Concept Paper on Inventory Control

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Quality, production times, distribution of items and final prices will brand you as a successful company, using some key management components can get you to that level. This concept paper is going to focus on production planning, developing a master production schedule, capacity planning, inventory management and total quality management. Each of the topics is crucial in materials management and whether the company is going to flourish or fall. The examples used are going to help bring an understanding on how each phase is important to each other.

No manufacturing or service industry can be productive without a sound production plan. Effective planning is fundamental in any business; it’s a complex process that covers a wide variety of activities that ensure that materials, equipment and human resources are available to complete the work. Think of production planning as a road map; it helps you know where you are going, and how long it will take to get to your final destination. To plan effectively you will need to estimate potential sales with some reliability. Most businesses do not have firm sales or service figures; however, they can forecast sales based on historical information and market trends. Initially the plan needs to address specific key elements well in advance of production on order to ensure an uninterrupted flow of work as it unfolds. Material ordering, equipment procurement, bottlenecks and human resources acquisitions and training are some of these elements.

Production planning needs to be done on several time scales; Long-range is plans for a five year term, Medium-range are made for two months to a year, and Short-range is no more than two months. Some basic strategies used to supplement these time scales are chase strategy, production leveling, subcontracting, and the hybrid strategy. Chase strategy is producing the amounts demanded at any given time. Inventory levels remain stable while production varies to meet demand. Production leveling is continually producing an amount equal to the average demand. Subcontracting is always producing at the level of minimum demand and meeting any additional demand through outsourcing. These three strategies are considered pure strategies; each has its own set of costs. The hybrid strategy is basically a combination of the three mixed to produce a unique production plan.

The production plan provides a foundation to schedule the actual work and plan the details of day-to-day activities. As sales orders come in, you will need to address them individually based on their priority. The importance of the sales order will determine the work flow and when it should be scheduled. Typically, a plan addresses materials, equipment, human resources, training, capacity and the routing or methods to complete the work in a standard time to meet customer demands.

In order to summarize production planning you have to look at three items. First is the work force level, this is the number of workers required for production. Second is production rate, the number of units produced per time period. The final item is the inventory level; this is the remainder of unused units carried from the last time period. The most productive plan should be done at minimum cost but at the same time try to maximize customer service and profits. The problem faced for each time period is to find a production level, inventory level, and number of workers that will meet the required forecast.

After production planning, the next step is to prepare a master production schedule (MPS). A Master production schedule acts as a very distinct and important linkage between the planning processes. With the help of this schedule, one can know the requirements for the individual end items by date and quantity. In companies, MPS are generally produced in order to know the number of each product that is to be made over some planning horizon. This schedule forms a unique part of the...
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