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It is the planning for the quantities of each product group to be produced each period. It utilizes the
resource allocation of activities of employees, materials and production capacity, in order to serve
different customers.
In level Strategy, production department establish average demand level and set production rate to that
level.
• Forecasts
• Inventory levels
• Capacity constraints
• Objectives –
• Bottleneck operations
• Critical material
• What to order
• When to order
• Planning factors such as lead times, order quantities, and safety stock
• Used to simplify
• Forecasting
• Planning
• Master Scheduling
• Work-in-process (WIP)
• Finished goods
• Distribution inventories
• Maintenance, repair, and operational supplies (MRO) – item that do not become part of the
product
INVENTORY FUNCTIONS
• Quality problems
• Equipment problems
• Transportation inventory
• Value of items usually not worth the extra control to keep inventory accurate
Cost advantage: Especially for components that are non-vital to the organization’s operations.
Quality: Suppliers have better technology, process, skilled labor, and the advantage of economy
of scale.
No competent supplier
Lower cost
SUPPLY BASE: Suppliers that a firm uses to acquire its materials, services, supplies, and equipment.
Lower cost
Transportation economies
Create competition
Information
Requires additional skills and knowledge to deal with international suppliers, logistics,
communication, political environment, and other issues.
OUTSOURCING: Buying materials and components from suppliers instead of making them in-house. The
trend has moved toward outsourcing.
“Collaboration process whereby supply chain trading partners can jointly plan key supply chain activities
from production and delivery of raw materials to production and delivery of final products to end
customers”
OBJECTIVE OF CPFR- optimize supply chain through improved demand forecasts, with the right product
delivered at right time to the right location, with reduced inventories, avoidance of stock-outs, &
improved customer service.
VALUE OF CPFR- broad and open exchange of forecasting information to improve forecasting accuracy
when both the buyer and seller collaborate through joint knowledge of base sales, promotions, store
openings or closings, & new product introductions