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Zero Stock Buying |
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Zero stock
buying refers to buying in a manner that the system
ensures that the material is delivered by the seller only when
it is required and that no prior inventory of the item is
maintained by the buyer.
As the competition becomes more intense the need for a lean
manufacturing system becomes more focussed. Keeping inventory
thus is blocking huge money that is idle for the firm. Thus
Zero stock buying is more of an inventory safeguard rather
than the normal buying.
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Normally, under this system the firms try to operate
on the basis of zero stock and the supplier holds the
stock for these firms. Usually, the firms of the buyer and
seller are close to each other so that the raw material of
one is the finished product of another. Alternatively, the
system could work well if the seller holds the inventory
and if the two parties work in close coordination. However
the price per item in this system is slightly higher as
the supplier may include the inventory carrying cost in
the price. In this system, the buyer need not lock up the
capital and so the purchasing routine is reduced. This
also significantly reduces obsolescence of inventory, lead
time and clerical efforts in paper work. |
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Thus, the
seller can devote his marketing efforts to other customers
and production scheduling becomes easy.
In practice, the buyer is called upon to pay to the
supplier only when the material is delivered as per the
need.
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For
example, in India , say the Indian Oil Limited maintains its
petrol and diesel refilling stations inside the manufacturing
premises of many companies. As and when petrol or diesel is
required ,say in a lorry, IOL fills that and a coupon is
signed by the driver of the lorry. |
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Buyer
makes the payment to IOL against that coupon.
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Zero stock is becoming popular with the concepts such as
Just-in-time approach that is similar to it. However, in
situations where the supplier has to transport material from
one place to the other with a fair distance in between ,this
system needs careful handling as one never knows the road or
weather conditions. Normally, the system caters to those items
that are not very critical to manufacturing. It best suits the
situations where the output of one firm is the input of the
other firm with both the firms located nearby. |
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