EFFECTS OF INVENTORY LEVEL AND STOCK OUTS IN PROCUREMENT
CHAPTER ONE:
INTRODUCTION
1.1 Background of the study
An Inventory refers to a detailed list of all the items in stock in an enterprise or in an organization. It is further defined as a list of goods and materials held available in stock by a business (Inventory search 15th Jan 2010 - Wikipedia.org/wiki/inventory). Inventory levels refer to the stock level in place; either minimum stock level, maximum stock level or the re-order inventory level.
Under stocking is a state of running out of inventory. The aspect of lead time is quite significant in regard to purchasing and supply. In most cases the purchasing division urges early requisition since it acts as a buffer from unexpected delivery and delay in lead time. The importance of stock in an organization or institute is to provide both internal and external customers with the required services in level of terms of quality and order rate fill. It also creates customers goodwill because of the ability to supply and also to avoid stock outs which are difficult to estimate. It also enables acquiring of stock at the right place and the right time.
There is an incidence of availability required for an item to be set. Market conditions for example political, financial and other considerations that will determine whether requirements shall be purchased on “hand – to – mouth” or “forward” basis.
The risk of running out of stock is created by variations in usage time, late deliveries delay of purchases requisition from user department.
Aristopher (1998) states that the achievement of delivery on time is standard. If any stock is delivered late this would hinder the work of the departments in the institutes and the work will not run smoothly as required. Stock out will lead to loss of customer goodwill because of the ability to supply or late deliveries, often costs of stock outs are hidden in overhead cost. Stock out would result in great expenses through production delays for example in Kenya forestry
INTRODUCTION
1.1 Background of the study
An Inventory refers to a detailed list of all the items in stock in an enterprise or in an organization. It is further defined as a list of goods and materials held available in stock by a business (Inventory search 15th Jan 2010 - Wikipedia.org/wiki/inventory). Inventory levels refer to the stock level in place; either minimum stock level, maximum stock level or the re-order inventory level.
Under stocking is a state of running out of inventory. The aspect of lead time is quite significant in regard to purchasing and supply. In most cases the purchasing division urges early requisition since it acts as a buffer from unexpected delivery and delay in lead time. The importance of stock in an organization or institute is to provide both internal and external customers with the required services in level of terms of quality and order rate fill. It also creates customers goodwill because of the ability to supply and also to avoid stock outs which are difficult to estimate. It also enables acquiring of stock at the right place and the right time.
There is an incidence of availability required for an item to be set. Market conditions for example political, financial and other considerations that will determine whether requirements shall be purchased on “hand – to – mouth” or “forward” basis.
The risk of running out of stock is created by variations in usage time, late deliveries delay of purchases requisition from user department.
Aristopher (1998) states that the achievement of delivery on time is standard. If any stock is delivered late this would hinder the work of the departments in the institutes and the work will not run smoothly as required. Stock out will lead to loss of customer goodwill because of the ability to supply or late deliveries, often costs of stock outs are hidden in overhead cost. Stock out would result in great expenses through production delays for example in Kenya forestry
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