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5.5: Production Planning (Capacity Utilisation (Productivity (Raise…
5.5: Production Planning
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Stock-Holding Costs
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- Risk of wastage & onsolescence
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Optimum Order Size
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economic order quantity (EOQ): the optimum or least-cost quantity of stock to re-order taking into account delivery costs and stock-holding costs
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Stock Control Charts
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the charts record stock levels, stock deliveries, buffer stocks and maximum stock levels over time
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Key Features
- Buffer stocks: the minimum stocks that should be held to ensure that production could still take place should a delay in delivery occur or production rates increas
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- Re-order quantity: re-order quantity: the number of units ordered each time
- Lead time: the normal time taken between ordering new stocks and their deliver
- Re-order stock level: the level of stocks that will trigger a new order to be sent to the supplier
Capacity Utilisation
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Impact Fixed Costs
when capacity utilisation is high :arrow_right: average fixed costs spread out over a large number of units
Excess Capacity
excess capacity: exists when the current levels of demand are less than the full capacity output of a business
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Productivity
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Raise Productivity
- Improve employee training
- Improve worker motivation
- Aquire technologically advanced equipment
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The Supply Chain Process
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Forms of Holding Stock
- Raw material & components
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