5.6 Production Planning

Production Planning

Organisation of resources to establish, what, when, how and where something can be produced

Supply chain

All stages of production through which a product passes, from the extraction of raw materials to the delivery of finished products/services to customers

Supply chain management

Working with suppliers to ensure reliable, high-quality production and delivery of goods

Procurement

Processes required in order to acquire the necessary resources to conduct operations

Local vs Global supply chains

Local	Global
Greater control, less risk	Greater choice, lower costs
Higher production costs	Greater risk, lack of transparency + control

Just-in-time production

Placing smaller, regular orders for resources, delivered just in time to be used

Just-in-case production

Large levels of buffer stock are helpd incase of unexpected events

Buffer stock

Additional quantities of stock (inventory) kept by a company in case of need

Stock control charts

Chart that records when stocks are delivered, sold and how much is reordered

Main parts of a stock control chart

• Maximum level

• Minimum level (Buffer stock level)

• Reorder level

• Reorder quantity 

• Lead time

Quantitative factors affecting make or buy decisions

• Total/average costs

• Defect rates

• Capacity utilisation

• Productivity rates

• Cost of logistics

• Capital expenditure

• Profitability

Qualitative factors affecting make or buy decisions

• Quality management

• Reputation/public relations

• Ethical implication

• Changing demand

• Supply chain reliability and lead times

• Specialisation

Vertical integration

Situation where elements of supply chain of a business are owned and operated by that business

Reasons to buy

• Specialisation and expertise

• Low costs due to EOS

• Lower fixed costs