5.5 Production planning (HL)

Question 1

The supply chain?

Answer 1

1. In short:
   Flow of raw materials through sectors (primary, secondary etc) to the finished products purchased by customers.
2. Wider description includes information flaw as well
   and in general it is
3. The system of connected organizations, information, resources and operations that allow a business to fulfill its business activities. It includes suppliers, distributors, retailers and customers.

Question 2

Just in case (JIC)?

Answer 2

A traditional method (but of stock control which means holding a reserve of raw materials and finished products in case of a sudden increase in demand.

Question 3

Just in time (JIT)?

Answer 3

A Japanese/modern model of stock control which involves getting supplies only when necessary and producing only when an order is made.

Question 4

The capacity utilization rate?

Answer 4

Actual output/ productive capacity.

Question 5

The productivity rate?

Answer 5

total output/total input

Question 6

JIT vs JIC?

Answer 6

JIT reduces costs of storage and wastage, but JIC reduces costs by buying in bulk.

JIT reduces the chance of obsolete or ruined stock, whereas JIC enable to meet additional demand

JIT creates a closer relationship with suppliers who also run JIT which has also its ads and disads, whereas JIC is not so dependent on specific suppliers and can demand lower prices.
JIT frees more cash for other projects.

Question 7

Cost to buy (CTB) vs cost to make (CTM) ?

Answer 7

CTB = P × Q
CTM = FC+ (VC × Q)
Each time we calculate and decide accordingly to outsource or not

Question 8

Optimal stock levels?

Answer 8

Differs considerably because of many factors, such as:
● Is the market growing?
● Is the product cheap, fast-moving, high-volume product or the opposite? Does its production depend on many suppliers?
● Is the stock perishable? big?
● Is the infrastructure reliable?
● Cash-flaw requirements?

Question 9

Economic order quantity?

Answer 9

A calculation companies perform that represents their ideal order size, allowing them to meet demand without overspending

Question 10

Curves of economic order quantity (EOQ)

Answer 10

● Cost of holding stock – if we do not have any stock, there is no cost, but then The cost rises as we store more and more units.
● Cost of stock out – if we have a small amount of stock, then the cost of having a sudden surge in demand could be substantial, but this will go down as more stock is ordered and bought in.
● Total cost – by combining the two sets of costs, we can see the minimum point of the total cost. This is called the “economic order quantity” (EOQ); it is the amount that should be ordered for a given time period. The EOQ is one of the oldest calculations in the area of operations management and stock control.

Question 11

Components of stock control chart?

Answer 11

● The initial order: the First amount of stock delivered, for example at the start of the year.
● The usage pattern/rate: how much stock is used over a given time period. Is usage pattern regular or with some predictable highs and lows (e.g Christmas)? The stock’s depletion over time is shown by a line with a negative slope.
● The maximum stock level
● The minimum stock level: kept back as a reserve, also called the buffer stock.
● The reorder level: a bit higher than the minimum stock level, a trigger or signal.
● The reorder quantity
● The lead time: time it takes between ordering new stock and receiving it.

Question 12

Labour productivity rate?

Answer 12

Total output (units) /number of employees or number of labour hours

Question 13

Capital productivity rate?

Answer 13

output (units) /fixed costs

Question 14

Factors influencing Economic Order Quantity?

Answer 14

√ [2 x D x S / H]
where D=Demand
S=average order cost
H=holding cost per unit per year

Question 15

Lead time on the chart?

Answer 15

From the point of reorder level to the maximum stock level

Question 16

Hardware and software of a supply chain?

Answer 16

Hardware - logistics (such as trucks and warehouses)
Software - information and communication (such as spreadsheets and databases)

Question 17

The best way to present a supply chain?

Answer 17

Flaw charts, representing the positions and movement of hardware and software

Question 18

How can be the output measured for productivity rate?

Answer 18

Productivity is simply the ratio of output to input. Output may be measured in terms of sales value or quantity. You can express the result in % or just in units (like 1000 units per 1 labour hour).

Question 19

How can be the input measured for productivity rate?

Answer 19

Productivity is simply the ratio of output to input.

The input consist of a number of production factors and elements:
Material,
labour and
capital costs.

Productivity can be determined based on the total Input or separately for each of these factors and may be expressed in terms of physical units (like number of units per labour hour) or in terms of money (value of units per labour hour cost).

Question 20

How can you express the productivity rate?

Answer 20

You can express the result in % or just in units (like 1000 units per 1 labour hour).

In Your BM guide, You have in your list of formulas only a version with % calculations, although in real life, this is not always necessarily so.

Question 21

Productivity vs Efficiency vs effectiveness:

Answer 21

Productivity - doing more work during the same time frame; or more output with the same input;

Efficiency - doing things well enough or the same output with less input;

Effectiveness - doing the right things.

Question 22

What type of inventory management should be preferred where there is uncertainties about demand?

Answer 22

JIC