EFFECTIVENESS OF INVENTORY MANAGEMENT CONTROL AND PRO DUCTION

PLANNING OF BAKERIES IN DAVAO CITY

Chapter 1

INTRODUCTION

Rationale of the Study

The importance of controlling inventories is to allow the firm to separate the process of

purchasing, manufacturing, and marketing of its primary products. Inventories are a component

of the firm’s working capital and as such represent a current account. Inventories are also

viewed as a source of near all cash. Inventory management best practice is key to deliver

efficiency and to effectively maintain a competitive position in the marketplace. The need to get

the right product to the right place within a strict deadline is critical to the success of a business,

due to heightened customer expectations. Inventory optimisation processes are becoming a

critical requirement due to increases in customer demand, expanding product portfolios and

lengthening supply chains. Effective inventory management is the best way for organisations to

free up capital, boost service levels and free up time for employees to focus on value-adding

tasks.

Production planning ensures materials, equipment and employees are all available to

meet production goals for a business. It also provides a detailed plan on how a bakery will reach

its production goals and how long it will take to achieve it, which can be useful for letting

customers how long it will take before they can expect their orders. Production planning helps to

maximize profits and make sure the needs of the customer are being met. Other advantages of

production planning include eliminating wasted time by improving process flow, reducing

inventory costs, optimizing equipment usage, using employees' time to the fullest advantage

and improving the delivery time of products and services.

 Production planning and control plays a major role in any organization that is into

production, using the case study of a bakery producing bread going through the planning phase

to the control phase. Product development and design entails the type of the bread shape and

size to produce either the normal family loaf size, sliced, round, ring shaped e.t.c , the types of

material to be used for the in the production of the bread, the bill of materials as well as the

drawing of the product. Forecasting looks into the future demand of the product, while

aggregate planning makes set of decision to match production with the level of demand

expected. Master scheduling ensures that the level of production is enough to meet the demand

for the product while material requirement planning ensures availability of materials such as

flour, butter, sugar etc at the right time.

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