective helps connect Managing stock to exam-style questions, flashcards, and revision notes for The role of procurement.
Quick student answer
A small manufacturer holds 200 units of a component. The unit cost is £8 and the annual holding cost rate is 25%. Calculate the annual holding cost for this component.
Direct answer
£400
How it works
Annual holding cost = quantity × unit cost × holding cost rate. 200 × £8 × 0.25 = £400.
Key terms
- buffer stock: A planned safety stock kept to cover variations in demand or supply lead times, ensuring product availability.
Common trap
Confusing spare stock with buffer stock: Spare stock is extra inventory kept for unforeseen demand, while buffer stock is a planned safety stock to cover lead time variability.
Related questions
Try this as a practice card
Question 1 of 1
Choose an answer, get feedback, then move sideways through the set.
Flashcard prompts
Flip through the key recall cards
Flashcard 1 of 2
Practise next
Revision tools
Choose how to practise
Flashcards0 linked cards
Practice Questions0 linked questions
Revision notestopic notes
Open the full topic revision notes when you are ready to review this objective in context.
Open revision notesRelated learning objectives
- Evaluate just in time stock management for a given business.
Managing stock
- Explain the benefits of reduced stock costs and the risks of frequent deliveries and lost purchasing economies.
Managing stock
- Analyse factors affecting supplier choice, including price, quality and reliability.
Suppliers, logistics and supply chains
- Explain procurement and logistics and their effect on efficiency and unit costs.
Suppliers, logistics and supply chains
- Explain the benefits of effective supply chain management, including supplier coordination, value, reduced waste and faster production.
Suppliers, logistics and supply chains