Making the Production Plan

 

Making the production plan. 

The production plan in responsibility to sets the limit or levels of manufacturing activity for some time in future or in another word is require the planning of production and manufacturing modules in a company or industry. It integrates the capabilities and capacity of the factory with the market and financial plan to achieve the overall business goals of the company. Its sets the general levels of production and inventories over the planning horizon. The prime purpose is to establish production rates that will accomplish the objectives of the strategic business plan. Typically, the period of six to eight months and done in monthly and sometimes weekly period. 

 Include:

Ø Inventory level

Ø Backlogs (unfilled customer orders)

Ø Market demand

Ø Customer services

Ø Low-cost plant operation

Ø Labor relations 

Basic Strategies

In other word, production planning problem typically has the following characteristics:

- Time horizon of 12 months is used, with periodic updating perhaps every single month or quarter.

- Production demand consists of one or a few product families or common units.

- Demand is fluctuating or seasonal.

- Plant and equipment are fixed within the time horizon.

- The variety of management objectives are set, such as low inventories, good customer services, and         so on.

You can use this three basic strategies to developing a production plan.

i) Chase strategy

ii) Production leveling

iii) Subcontracting

What is Chase Strategy??

- It means producing the amounts demanded at any given time.

-Inventory level in this strategy is remain stable while production varies to meet demand.

- The advantages for this strategies is inventory can be kept to a minimum. 

- Goods are made when demand occur and are not stockpiled.

- And, the cost associated with carrying inventories are avoided.

What is Production leveling??

- It is actually continually producing an amount equal to average demand.

- Sometimes demand is less than the amount produced and an inventory builds up. At other times              demand is greater and inventory is used up.

- Advantages for production leveling strategy is results in a smooth level of operation. This advantages    can avoids the costs of changing production levels.

- Firms not need to have excess capacity to  meet capacity demand.

- They not need to hire and train workers and lay them off in slack periods.

- What they can do, they can build a stable workforce.

- The disadvantages is the inventory will build up in low-demand periods. The inventory will cost             money to carry.

What is Subcontracting??

- It means producing at the level of minimum demand and meet any additional demand.

- It also can mean buying the extra amounts demanded or turning away extra demand.

- The latter can be done by increasing prices when demand is high or by extending lead times.

- Major advantage for this strategies is cost. Cost associated with excess capacity are avoided, and            because production is leveled.

- The main disadvantages is the cost of purchasing may be greater than if the item were made in the           plant.

Hybrid Strategy.

The three strategies discussed so far are pure strategies. Each has its own set of cost: equipment, hiring/layoff, overtime, inventory and subcontracting. But in reality, there are many possible hybrid or combined strategies a company may use. Each will have its own set of cost characteristics.