Production Planning and Inventory ControlProduction planning and inventory control - Although understanding the behavior of a process, looking for bottlenecks, reducing work in process, developing optimal programming, forming the most effective methods of forecasting and polishing inventory control methods are the main concerns of production planning, Its main focus is on programming and controlling inventory levels. There are significant costs associated with the maintenance, or not, of the inventory.
Planning, or scheduling of production, is a term assigned to such planning in all aspects of the activities of the work force for the delivery of the product. It is observed almost exclusively in manufacturing environments, however, many of the techniques used in production planning can be and are used by many service-oriented companies.
It is based mainly on the efficient use of resources. Although it is sometimes referred to as the planning of operations, and indeed employs many of the same techniques, the main distinguishing feature is that production planning focuses on actual production, while operations planning observes the operation as a whole.
While a large part of production is planned, inventory control is often seen in a minor subset of supply chain management, however, it is a crucial part of the production system. Apart from determining the minimum level of actions that a company can maintain as security against a balloon in customer demand, inventory control observes the costs associated with maintaining inventory. It may comprise the inventory of a finished product or the materials used in the manufacture of said products. Inventory control is affected by changes in customer demand, investment costs, order costs and order costs again.
Maintaining an optimal quantity of raw materials in action is a crucial component of any production-oriented business. Before a product can be manufactured, the raw material must be available and in good quality. The optimum level of the raw material is normally determined by the EOQ (EOQ, or Economic Order Quantity), or economic order quantity. This is calculated by taking the square root of the quantity by twice the cost of the order multiplied by the demand divided by the cost of storage.
EOQ = square root ((2 x order cost x demand) / storage cost)
Another useful tool for determining an optimal level of raw materials is the ABC analysis, also called Pareto analysis or concept 80-20. This concept divides the products that are manufactured into three categories: A is the high value category and includes those products that require the majority of materials; B is a category of average value and has products that have an average cost of production and an average demand; and C is a category that consists of those products that require the least amount of resources.
The concept 80-20 derives from the fact that typically 20% of manufactured products represent 80% of the resources consumed. This is known as Pareto analysis in honor of Vilfredo Pareto, an Italian economist who found that 80% of the income obtained in most countries belong to 20% of the population. Joseph M. Juran suggested and applied the principle of change management, attributing the concept of Pareto.
The final inventory has often been managed through global planning, a method that deals with production, the workforce itself and inventory management. Aggregate planning basically links facility planning to programming decisions, and does so in a quantitative way, which means that it produces numbers to support an operations plan. Aggregated plans help to balance supply and demand and minimize costs by applying higher-level forecasts to the lower level, scheduling the production plant. The plans generally "pursue" the demand, adjusting their staff accordingly, or foresee "level", which means that the work is relatively constant with fluctuations in the demand that the inventories and orders are met. A "hybrid" plan, which combines the pursuit planning and the planning level can also be used. The suitability of the aggregate plan chosen will be very individual to the company.