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a) Stockpiles refers to the accumulated (or excess level of) supply Ford motor vehicles, i.e. too much production given the level of demand. The purpose is to prevent possible shortages in supplies which could harm profitability and sales (although in Ford's case stockpiling is the result of poor stock control).
b) Poor stock control can mean either under-stocking or excessive stockpiling (or even a stock-out). There are drawbacks to both, as outline below:
Over-stocking
Under-stocking
Reduces Ford's liquidity position
Disgruntled and dissatisfied customers
Likely to hinder working capital since finance is tied up in stockpiles
Customers might switch to rival manufacturers' brands
Higher storage costs, e.g. insurance, maintenance and security
Compensation for failure to meet promised delivery dates
Possibility of some stock being damaged or even becoming obsolete (unlikely for cars, but their value could still depreciate)
Higher unit costs due to idle resources (which cost money but do not generate revenue)
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Forward market evaluation Net receipt in 1 month = 240000 - 140000 = $100000 Nedwen Co requires to sell dollars at an exchange rate of 1.7829 + 0.003 = $1.7832 per £ Ster
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