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Production planning - Coggle Diagram

- - - - incomplete units of output
    - - cmpleted production that are ready to be sold to consumers
    - - natural resources for use in the production process
  - - - The minimum stock level that a firm wishes to hold at any point of time
      - Used in case there is an unexpected increase in orders from customers, late deliveries from suppliers or damaged stocks
    - - The level of inventory when a firm is required to reorder its stock.
    - - The most amount of stock that a firm wants to hold at any point in time, given its storage facilities and capacity
    - - THe timeframe from when a firm places an order for stock and it receiving delivery of the stock
      - shorter lead time
        
        the lower the buffer stock leel needs to be
        
        Lower buffer stock levels can be held as the producer knows new stock orders will be delivered soon
      - long lead time
        
        the earlier the reorder needs to be
    - - The rate at which stocks are used in the production process
      - formula
        
        Usage rate per time period=stock used/time period
      - Usage rate increases in times of economic prosperity and peak periods, whereas the usage rate drops during recession and off-peak seasons
  - - - the practice of a business ordering more stock than it would usually do or holding more stock than is necessary or efficient.
      - Often happens in anticipation to moments of high demand during economically prodperous times
    - - When a business has no more stock for production or sale
  - - - significant storage costs
        
        risk of spoilage and shrinkage
      - opportunity cost
        
        price reduction
        
        unsold stock
    - - risk of stockout
        
        production stoppages
        
        capital and labour underutilised
      - unexpected increases in demand can't e met
        
        loss of poential sales
- - - - causes of inefficiency
        
        late deliveries
        
        miscomunication
  - - - when there is a short distance between producers suppliers and consumers
      - adv
        
        more efficient
        
        more organised
        
        less transportation
        
        positive impact on enviroment and local economy
      - dis
        
        higher costs
    - - whent he network between producers, suppliers and consumers is done at an international/large scale level
      - adv
        
        improved efficienct
        
        access to specialised expertise
        
        increased market reach
        
        lower costs
      - dis
        
        harder to control
        
        enviromental damage
        
        more transportations costs
- - - - capacity utilization =actual output per period/full capacity output per period) x 100
      - firm capacity utilization 0%
        
        not producing any output
      - firm capacity utilization 100%
        
        operating at full capacity
  - - - improving capacity utilization may involve upgrading IT systems and techologies
      - overall quality will suffer
      - Machinery and capital equipment are likely to become wear out and depreciate at a fast pace.
        
        results in higher costs of maintenance and replacement or repairs
      - workers can becomed overworked
        
        workers become stressed and demotivated
    - - higher capacity utilization can help to reduce a firm's unit costs, making it more competitive
      - Lower production costs leads to higher profit for the business
      - higher capacity utilization required to achieve economies of scale
      - the firm is more productively efficient
  - - - defect rate=number of defective items/total output x100
      - Defect rate=number of defecive items/number of items tested x100
    - - customers will complain of substandard products
      - unsafe products may harm customers and could get into legal issues
      - Avoid loss of revenue
        
        faulty roducts can rarely be sold
      - defective products often are returned and require refunds
- - - - firm's liquidity positoion improves
        
        improves cash flow position
      - helps improve organisation competitivenes
      - eliminates needs for buffer stocks
        
        minimises storage costs
      - more spaec not used for inventory
    - - efficiency depends on reliabillity of suppliers
      - inflexible if there is a sudden rise in demand
      - relies heavely on technology
      - harder to achieve economies of scale
  - - - production continues even if suppliers are delayed
      - economies of scale can be achieved when bulk buying
      - allows for flexibility to adapt to changes in demand
      - maintains cusstomer satisfaction as demand is constantly met
    - - stocks are subject to damage or theft
      - Stockpiling (holding large volumes of stock) can harm the firm’s cash flow and working capital, especially if the stocks are not highly liquid.
      - additional costs associated with JIC which can include insurance and maintinance
- - - - the output per worker using an output to input ratio for a given time period, such as sales revenue per worker or output per labour hour.
      - calculation
        
        labour productivity/total labour input
    - - Capital productivity expresses the total output of a business using an output to input ratio for a given time period, such as output per machine hour
      - Calculation
        
        capital productivity (output per machine hour)= (total output/total capital input) x 100
    - - a measure to determine how well things are done in terms of a ration betweenvolume of output and the volume of inputs during a given time period
      - calculation
        
        productivity rate=total output/total input
    - - improvements in technology improves worker productivity by allowing flexible working and higher quality output
      - Business owners' or managers' attitude towards risk determines the steps taken to improve productivity
      - Rivalry is an incentive for managers and workers to increase productivity
  - - - a firm's earnings from sales revenue before interest and taxes are deducted
      - calculation
        
        operating income=gross profit - operating expenses
    - - Operating leverage--the financial ratio that measures how a frm's operating income is affected by its fixed costs, variable costs and sales
      - allows businesses to determine if they have too much fixed costs or variable costs
      - the ratio indicates the degree to which a business can increase operating income by increasing sales revenue.
        
        A business with more fixed costs
        
        face more risks
        
        A fall in sales will mean that those expenses will still hae to be paid
        
        increase in sales
        
        the business stands to gain a lot more opeating profit
        
        business with more variable costs
        
        faces less risk
        
        if sales revenues fall, the firm's costts of sales are directly linked with output
        
        increase in sales
        
        The business stands to gain less operating profit compared to businesses with more fixed
        costs
    - - shows a business how well they are using its fixed cost items to generate profits
        
        The more profit that a business can squeeze out of its fixed assets (or non-current assets), the higher its degree of operating leverage will be.
      - Calculation
        
        degree of operating leveage=quantity(price per unit-variable costs)/quantity(price per unit- variable costs)- fixed costs