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5.7 Production Planning Outline

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5.7 Production Planning Revision

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5.7 Production Planning

Key words

Notes

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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