production management assignment s

8/6/2019 Production Management Assignment s

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.........a.Production planning is best accomplished wheninventory is excluded. Criticize this statement and showthe relevance of stock control in any manufacturing orservice firm

Production planning may be defined as the technique of foreseeing every step in a

long series of separate operations, each step to be taken at the right time and in the

right place and each operation to be performed in maximum efficiency (Abhar

Kumar,Prod. Plan &Cont. 2011).

Production planning entails the acquisition and allocation of limited resources to

production activities so as to satisfy customer demand over a specified time

horizon and this can be optimally achieved by including(not excluding) inventory

in production planning by organizations. As such, planning and control problems

are inherently optimization problems, where the objective is to develop a plan that

meets demand at minimum cost or that maximizes profit (Taps B. S. 2005).

Inventory management is a vital part of production planning. In fact, if production

planning is simplified to its most basic, it really is a type of inventory

management. In order to manage production, one must manage inventory, be it of

raw materials, works-in-progress or finished pieces. Understanding what inventorymanagement and production planning are and how different inventory/production

tools are used is necessary for a manager in any production-oriented business

Production is managed by balancing workforce with inventory. In environments

where the workforce is taken to remain constant, inventory becomes a primary

consideration

Inventory management involves purchasing, receiving, holding, selling and

shipping products. The key to success in inventory management is achieving the

correct quantity of stock without being over stocked or running out. Generally the

inventories of finished products are distributed without production. Production

planning includes managing the inventory that is required to produce the finished

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.........product and planning the production. Like inventory management, success isachieved when production continues smoothly without stopping because a

production item is out of stock.

The task of all production planning is to typically balance conflictingobjectives such as those of minimum purchase or production cost, minimum

inventory investment and minimum storage and distribution costs (Kroeger, 2009)

Optimum production planning can only be achieved when the following objectives

are met i.e. :

- availability of materials for production and availability of products for

delivery to customers

- maintenance of the lowest possible levels of inventory

- optimally planned manufacturing activities, delivery schedules and

purchasing activities.

An example of a system of planning commonly used in manufacturing firms is the

Materials Requirements Planning (MRP) which uses both production planning and

inventory control to achieve optimal manufacturing processes. In incorporating

inventory control in production planning, questions such as whatitems are

required, how many are required and when are they required are easily answered.

In using the MRP system one of the most important data that must be imputed into

it is the inventory status record.

The relevance of inventory control in production planning processes cannot be

over emphasized e.g. in the pharmaceutical sector where raw materials are

expensive and also have very variable expiration times. The principal advantages

of incorporating inventory in production planning (especially in an industry like

the pharmaceutical sector where competition is very high), are stated below:

Better Service to Customers: Production planning and control, through

proper scheduling and expediting of work, helps in providing better

services to customers is terms of better quality of goods at reasonable prices

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.........as per promised delivery dates. Delivery in time and proper quality, bothhelp in winning the confidence of customers, improving relations with

customers and promoting profitable repeat orders.

Fewer Rush Orders : In an organization, where there is effective system

of production planning and control, production, operations move smoothly

as per original planning and matching with the promised delivery dates.Consequently, there will be fewer rush orders in the plant and less overtimethan, in the same industry, without adequate production planning and

control.

Better Control of Inventory: A sound system of production planning and

control helps in maintaining inventory at proper levels and, thereby,

minimizing investment in inventory. It requires lower inventory of work-in-

progress and less finished stock to give efficient service to customers(Liebermann et al, 2002). It also helps in exercising better control over

raw-material inventory, which contributes to more effective purchasing.

More Effective Use of Equipment: An efficient system of production planning and control makes for the most effective use of equipment. It

provides information to the management on regular basis pertaining to the

present position of all orders in process, equipment and personnelrequirements for next few weeks. The workers can be communicated well

in advance if any retrenchment, lay-offs, transfer, etc. is likely to come

about. Also, unnecessary purchases of equipment and materials can be

avoided. Thus, it is possible to ensure proper utilization of equipment and

other resources.

Reduced Idle Time: Production planning and control helps in reducing

idle time i.e. loss of time by workers waiting for materials and otherfacilities; because it ensures that materials and other facilities are available

to the workers in time as per the production schedule. Consequently, less

man-hours are lost, which has a positive impact on the cost of production.

Improved Plant Morale: An effective system of production planning and

control co-ordinates the activities of all the departments involved in theproduction activity. It ensures even flow of work and avoids rush orders. It

maintains healthy working conditions in the plant thus, there is improve

plant morale as a by-product.

Good public image: A proper system of production planning and control is

helpful in keeping systematized operations in an organization .Such an

organization is in a position to meet its orders in time to the satisfaction ofits customers. Customers satisfaction leads to increased sales, increased

profits, industrial harmony and, ultimately, good public image of the

enterprise.

Lower capital requirements: Under a sound system of production

planning and control, everything relating to production is planned well in

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.........advance of operations. Where, when and what is required in the form ofinput is known before the actual production process starts .Inputs are made

available as per schedule which ensures even flow of production without

any bottlenecks (Sethi &Sethi, 1990). Facilities are used more effectively

and inventory levels are kept as per schedule neither more nor less .Thus,

production planning and control helps, in minimizing capital investment inequipment and inventories.

b. What are the control methods you would like to

introduce to a medium-sized company regarding its

stocks? Justify your choice of one reactive method and

one proactive method of inventory control in Nigeria.

The optional (hybrid) inventory controlsystem is recommended as a

reactive method. A reactive inventory control method, as the term implies,

responds to a channel member's inventory needs by drawing the products

through the distribution channel. Replenishment raw materials are initiated

when available stock levels at the production or distribution facility fall

below a predetermined minimum or reorder point (Bowersox et al. 2002).

Because of the high cost of raw materials, very rampant competition and

high rate of degradation of raw materials of pharmaceutical firms, the

optional (hybrid) review system of inventory control is recommended for

firms i.e.

- hybrid review system = { s, S, R}

where s = minimum material level

S= maximum material levelR= review time.

This system is recommended because it is the most economical system because at

each review when the stock level is at minimum, then re-order to maximum levels

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.........so that advantages of bulk discounts can be achieved. Also when issues likeavailability of capital, perishability, storage capacity and storage costs are

considerations, then adopting the hybrid model may be the most economic of the

reactive inventory control systems.

ThePeriod Order Quantity modelof inventory control is recommended as

a proactive method of inventory control.POQ modifies the EconomicOrder Quantity model for discrete demand by assuming a single best

reorder interval (number of periods covered by a single lot). It eliminates

the issue of remnants after each period. The POQ model was designed to

avoid remnants and give lower costs with lumpy demand i.e. the aim is to

balance ordering and holding costs, thus incurring less in operational costs.

The ordering rule is to order enough to satisfy the next manufacturing

period. This technique results in order quantities based on a predetermined

number of periods for which replenishment orders supply goods. The POQ

is determined by calculating the number of weeks between orders that

would result from the use of an economic order quantity EOQ, and

rounding the number to the nearest integer.

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REFERENCESAbhar Kumar Production Planning and Control (2011)

Bowersox D. Gloss D. Bixby-Cooper M. (2002) Supply Chain LogisticsManagement. Boston McGraw Hill

IEOR 4000: Production Management" (Lecture 2), Columbia (2004)

Kroeger, D. R. "Determining Economic Production in a Continuous Process" IIE

Process Industries Webinar, IIE (2009)

Lieberman, M.B., S. Helper, and L. Demeester, "The Empirical Determinants of

Inventory Levels in High-Volume Manufacturing," Production and Operations

Management, Vol.8, No.1, 2002, pp.44-55

Sethi, A.K. and S.P. Sethi, "Flexibility in Manufacturing: A Survey," The

International Journal of Flexible Manufacturing Systems, Vol. 2, No. 4, 1990, pp.

289-328.

Stevenson, W. J. "Operations Management" PowerPoint slide 19, The McGraw-

Hill Companies (2005). [2]

Taps, B. S. (2005), "Configuration of Manufacturing Processes in Developing

Regions," Ph.D. thesis, Dept. of Production, Aalborg University, ISBN: 87-91200-29-6.

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