Professional Education
January 24, 2011 | 
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Almost every company carries stocks of some sort,even if they are only stocks of consumables such as stationery.For a manufacturing business,stocks ,in the form of raw materials, working progress & finished goods,may amount to a substsntial proportion of the total assets of the business. Some business attempt to control stocks on a scientific basis by balancing the costs of stock shortages against those of stock holding. The economic order quantity ( EOQ ) model can be used to decide the optimum order size for stocks which will minimize the costs of ordering stocks plus stock holding costs. If discounts for bulk purchases are available , it may be cheaper to buy stocks in large order size so as to abtain the discounts. Uncertainty in the demand for stocks & /or the supply lead time may lead a company to decide to hold buffer stocks ( there are by increasing its investment in working capital ) in order to reduce or eleminate the risk of stock-outs ( running out of stock ).
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For a developed business, stocks, in the shape of rare resources, operational development & over supplies, may quantity to a substantial amount of the whole assets of the business.