Which one of these actions would help a bookshop's procurement team manage stock of popular revision guides? Sales rise rapidly six weeks before examination...
Question 1 Report
Which one of these actions would help a bookshop's procurement team manage stock of popular revision guides? Sales rise rapidly six weeks before examinations, then fall after the final examination. The bookshop has limited space and cannot return unsold books to the publisher. Managers want sufficient stock without creating unnecessary storage costs.
(a) Which action is most suitable: use past sales data to forecast demand, order the same quantity every month, stop checking stock levels or buy only the most expensive guide? [1]
(b) Explain one reason why accurate demand forecasts help procurement. [2]
(c) Identify one cost caused by holding too many unsold revision guides. [1]
(d) What is meant by stock in this business? [1]
Answer Details
(a) The most suitable action is to use past sales data to forecast demand [1]. Demand changes predictably before and after examinations, so ordering the same amount every month would not match likely sales.
(b) Accurate forecasts help the business order an appropriate quantity [1]. This reduces stockouts and lost sales, as well as excess stock, waste and storage costs [1].
(c) Storage cost is one cost of holding too many unsold revision guides [1]. Insurance costs, cash tied up and the risk that stock becomes obsolete are also acceptable.
(d) Stock means goods held by a business for sale or use [1]. In this case, it includes revision guides held for customers to buy.
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