Working with suppliers
Responding to stock problems
Responding to stock problems means changing stock control when sales or deliveries differ from the plan. The aim is to keep enough stock to trade without holding far more than needed.
| Situation | What happens to stock | How the business may respond |
|---|---|---|
| Sales are higher than expected | Stock falls faster and may go below buffer stock, the safety minimum held. | Reorder sooner, increase the order size or review forecasts. |
| Sales are lower than expected | Stock stays high because it is being used or sold more slowly. | Delay orders, reduce order quantity or use promotions to reduce stock. |
| A supplier delays delivery | Lead time — the time from ordering to receiving — increases. | Set a higher reorder level, hold more buffer stock or use an alternative supplier. |
If sales are higher than expected, the business is using stock faster than planned. Ordering sooner or in larger amounts helps protect the buffer and reduces the chance of a stockout, where shelves or production lines have no stock. Reviewing forecasts helps the next order match demand more closely.
If sales are lower than expected, stock can build up. Delaying orders or cutting order quantity stops stock building up further, and a promotion such as a discount encourages customers to buy the slower stock.
If a supplier delays delivery, the gap between ordering and receiving grows. A higher reorder level makes the business order earlier, and more buffer stock gives it a safety margin. If delays continue, an alternative supplier may keep production or sales going.
A worked example
A garden centre sells bird feeders. A TV gardener features one of its feeders and sales are much higher than forecast. The manager reorders sooner and increases the order size, then reviews the forecast. When sales later slow, the centre delays its next delivery and runs a weekend promotion on feeders. If the feeder supplier then delays delivery, the centre raises its reorder level and keeps extra buffer stock until a second supplier can deliver.
Practise this
Edexcel GCSE Business · 2.3.2 Working with suppliers