QUESTION TWO

Read the case study and answer the subsequent questions

Michelle has a party and dcor shop, which she runs from a small shop front at the community shopping centre. The area in which the shop is located is filled with well-off modern mommies who love to through elaborate children birthday parties. Her clientele would rather have the latest trends in party dcor than worry about price.

Michelles shop is just big enough for her displays of mini party dcor stalls, party favour station and the backdrops that line all the walls. Michelle follows party blogs and see the latest trends that she wants to stay up to date with. She does not want to be left behind in the trends and searches for where she can purchase the latest items for the lowest prices.

Michelle finds a bargain on a bulk purchase of dcor items, however it is more than what she would usually stock, but because she wants to be the first party store in her area to sell these items. So she purchases them anyway, thinking that if she is first to have it, customers will purchase from her and become loyal customers because of her merchandise.

Due to spending so much on new stock and having too little space to store the stock, Michelle is faced with a shortage of capital to pay the rent for her shop space and she has increased costs as she stores her additional stock in her neighbours garage at a fee.

Questions:

1. What classification of stock does Michelle hold? Justify your answer.
2. Discuss the stocking error that Michelle has made? Suggest how she can fix the error. Justify your answer.
3. Does Michelles business justify using the JIT principle? Justify.