5.5 Production Planning HL Flashcards
The supply chain process
All the steps necessary to get the good or service from the supplier to the customer
The difference between JIT and just-in-case (JIC)
JIT:
- No or limited inventory is held
- Finished products are delivered to consumers as soon as they are produced
- Inputs from suppliers arrive when needed
JIC:
- Firms hold high levels of stock
Stock control charts
A visual aid to maintaining suitable levels of inventory over a period of time
Predict future stock levels in order to ensure:
- Do not run out of inventory
- Minimize inventory levels
Inventory
When a business holds stock of:
- Raw materials
- Finished goods
- Work-in-progress
Stock contol chart structure
Maximum Level
Level of stock that a business can hold, as limited by space
Re-order Level
Level of stock that triggers a new order
Re-order Quantity
Amount of stock that is ordered
Lead Time
Time between order and delivery of order
Buffer Stock (minimum stock)
Minimum stock level held in case of emergencies (e.g. delay in delivery)
Quantity Used
Capacity utilization rate (CUR)
(Current Output Level ÷ Maximum Output Level) × 100
E.g. a factory can produce a maximum of 5,000 smart phones per day. It is currently producing 3,000.
3,000 ÷ 5,000 = 60%
High CUR is useful if:
- High Fixed Costs
- Low Profit Margins
But:
- Machinery used all the time –> Possibility of breakdowns
- Reduced quality –> Overworked employees
Productivity rate
Ratio of output to input
Total Output ÷ Number of Workers
- E.g. a car manufacturer produces 1,000 cars per days with 500 workers
- 1,000 ÷ 500 = 2 cars per worker per day
Raising productivity
- Train workers
- Raise EE motivation
- New capital
- Better management
- New competition
Cost to buy (CTB)
Cost to make (CTM)
CTB = (Expected amount) × (costs from supplier)
⇒ Amount × Cost
CTM = (Fixed Costs) + (Cost to make product × Amount)
