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Zero Stock Buying
 

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.

 

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. 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.

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.  Buyer makes the payment to IOL against that coupon.

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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