5.5 Production planning

JIC

________- just- in- case stock control: stock management strategy that businesses use when they hold a high level of stocks because there is a risk of "stock- out.

JIT

________- just- in- time stock control: stock- control method that aims to avoid holding stocks by requiring supplies to arrive just as they are needed in production and completed products are produced to order.

supply chain

Managing the ________ and stock (inventory) levels are important operations management responsibilities.

Productivity

________: ratio of outputs to inputs during production, e.g.

Cost minimization

________- to remain competitive.

Re order

________ stock level: level of stocks that will trigger a new order to be sent to the supplier.

Re order quantity

________: number of units ordered each time.

Supply chain

________: every business that comes into contact with a particular product for example, the ________ for most products will be all the businesses manufacturing parts for the product, assembling it, delivering it and selling it.

Cost minimization

to remain competitive

Consistent and reliable supply of products

to satisfy customer demand

Supply chain

every business that comes into contact with a particular product for example, the supply chain for most products will be all the businesses manufacturing parts for the product, assembling it, delivering it and selling it

Stock (inventory) control

the difference between JIT and JIC

Stock (inventory)

materials and goods required to allow for the production and supply of products to the customer

Economic order quantity (EOQ)

optimum or least-cost quantity of stock to re-order taking into account delivery costs and stock-holding costs

Buffer stocks

minimum stocks that should be held to ensure that production could still take place should a delay in delivery occur or production rates increase

Re-order quantity

number of units ordered each time

Lead time

normal time taken between ordering new stocks and their delivery

Re-order stock level

level of stocks that will trigger a new order to be sent to the supplier

Capacity utilization

proportion of maximum output capacity currently being achieved

Excess capacity exists when the current levels of demand are less than the full capacity output of a business

also known as spare capacity

Productivity

ratio of outputs to inputs during production, e.g

Level of production

number of units produced a during a time period

Supply chain

Every business that comes into contact with a particular product for example, the supply chain for most products will be all the businesses manufacturing parts for the product, assembling it, delivering it and selling it

Stock (inventory)

Materials and goods required to allow for the production and supply of products to the customer

Just-in-time (JIT) stock control

Stock control method that aims to avoid holding stocks by requiring supplies to arrive just as they are needed in production and completed products are produced to order

Just-in-case (JIC) stock control

Stock management strategy that businesses use when they hold a high level of stocks because there is a risk of "stock-out"

Raw materials and components; work in progress; finished goods

3 forms in which manufacturing businesses will hold stocks

Opportunity cost; storage costs; risk of wastage and obsolescence

3 costs associated with stock-holding

Lost sales; idle production resources; special orders could be expensive; small order quantities

4 costs of not holding enough stocks

Economic order quantity (EOQ)

Optimum or least-cost quantity of stock to re-order taking into account delivery costs and stock-holding
costs

Buffer stocks

Minimum stocks that should be held to ensure that production could still take place should a delay in delivery occur or production rates increase

Re-order quantity

Number of units ordered each time

Lead time

Normal time taken between ordering new stocks and their delivery

Re-order stock level

Level of stocks that will trigger a new order to be sent to the supplier

Capacity utilization

Proportion of maximum output capacity currently being achieved

Excess capacity

Excess capacity exists when the current levels of demand are less than the full capacity output of a business also known as spare capacity

Productivity

Ratio of outputs to inputs during production, e.g. output per worker per time period

Level of production

Number of units produced a during a time period

Improve the training of employees to raise skill levels; improve worker motivation; purchase more technologically advanced equipment; more effective management

4 ways in which productivity levels could be increased

Opportunity cost

Working capital tied up in stocks could be put to another best alternative use. The capital might be used to pay off loans, buy new equipment or pay off suppliers, or could be left in the bank to earn interest

Storage costs

Stocks have to be held in secure warehouses. They often require special conditions, such as refrigeration. Staff will be needed to guard and transport the stocks, which should be insured against fire/theft

Risk of wastage and obsolescence

If stocks are used or sold rapidly as expected, then there is an increasing danger of goods deteriorating or becoming outdated. This will lower the value of such stocks