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Production planning 5.5 - Coggle Diagram
Production planning 5.5
Supply chain
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Supply items need to be managed to reduce costs, minimize transportation, illuminate bottlenecks and maximize customer value. The more optimised the supply chain the lower the costs
Just in time (JIT) Stock control method aiming to avoid holding stock by ordering supplies to arrive right when they are needed in production
- Need good relations with suppliers + transport links
- No economies of scale (purchasing + delivery)
Just in case (JIC): Stock management strategy used when businesses hold high levels of stock as there is a risk of 'stock out'
- Failure to hold enough stock (if stock runs out) could lead to production being halted = Customer demand may not be met. JIC acts as a buffer
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Stock control charts
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Buffer stock: the min stock held to endure that production can continue if there is a delay in deliveries or production rate increases. The more uncertainty about delivery times, the higher the level.
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Cost to Buy (CTB) = Volume x unit costs of suppliers (V x UCS)
- CTB < CTM, financially better to outsource. Qualitative factors should also be considered eg worker morale, pressure, quality
Cost to Make (CTM) = (volume x unit direct costs) + fixed costs ((V x UDC) + FC)
- CTB > CTM business will financially benefit from CTM.
Productivity rate
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Employ fewer but better skilled workers, motivate workers, train to raise skills levels, fewer but more technologically advanced machinery = increase in output = decrease in unit costs.