Chapter 6
Planning and Controlling Production:

The sales plan must be     translated into supporting activities:
    1. Production
    2. Finished goods, direct materials and WIP Inventories
    3. Materials Purchases


Production managers are usually responsible for the planning and control since they will be operating the production plan through out the year.

The production manager has knowledge of:
        1. The plant capacity
        2. Turn over rates                     
        3. Inventory
        4. Work force
        5. Costs associated withvchanging the line
        6. Etc.

    There must be a strong coordination between sales plans, production plans, and inventory policies. Sales people and production people want to keep high inventories (management hates inventory).

Sales people must also be involved in sales planning process. They need to know which products need to be moved, promoted, discounted, etc.

    There must be a coordinated effort between each product with      regards to capacity.

The production plan must
The plan must be outlined in a     finished goods format
1. Determine the total production plan by product based on sales
2. Inventory policies
3. Plant capacity level
4. Adequacy of plant facilities
5. Availability of DL and DM
6. Length of processing time
7. Economic runs (or lots)
8. Timing of production    

Time dimensions of Production planning:
        Long range plans must be considered:
    1. Plant expansion-Do we need to expand?
    2. Personnel - How many people will be needed?
        This increases the budget.
    3. Cash Flows
    4. New products

    Short Range Plans
    The annual production plan should be identified into
    manageable units (Lots of products/month or quarter.

        Review the example on page 215 - Production plan
       
    Production plan and inventory levels should ideally be stable.
    (This is impossible because of seasonal demands)
   
Inventories effect different functional areas:
1.    Sales- High inventories help meet demands
2. Production- Inventories of     RM., personnel
3. Purchasing- Quantity discounts, obsolesces, etc.   
4.    Finance- cash flows, quantity discounts, etc.


    The inventory policy should:
    -Create the optimal inventory investment
    -Maintain these optimal inventory levels
    -Inventory planning should be assigned to specific people    
    -Procedure for accounting for inventories
    -Status report


The finished goods inventory     policy should consider:
    -Sales plan requirements
    -Perishable items
    -Length of production period
    -Storage requirements
    -Distribution time
    -Holding Costs
    -Protection against DM shortages and price changes-Theft
    -Customer return policy
    -Obsolescence
    -Lack of Demand

        Review the two case examples on Page 221 and 222.

Setting production Policies
A stable production policy is     usually favorable:
1. Labor- Morale, less t/o,     better employees, less      training (Seasonal employees tend to be bad)
2. Economics in purchasing
3. Utilization of plant facilities-     Reduce idle time

   
Availability of Raw Materials
    --Prices
    --Perishable (Restaurants)
    --Economies of purchasing--Storage

Length of Production Period
The production period must be considered so that purchases
can be timed properly, delivery issues, etc.




Material Requirements Planning (MRP)
    - A technique to coordinate production of multi stage production with many parts, materials, components, and finished goods.

Just in time (JIT)
- Based on the inefficiency of carrying large inventories of RM.-Set up times have been reduced        (Robotics)
-More frequent purchases (More purchasing costs)
-There must be a good relationship with the supplier
-There are production sequence     implications - Stock out of RM. for the sequence
   
Homework - 6-5 (1 and 2)

KEY POINTS
CHAPTER 6

1. EXHIBIT 6.1
2. EXHIBIT 6.2
3. GENERAL     CONSIDERATIONS FOR
    THE PRODUCTION PLAN
4. FINISHED GOODS     INVENTORY LEVELS
5. ‘JUST IN TIME’



KEY POINTS
CHAPTER 6

1. EXHIBIT 6.1
2. EXHIBIT 6.2
3. GENERAL CONSIDERATIONS FOR
    THE PRODUCTION PLAN
4. FINISHED GOODS INVENTORY LEVELS
5. ‘JUST IN TIME’