5.6 Production Planning

Question 1

Production planning

Answer 1

process of organizing and optimizing resources, scheduling, and workflows to ensure efficient production that meets customer demand and minimizes costs

Question 2

Supply chain

Answer 2

the entire network of individuals, organizations, resources, and processes involved in producing and delivering a product or service from the initial supplier to the end customer

Question 3

Local supply chain

Answer 3

Sourcing, production, and distribution within a specific region or country, often allowing for faster delivery times and lower transportation costs

Question 4

Global supply chain

Answer 4

These span multiple countries and continents, connecting suppliers, manufacturers, and consumers worldwide, enabling access to a broader range of resources but often involving more complex logistics and higher risk of disruptions

Question 5

Stock control

Answer 5

the process of managing and regulating inventory levels to ensure a business has the right amount of stock available to meet demand while minimizing costs and avoiding overstocking or stockouts

Question 6

Important elements of stock control

Answer 6

1. initial order
2. usage pattern
3. max stock level
4. min stock level
5. reorder level
6. reorder quantity
7. lead time

Question 7

Buffer stock

Answer 7

the minimum amount of stock that should be held to ensure that production is still possible and customers’ orders can still be fulfilled

Question 8

Reorder level

Answer 8

the level at which stock has to be reordered

Question 9

Reorder quantity

Answer 9

the amount of stock that is reordered

Question 10

Lead time

Answer 10

the amount of time it takes between ordering new stock and receiving it

Question 11

Stock control - sets of costs

Answer 11

Cost of holding stock: cost rises
Cost of stock out: reduce as more stock is ordered
Total cost: by combining both sets we can see the minimum point of the total cost, called “economic order quantity”

Question 12

Factors taken into account for optimal stock levels

Answer 12

1. The market (size, competitors)
2. The final product (type)
3. The stock (size, space needed)
4. The infrastructure (reliable)
5. Finance (enough money)
6. Human resources (workforce planning)

Question 13

Capacity path analysis

Answer 13

Business tool aiming to identify the minimum duration of a project, when different stages may overlap

Question 14

Capacity utilization rate

Answer 14

measure of how much of a business’s total production capacity is being used, expressed as a percentage, indicating operational efficiency and resource use

Question 15

Defect rate

Answer 15

percentage of products or services produced that fail to meet quality standards, indicating the frequency of errors or flaws in a production process

Question 16

Productivity rate

Answer 16

measures the efficiency of production by calculating the amount of output produced per unit of input, such as labor hours, over a specific period

Question 17

Labour productivity

Answer 17

measures the amount of output produced per worker or per labor hour, indicating how efficiently labor resources are being used

Question 18

Capital productivity

Answer 18

evaluates the amount of output generated per unit of capital, such as machinery or equipment, reflecting the efficiency of capital investment

Question 19

Operating leverage

Answer 19

the degree to which a company’s net income is affected by fixed costs; a higher operating leverage means that a small change in sales can lead to a larger change in profits

Question 20

Cost to buy

Answer 20

the total expenses associated with purchasing a product or component from an external supplier, including the purchase price, shipping, and any additional handling costs

Question 21

Cost to make

Answer 21

all costs involved in manufacturing a product internally, such as materials, labor, and overhead, helping businesses decide whether to produce in-house or outsource