5.7 Production Planning Outline
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5.7 Production Planning Revision
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5.7 Production Planning
1. Explain the difference between just-in-case and just-in-time. Just-in-case
The traditional stock management system that recognized the need to maintain large amounts of stock in case there any emergencies or supply and demand fluctuations
Advantage o Allows a business to meet sudden changes in demand o There is increased flexibility because having sufficient stocks enables the firms to speed up production if necessary o Purchasing economies of scales o Reduces downtime caused by a stock-out Just-in-time
Materials and components are scheduled to arrive precisely when they are needed in the production process
Advantage o Reduces the costs of holding stock o Since there is minimal money tied up in stock; working capital can be better used elsewhere o Improves cash flow and the working capital cycle as there is no need to hold large volumes of stock o Reduce break-even point o More flexible and responsive to customer needs o Improve motivation in the workplace by promoting employee participation and team working o Its implementation can reduce waste o Help strengthen a firm's relationship with its suppliers
Limitation o Huge reliance on external suppliers o Minimal stock levels mean that there is little room for mistakes o Prove inflexible in trying to cope with sudden increase in demand o Fewer opportunities to exploit purchasing economies of scales o Administration costs will be higher o Stock must be of good quality in order to prevent bottlenecks in the production process, no time for quality control o Relies on sophisticated computer technologies to ensure that the correct stocks are ordered and delivered at the right time and place
2. Recognize the need for optimum stock levels; prepare and analyse appropriate graphs.
JIC uses a purchasing department to take charge of stock control Roles of the purchasing department
Purchase good quality raw materials, components and other supplies at competitive prices
Ensure that the right quantity and quality of products are available for production
Arrange for timely delivery of stocks to ensure that they are available for production
Develop good professional relationships with suppliers Stock control charts
Maximum stock refers to the upper limit of inventories that a business wishes to hold at any point in time Reorder level - desired level of stock when a new order must be place o Since there is a time lag between a firm placing an inventory order and it being delivered, the reorder level helps to prevent production problems arising from a lack of stock Minimum stock level- the least amount of inventories that a business wishes to hold o Buffer stock - the minimum stock level held by a business in case there are any unexpected occurrences
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