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Inventory management is a vital part of production planning. one must manage inventory. . 2011). Criticize this statement and show the relevance of stock control in any manufacturing or service firm’ Production planning may be defined as the technique of foreseeing every step in a long series of separate operations. if production planning is simplified to its most basic. . where the objective is to develop a plan that meets demand at minimum cost or that maximizes profit (Taps B. each step to be taken at the right time and in the right place and each operation to be performed in maximum efficiency (Abhar Kumar. 2005). inventory is excluded”. . inventory becomes a primary consideration Inventory management involves purchasing. be it of raw materials. In order to manage production. Plan & Cont. Prod. Production planning includes managing the inventory that is required to produce the finished 2 . . Understanding what inventory management and production planning are and how different inventory/production tools are used is necessary for a manager in any production-oriented business Production is managed by balancing workforce with inventory. S. a. selling and shipping products.. planning and control problems are inherently optimization problems. In environments where the workforce is taken to remain constant. ‘“Production planning is best accomplished when . Production planning entails the acquisition and allocation of limited resources to production activities so as to satisfy customer demand over a specified time horizon and this can be optimally achieved by including (not excluding) inventory in production planning by organizations. . . holding. In fact. Generally the inventories of finished products are distributed without production. As such. The key to success in inventory management is achieving the correct quantity of stock without being over stocked or running out. it really is a type of inventory management. receiving. works-in-progress or finished pieces. .

planning the production. achieved when production continues smoothly without stopping because a production item is out of stock.e. The relevance of inventory control in production planning processes cannot be over emphasized e. In using the MRP system one of the most important data that must be imputed into it is the inventory status record. . Like inventory management. through proper scheduling and expediting of work. The principal advantages of incorporating inventory in production planning (especially in an industry like the pharmaceutical sector where competition is very high). helps in providing better services to customers is terms of better quality of goods at reasonable prices 3 . In incorporating inventory control in production planning. delivery schedules and purchasing activities. . minimum inventory investment and minimum storage and distribution costs (Kroeger. : availability of materials for production and availability of products for delivery to customers maintenance of the lowest possible levels of inventory optimally planned manufacturing activities. . success is .. in the pharmaceutical sector where raw materials are expensive and also have very variable expiration times. questions such as what items are required. 2009) Optimum production planning can only be achieved when the following objectives are met i. . how many are required and when are they required are easily answered. . An example of a system of planning commonly used in manufacturing firms is the Materials Requirements Planning (MRP) which uses both production planning and inventory control to achieve optimal manufacturing processes. product and . The task of all production planning is to typically balance conflicting objectives such as those of minimum purchase or production cost.g. are stated below: • Better Service to Customers: Production planning and control. .

which has a positive impact on the cost of production. Customers satisfaction leads to increased sales. Thus. It maintains healthy working conditions in the plant thus. there will be fewer rush orders in the plant and less overtime than. without adequate production planning and control. . Consequently.e. Good public image: A proper system of production planning and control is helpful in keeping systematized operations in an organization . Fewer Rush Orders : In an organization. industrial harmony and. because it ensures that materials and other facilities are available to the workers in time as per the production schedule. good public image of the enterprise. loss of time by workers waiting for materials and other facilities. . Also. It provides information to the management on regular basis pertaining to the present position of all orders in process. . . which contributes to more effective purchasing.. both . as per promised delivery dates. where there is effective system of production planning and control. . equipment and personnel requirements for next few weeks. Lower capital requirements: Under a sound system of production planning and control. production. unnecessary purchases of equipment and materials can be avoided. It also helps in exercising better control over raw-material inventory. less man-hours are lost. Delivery in time and proper quality. it is possible to ensure proper utilization of equipment and other resources. It requires lower inventory of work-inprogress and less finished stock to give efficient service to customers (Liebermann et al. Consequently. . transfer. ultimately.Such an organization is in a position to meet its orders in time to the satisfaction of its customers. etc. in the same industry. minimizing investment in inventory. 2002). improving relations with customers and promoting profitable repeat orders. increased profits. Improved Plant Morale: An effective system of production planning and control co-ordinates the activities of all the departments involved in the production activity. • • • • • • • help in winning the confidence of customers. More Effective Use of Equipment: An efficient system of production planning and control makes for the most effective use of equipment. It ensures even flow of work and avoids rush orders. . The workers can be communicated well in advance if any retrenchment. Better Control of Inventory: A sound system of production planning and control helps in maintaining inventory at proper levels and. operations move smoothly as per original planning and matching with the promised delivery dates. lay-offs. thereby. everything relating to production is planned well in 4 . there is improve plant morale as a by-product. is likely to come about. Reduced Idle Time: Production planning and control helps in reducing idle time i.

. ‘What are the control methods you would like to introduce to a medium-sized company regarding its stocks? Justify your choice of one reactive method and one proactive method of inventory control in Nigeria. A reactive inventory control method. very rampant competition and high rate of degradation of raw materials of pharmaceutical firms. as the term implies. 2002). 1990). Facilities are used more effectively and inventory levels are kept as per schedule neither more nor less .e.Thus. b. when and what is required in the form of . responds to a channel member's inventory needs by drawing the products through the distribution channel. . hybrid review system = { s.Inputs are made available as per schedule which ensures even flow of production without any bottlenecks (Sethi &Sethi. . production planning and control helps. in minimizing capital investment in equipment and inventories. the optional (hybrid) review system of inventory control is recommended for firms i.. Because of the high cost of raw materials. . then re-order to maximum levels 5 . S. . R} where s = minimum material level S= maximum material level R= review time. Where. advance of operations. .’ • The optional (hybrid) inventory control system is recommended as a reactive method. This system is recommended because it is the most economical system because at each review when the stock level is at minimum. input is known before the actual production process starts . Replenishment raw materials are initiated when available stock levels at the production or distribution facility fall below a predetermined minimum or reorder point (Bowersox et al. .

Also when issues like .. The ordering rule is to order enough to satisfy the next manufacturing period. and rounding the number to the nearest integer. . The POQ model was designed to avoid remnants and give lower costs with lumpy demand i.e. storage capacity and storage costs are considerations. . . . The POQ is determined by calculating the number of weeks between orders that would result from the use of an economic order quantity EOQ. This technique results in order quantities based on a predetermined number of periods for which replenishment orders supply goods. the aim is to balance ordering and holding costs. then adopting the hybrid model may be the most economic of the reactive inventory control systems. • The Period Order Quantity model of inventory control is recommended as a proactive method of inventory control. . perishability. It eliminates the issue of remnants after each period. thus incurring less in operational costs. availability of capital. . 6 . POQ modifies the Economic Order Quantity model for discrete demand by assuming a single best reorder interval (number of periods covered by a single lot). so that advantages of bulk discounts can be achieved. .

Boston McGraw Hill IEOR 4000: Production Management" (Lecture 2). (2002) Supply Chain Logistics Management. 1990. Demeester. . "Determining Economic Production in a Continuous Process" IIE Process Industries Webinar. Helper.B. S. Bixby-Cooper M." The International Journal of Flexible Manufacturing Systems. . A. No. Sethi.44-55 Sethi. 7 . S. pp. . Vol. M. Aalborg University. 2002. D. and S. thesis.P. [2] Taps." Production and Operations Management. . B. of Production. Columbia (2004)” Kroeger. The McGrawHill Companies (2005). No. IIE (2009) Lieberman.8. . . 289-328. . pp. "The Empirical Determinants of Inventory Levels in High-Volume Manufacturing. REFERENCES Abhar Kumar “Production Planning and Control (2011) Bowersox D. Dept.. "Flexibility in Manufacturing: A Survey. J. "Configuration of Manufacturing Processes in Developing Regions. 2. (2005). 4." Ph.K. W. R. and L. ISBN: 87-9120029-6.D. Vol. "Operations Management" PowerPoint slide 19. Stevenson.1. . Gloss D..

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