IB Business Management HLTopic 5 — Operations ManagementPaper 1 & 2Core skill~9 min read
Reading a Stock Control Chart
This is one of the friendliest diagrams in the whole course. It looks like a row of shark fins, and every question about it comes down to reading four numbers off the axes. Learn what each line means once and these become guaranteed marks.
📚 What you need to know
The maximum stock level is the most the business will hold.
The reorder level is the stock level that triggers a new order.
The minimum (buffer) stock level is the lowest the business is willing to go.
The lead time is the gap between placing an order and receiving it.
The reorder quantity is maximum stock − minimum stock — the size of each delivery.
Sloping lines show stock being used up; vertical lines show a delivery arriving.
What the chart is showing
Time runs along the bottom, stock held runs up the side. As the business uses materials, the line slopes down. When a delivery arrives, the line jumps straight up. Repeat, and you get the sawtooth shape.
Notice why the reorder level sits at 600 and not lower. The workshop uses 300 a week and waits a week, so it must order while it still has enough to cover that week plus its buffer.
Maximum stock — the top dashed line, and the height every vertical jump reaches.
Minimum or buffer stock — the bottom dashed line, where each downward slope stops.
Reorder level — the middle dashed line. Find where the sloping line crosses it; that is the moment the order goes in.
Lead time — the horizontal distance from that crossing point to the next vertical jump. Read it off the time axis.
Reorder quantity — subtract the bottom line from the top line, or just measure the height of one vertical jump.
Usage rate — the steepness of the slope. Divide the fall in stock by the time it took.
If a question asks for lead time in days rather than weeks, check whether the business works a five-day or seven-day week. That small detail is deliberately placed in the stem and students miss it constantly.
Why the reorder level sits where it does
Students often think the reorder level is chosen at random. It is not. It has to be high enough that the stock left over will cover usage for the whole lead time, and still leave the buffer untouched.
The rule. Reorder level = (usage per period × lead time) + buffer stock. In the chart above that is (300 × 1) + 300 = 600 units. If the supplier became slower and lead time doubled, the reorder level would have to rise to 900.
When stock control goes wrong
Idle machines are the expensive one. Stock costs a few per cent of its value to store, but a stopped line still pays wages and rent while earning nothing.
Worked examples
WORKED EXAMPLE 1
From the chart above, identify the maximum stock level, the buffer stock level, the reorder quantity and the lead time. [4]
Step 1: read the top dashed lineMaximum stock = 1,200 unitsStep 2: read the bottom dashed lineBuffer stock = 300 unitsStep 3: subtract for the reorder quantity1,200 − 300 = 900 unitsStep 4: measure from the reorder crossing to the delivery
The line crosses 600 units in week 2 and stock arrives in week 3.
Lead time = 1 weekOne mark each. Always give units, not bare numbers.
WORKED EXAMPLE 2
The workshop’s supplier warns that lead time will rise from one week to two. Explain what the workshop must change, and why. [4]
Step 1: work out the cover needed
Usage is 300 units a week, so two weeks of waiting now uses 600 units.
Step 2: apply the reorder ruleReorder level = (300 × 2) + 300 buffer = 900 unitsThe reorder level must rise from 600 to 900 unitsStep 3: say why
If it stayed at 600, stock would run to zero before the delivery arrived, stopping production for a week.
Notice the maximum and the buffer do not change. Only the trigger point moves.
💡 Exam tip
Read values off the axis, not off the shape. Every number you need is printed on the diagram.
The vertical jump is the delivery. Its height is the reorder quantity.
Steeper slope means faster usage. A change of slope in a chart is a change in demand, and it is usually the point of the question.
Check the time units. Weeks, days and working days are not the same thing.
Link to JIT. A JIT firm’s chart has a much lower maximum and a buffer close to zero, with far more frequent jumps.
⚠️ Common mix-up
Reorder level is not reorder quantity. One is when you order, the other is how much.
Buffer stock is not zero. The line stops above the axis on purpose.
Lead time is not the whole cycle. It is only the wait between ordering and receiving.
Stock is not sales. The downward slope is materials being used in production, not units being sold.
A vertical line is not a spike in demand. It is a delivery arriving.
Up next: Capacity, Productivity and Other Metrics — the calculations that tell a business whether its operation is running well.
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