5.6 - Production Planning Flashcards
Define supply chain
A series of processes involved in production and distribution of goods to the end customer and consumer
Define supply chain management
Refers to dealing with the flow of goods in the supply chain in the most efficient way
What are the 2 types of supply chain
- local supply chain
- global supply chain
What is the scale of a local supply chain
Operates on a smaller level. The distance between supplier, producers and distributors is short. They cover a region
What is an example of a local supply chain
Farmer selling local produce
What are the advantages and disadvantages of a local supply chain
Ad - benefit from local community
Dis - whats available on local scale is limited compared to global scale
What is the scale of a global supply chain
Operates on a larger scale. The distance between suppliers, producers and distributors is long. These are transnational company’s
What is an example of a company which works on a global scale
Apple
What re the advantges and disadvantages of a global supply chain
Ad - costs are minimal as organisation are able to find location with the lowest wages and costs.
Dis - high risk, organisations have to rely on suppliers, manufactures and distributors from different countries with different legislations and cultures and with different levels of stability
Define stock/invatory
Raw materials, components, WIP and finished goods that are healed by a organisation
Define buffer stock
Inventory that is kept JIC for demand fluctuations or supply chain problems
Define JIC
Stock control system that holds buffer stock
Define JIT
Stock control system that aims for no buffer stock
What are the features of JIC
- hold buffer stock
- can use purchasing EOS (buy more get discount)
What are the positives and negatives of buffer stock
Dis - higher storage cost
Ad - demand fluctuations has minimal impact
What are the effects of JIC on working capital and BEQ
- negative effect on working capital because cash is tied up in stock
- higher BEQ becuase of higher costs
What are the features of JIT
- no buffer stock
- replys on developing close relationship with supplier
What are the advantages and disadvantages of JIT
- low storage costs
- demand fluctuation has significant impact
What are the effects of JIT on working capital and BEQ
- positive effects on working capital as cash is free for daily operations
- low BEQ becuase lower costs
What are the 7 aspects of a stock control chart
- Max stock level
- Re order level
3, min stock level - Buffer stock
- Re order quantity (min-max)
- Lead time (point where you need to place order for more)
- Delivery of stock
Define lead time
Period between ordering new stock and receiving it
Define buffer stock
Min amount of stock
Define re order level
The level of stock at which the new order is placed
Define re order quantity
The amount of stock ordered
What are the 6 different rates
- Capital utilisation rate
- Defect rate
- Productivity rate
- Labour productivity rate
- Capital productivity rate
- Operating leverage
Define capital utilisation
Am measure of existing output relative to productive capacity
What is the formula for capital utilisation
= actual output / productive capacity x 100
Define defect rate
Problem that hinder usability
What is the formula for defect rate
= number of defect units / total output x 100
Define productivity rate
Measure of efficiency of production
What is the formula for productivity rate
= total output/total input
General formula
Define labour productivity
Measure of workers efficacy
what is the formula for labour productivity
Total outputs / hours worked
Define capital productivity
Measure of efficiency of organisations capital, especially working capital
What is the formula for capital productivity
= current assets - current liabilities
Define operating leverage
Measure of effect of fixed costs on profit given different sales levels
What is the formula for operating leverage
- uses same data as break even
Fixed costs, variable costs, contribution - unit contribution = P - AVC
Total contribution = (P-AVC)xQ - operating leverage = total contribution/profit
After you have the operating leverage what do you have to do
Calculate change in profits
- change in profits = change in sales% x operating leverage
What are the positives and negatives of high operating leverage
Pos - more sales = more profits
Neg - high foxed costs, high risk is sales are low
What are the positives and negatives of low operating leverage
Pos - low fixed costs, low risk if sales are low
Neg - more sales don’t have much effect on profit
Define make or buy desition
A choice between purchasing from supplier and manufacturing on its own
What are the 2 factors of make and buy desision
Qualitative factors : suppliers per and reliability, product quality, ethics
Quantative factors : break even analysis, investment appraisal, budgets, costs, cost to buy and cost to make
Define cost to buy and give its formula
- cost of purchasing from supplier
- CTB = PXQ
Define cost to make and give its formula
- cost of purchasing from supplier
- CTB=(AVCxQ) + TFC
