Introduction A production system takes inputs and converts them into outputs. The conversion process is the predominant activity of a production system. Production management is the management of an organizations productive resources or its production system.
ADVANTAGES OF MASS PRODUCTION Cost of production per unit is low. Eliminates human error because of automation. Consistency in Quality. High Volume production. Production control is easy. Small work-in-progress inventory.
DISADVANTAGES OF MASS PRODUCTION Requires large investment Difficult and expensive to implement product design changes Products should have long product life cycle to get back the investment with profit.
Pharmaceutical Products Market size and Segment Complexity of design Factor Costs – Land, Labour and Capital All income groups simple Need labs
ADVANTAGES OF BATCH PRODUCTION Better utilization of production facilities. Batch size can be increased for larger orders increasing profit. Flexibility to produce any product mix. Product design changes can be incorporated easily. Computerized production control can be implemented.
DISADVANTAGES OF BATCH PRODUCTION Manual production control is difficult. Special attention to be given for maintenance of machines. High work-in-progress inventory.
Wal-mart American multinational corporation Department stores Largest public corporation in terms of revenue in the world. Has 8500 stores in 15 countries. Reason behind wal-mart success – inventory control.
INVENTORY Inventory is defined as the list of movable goods which help directly or indirectly in the production of goods for sale. It is an investment by the firm in the form of tools, gauges, supplies etc.
CLASSIFICATION OF INVENTORY Direct Inventory Indirect Inventory
DIRECT INVENTORIES Inventories which play a direct role in the manufacture of a product and become and integral part of the finished product are called direct inventories. Raw Materials Work-In-Progress Purchased Parts Finished Goods
INDIRECT INVENTORIES Indirect Inventories are those materials which help the raw materials to get converted into the finished products, but do not become an integral part of the finished product.
NEED FOR INVENTORY To ensure against delays in deliveries. To allow for possible increase in output Maintain smooth and efficient production flow. To keep better customer relations. To take advantage of quantity discounts. To utilize to advantage price fluctuations. To ensure against scarcity of demand in the market.
INVENTORY CONTROL Inventory Control means making the desired item of required quality and in required quantity, available to various departments when needed. Too much inventory creates a problem of their storage, huge investment and maintenance of stored items from deterioration, pilferage etc. Low Inventory levels leads to chances of stoppage of production, increase in overheads and disruption in production schedules and delivery promises. Need to find the optimum level.
DETERMINING INVENTORY LEVEL Order Quantity Lead Time Safety Stock Reorder Point