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  • Created by: geogt002
  • Created on: 06-06-16 13:25
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  • warehousing
    • af's current system of warehousing/ stock ordering is to order their own materials every 3 months and store the wood in the warehouse.
    • advantages
      • they can benefit from purchasing economies of scale. ny ordering the wood in bulk to last 3 months it will reduce the cost per piece of wood and will help to improve profitability. however variable costs are high so there is little evidence of this.
      • if they order a lot of stock then they should be able to cope with a sudden increase in demand.
    • diadvantages
      • by ordering every 3 months af might order too much. this can lead to higher wastage as some wood will either not be needed or will perish in the warehouse.
      • its is difficult to predict demand 3 months in advance. therefore they might not place the right size order.
      • storing a lot of wood will mean paying for a large warehouse. this will increase the fixed cost. capacity issues.
    • alternitive methods
      • just in time stock ordering-this is when a firm order only the quantity of raw materials that they need. this results in ordering much smaller quantities more frequently.
        • advantages... af will hold less stock and this will reduce any potential wastage which in turn will reduce their variable costs. ordering and holding less stock will also mean needing a much smaller warehouse. if they decide to continue to manufacture in the uk then it might be possible to rent a smaller and cheaper warehouse or use space at the factory and close the warehouse altogether. however if they stop production in the uk they might need a large warehouse to store all the finished products.


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