5.5 Production planning Flashcards
What is the definition of “supply chain”
“The sequence of processes involved in the production and distribution of a product”
What is the equation of “capacity utilization”
(actual level of output / Maximum possible output) x 100
–> this is IN the FORMULA BOOKLET!
What is the “capacity-utilization” equation used for?
The percentage of the maximum capacity level that is actually achieved in a given period.
(actual level of output / Maximum possible output) x 100
What are some reasons why a business may not want to run at maximum capacity?
- seasonal variation in demand
- inefficiency in the production process
- lack of motivation from workers
- regulations
- capital (machinery breaking down faster at max capacity)
- JIT - stock not arriving
- Might want to have spare so you can meet unexpected demand
- Possible trade union action
How can capacity be increased?
- Increase working hours (pay overtime)
- Invest in new machinery
- Train the workers
- More motivated workers
- Increase resources
- Relocation
How can productivity (of a supply-chain) be increased?
- Training
- Kaizen
- Motivation
- Leadership
- Production method
- Job rotation/ enlargement
- Promotion opportunities
- Delayering (shorter chain of command, less messages/ tasks that go missing)
What are the two equations used in “make or buy” decisions?
NOT IN THE FORMULA BOOKLET!
Cost to buy (CTB) = expected volume x unit cost from an external supplier = V x UCS
Cost to make (CTM) = fixed costs + (the unit direct costs x volume) = FC + (UDC x V)
If CTM exceeds CTB, then it is financially better to outsource.
What should a business do if Cost To Make exceeds Cost To Buy?
If CTM exceeds CTB, then it is financially better to outsource.
