Unit -2

Production and
Management

P.K.Jawahar Kumar
Assistant professor
MBA Department
Production
management
Economics and Economy

Economics is a subject concerned with the

optimization of available resources, in an efficient
manner.

On the other hand, Economy denotes the

economic condition, status and activities of a
geographical area or country
Work Study
• Work study is the investigation, by means
of a consistent system of the work done in
an organization in order to attain the best
utilization of resources i.e., Materials,
Machines, Men and Money. All the
technologies and management systems
are related with productivity.
Objectives of work study
(i) To analyse the work in order to achieve work simplification and thereby
improving productivity of the system.

(ii) To have optimum utilization of resources i.e., 4 Ms.

(iii) To evaluate the work content through work measurement.

(iv) To set time standards for various jobs.

 • Motion study refers to the
study of movements like
lifting, putting objects,
sitting and changing
positions, etc., which
are undertaken while
doing a typical job.
Unnecessary movements
are sought to be
eliminated so that it takes
less time to complete the
job efficiently.
• It examines the exact
types of motion required to
perform a work task
Motion study
Time study
Time study may be defined as “the art of observing and
recording the time required to do each detailed element
of an industrial activity/operation.”
• (i) Mental time includes time taken by the operator
for thinking over some alternative operations.
• (ii) Manual time consists of three types of operations
i.e. related with handling of materials, handling of
tools and handling of machines.
• (iii) Machining time includes time taken by the
machines in performing the requisite operations. Thus
time study standardizes the time taken by average
worker to perform these operations.
 Principles of Time study

To furnish a basis of To determining the

To set labour standard To determine
To fix a fair output rate comparison for standard costs and
for satisfactory equipment and labour
for workers determining operating preparing relevant
performance. requirements.
effectiveness. budgets

To determine the To balance the work of

To set the completion To determine the cycle
To determine basic number of machines operators in
schedule for individual time for completion of
times/normal times. an operator can production or
operations or jobs. a job.
handle. assembly lines.
 Objectives of time study

•The sound comparison of

•The main aim is to estimate the •On the basis of the target times,
alternative methods can be made •It leads to proper balancing of
target time for each job the incentive plans can be
possible by comparing their basic work distribution.
scientifically. formulated.
times.

•Time study helps in analyzing

the activities for performing a job
•It aims at standardize the •It aims at standardize the •It aims at determining men and
with a view to eliminate or
efficient method of performing conditions for efficient machines ratio for effective and
reduce unnecessary or repetitive
operations. performance. efficient utilization of both.
operations so that efforts of
human can be minimized.
 Advantages of time study

Estimation of Estimation of
Balancing the work of
equipment or production cost per unit Estimating manpower Taking make or buy
operations constituting
machinery in order to determine/ requirements. decisions.
the group.
requirements. fix selling price.

Estimating times Making alternative Developing efficient

Estimating delivery required for a specified Estimation of labor investment decision in plant layout and
dates. inventory level costs. purchasing machines/ material handling
generation. equipment. arrangement.
Limitations

Sometimes, it is difficult to
Standards cannot be
define the quality standards Where piece rate wage
established by this
precisely, in that case setting system exist, it is impossible
technique on jobs which are
of incentive plans may leads to maintain standard time.
not well defined.
to quality deterioration.

Time study is helpful for

‘doing’ jobs only not for
‘thinking’ jobs.
Elements of production control

CONTROL OF CONTROL OF CONTROL OF CONTROL OF CONTROL OF CONTROL OF

PLANNING MATERIALS TOOLING MANUFACTURING ACTIVITIES QUANTITY
CAPACITY

CONTROL OF CONTROL OF
MATERIAL INFORMATION
HANDLING
Steps Estimating Scheduling
involved in
production
control
Dispatching Expediting / follow
up
Estimating

• It covers deciding or predicting

the quantity that is required
to be produced and the cost
involved in producing the
same
Scheduling

• Involvement of different jobs

leads to fixation of the
priorities by allocating the
start and the end time to each
of the job . So for all the
process in the production , a
start date and the end date is
set
Dispatching
• Routing and scheduling are
theoretical concept only and
merely constitute written
documents. Till now actual
production has not taken place .
While under the concept of
dispatching the paperwork is
transformed into the actual work
as per scheme laid down in
routing and scheduling
Expediting/follow up
• This stage ensure that work is
carried out as per the timing
schedules and the delivery
targets will be duly met
• This function follows after the
function of dispatching
• It is closely related to the
process of scheduling to give
timely feedback and the targets
and schedules are constantly
reviewed
Flow chart for
production
planning and
control
THANK YOU
WORK SYSTEM STUDY
Jawahar kumar
MBA Department
 WORK STUDY
WORK STUDY:
Work study is one of the most important management techniques
which is employed to improve the activities in the production.
• The main objective of work study
is to assist the management in the optimum use of the human and
material resources.
It has three aspects:
➢ More effective use of plant and equipment.
➢ More effective use of human effort.
➢ Evaluation of human work.
Work study is simply the study of work. It is the analysis of work into
smaller parts followed by rearrangement of these parts to give the
same effectiveness at lesser cost.
It examines both the method and duration of the work involved in a
process.
 It helps in motivating the The work study helps in It helps in enhancing the
employee by better and research and development operation method
efficient physical methods for the company

OBJECTIVES

It helps in simplifying and It helps in improving the It helps in increasing the

improving the product organization , product efficiency of human
process and also reduces planning and control resources at all levels
variety by setting standards
 It helps in continuous Efficiency of productivity It reduces the cost of
movement of increased manufacturing

ADVANTAGES OF
production

WORK S TUDY

It increases the goodwill It helps in establishing It provide better quality

among the customer by relationship between of the service to the
ontime and correct employee and employer customer
delivery
 The worker works in same and repetitive
manner which makes them exhausted

In the work study the employer gets to know

unnecessary information about the workers
D I S A D VA N T A G E S which may use against the workers
O F WO R K
S T U DY
Increase in unnecessary control of
management on the workers

It gives more importance to quantity of the

product rather than quality
R E L AT I O N B E T W E E N
ME TH O D S TU DY
A N D WO R K
MEASUREMENT

• Work Measurement: Work

measurement is concerned
with the determination of the
amount of time required for a
qualified worker to carry out a
specified job at a defined level
of performance.

• Method Study: “Method

study is the systematic
recording and critical
examination of existing ways of
doing work, as a means of
developing and applying easier
and more effective methods
and reducing costs”.
 METHOD STUDY
• “Method study is the systematic
recording and critical examination
of existing ways of doing work, as
a means of developing and
applying easier and more effective
methods and reducing costs”.
 OBJECTI VES OF METHOD S TUDY
 The improvement of processes and procedures.
 The improvement of factory, shop and work place layout and of the
design of plant and equipment.
 Economy in human effort and reduction of unnecessary fatigue.
 Improvement in the use of materials, machines and manpower.
 To find the best way of doing a job.
 To standardize the best method.
 Reduction of waste and scrap, improvement in quality.
 Greater job satisfaction, higher standards of safety and health.
FLOW CHART FOR PROCEDURE \ STEPS
IN METHOD S TUDY DESIGN
 SELECT
The job or process or the operation need to be selected
 SELECTION OF JOB:
While selecting the job the following factors should be considered.
Economical,Technical,Human reactions
Economical factors
 Cost of study
 Time loss due to investigation
 Cost associated with the implementation of changes for new model
Technical factors
 All the technical details about the job should be available
SELECT/IDENTIFY
 Every machine tool will have its own capacity
Human factors
 Method study will be successful only with the cooperation of all people conser
 Workers may resist method due to
fear of unemployment
fear of increased work load
effective communication with workers and supervisors
fear of loss of prestige
Types of chart
Operation process chart
Flow process chart
(men, material & equipment)
Two handed process chart
Multiple activity chart
Flow chart
String diagram
Purpose
All the operations and
inspections are recorded
All the activities of men, material
and equipment
Workers both hands are
recorded independently
Activities of group of workers
doing a single job or A single
worker operating the no of
machines are recorded
Path of flow of materials is stop
is recorded
The movements of workers are
recorded
RECORD
• The success of method study
depends on the accuracy of
recording
• The record facts should be
clear and complete
• Various record techniques are
used in motion study
• They are in the forms of
charts, diagrams and models
• Symbols are used to record
the activities
The followings are used in
recordings
SOME EXAMPLE SYMBOLS USED IN RECORDING
 EXAMINE
• Analyze all the recorded facts ,
question on the purpose, place,
sequence, person and the way of
completing job, process or operation
• Question techniques are used to
examine
• It includes 5W and 1H
 DEVELOP
• After the examination it is necessary to
convert the findings into the
development of new methods
• The development method should be
• Practical and feasible
• Safe and effective
• Economical
• Acceptable to design, production
control, quality and sales department
 E VALUAT E/ M EASURE

• In this step the work content helps in

determining the accurate work
 DEFINE
• In this new method is design for
particular job operation or process
 INS TALL
• Installation of developed method needs support
of everyone concerned
• Installation consists of the following

• Selling of proposal

Communication, approval of persons involved in

installation and use
• Preparation

Purchase of required machine and equipment, time

for installation, planning, arranging, trading and
rehearsing
• Commencement of new method

New method state working smoothly and

satisfactory
 MAINTAIN
• After the installation of new method,it
is to be maintained properly
• Periodic review is required to maintain
properly
• If any deviations available during the
working conditions, it is need to take
corrective actions
OVERALL
FLOW
CHART
 Work
measurement
techniques
 Work
measurement
The time taken to finish the work of
a particular job is known as work
measurement
Work measurement

 Work measurement (also called as time

study) is the method of establishing the
time required by the qualified worker to
carry out a specified job at a defined
level of performance.
• Work measurement is concerned with
investigating, reducing and subsequently
eliminating ineffective time.
Work measurement-
objectives

• Determine the time required to do a job.

• Cost reduction and cost control.
• Identifying sub-standard workers.
• Training of employees
Work
Time study/ stop watch study
measurement
techniques
Synthesis

Predetermined motion time system (PMTS)

Analytical estimating

Work sampling
Time study/stop watch
study

 Time study is a technique for

determining the time necessary to carry
out a given activity.
 Accurate measurement of time is
necessary from limited number of
observations.
• Time study with the help of a stop watch is the
most commonly used work measurement method.
This technique was developed by Frederick
Winslow Taylor (1856-1915).
• Time study is best suited for short-cycle repetitive
jobs. Most of the production jobs can be easily
timed by a time-study.
• Time study procedure consists of the following
steps:
1. Select the job to be timed.
2. Standardize the method of doing the job.
3. Select the worker to be studied.
4. Record the necessary details of the job and
conditions of work.
5. Divide the job into elements. Here, ’element’ is a
part of the job.
6. Find out the time taken to do every single element.
7. Keep provisions for relaxation, etc.
8. Fix the standard time for doing the job.
•
Advantages of Easy to calculate
time study
Helps in scheduling

Serve as benchmarks

Checking operators complain

Evaluation of machine capacities

Getting recommendations

Helps in improvement
Disadvantages of time
study

•
•

•
•
•
 •

Synthesis

•
Advantages of
synthesis
It provides reliable information
about standard time for doing
different jobs. This is because it is
based on many past time studies.

It is economical because there is

no need to conduct new time
studies.
Predetermined motion time
system (PMTS)

•
Advantages It is a very accurate method. It avoids subjective
judgement or bias of rater.

It is an effective and economical method for

repetitive jobs of short duration.

There is no interference in the normal work routine,

and so it does not face any resistance from the
employees.

It helps to improve the work methods because it

gives a detailed analysis of the motions.

It is more economical and fast compared to normal

time studies.
Analytical estimation

•
Advantages

It helps in planning and scheduling the production activities.

It provides a basis for fixing labor rate for non-repetitive jobs.

It is economical because it uses standard data for fixing the standard

time of each job.
Disadvantages

•
Work sampling

•
Steps to follow

Deciding what activities Observe the worker at

are defined as ’working’.
Non-working are those
activities which are not
defined as working.
P= no of observations
selected intervals and Calculate the portion of
during which working
record (write down) time (P), a worker is
occurred / total no of
whether he is working or working.
observations
not.

A portion of time (P) a worker is working equals to

’Number of observations during which working occurred’
divided by ’Total Number of observations.’
 Advantages

01 02 03 04 05
Much more Less time consuming Certain work that is The analyst which is Use of stop watch is
economical than time not practical is doing work sampling not necessary
study measured by time does not require
study which can be much knowledge and
measured by this experience
 Disadvantages

1 2 3
Not used for small cycle Workers speed of Workers may temporarily
jobs performing is not start working efficiently to
generally measured impress the observer
Thank you
Forecasting and its methods
-Jawahar kumar
Assistant professor
MBA department
Forecasting

• Forecasting is estimating the magnitude of

uncertain future events and provide different results
with different assumptions.
Qualitative method

• These methods are based on emotions,

intuitions, judgments, personal experiences, and
opinions. This means that there is no math
involved in qualitative forecasting
methods. Delphi Method, Market Survey,
Executive Opinion, SalesForce Composite are
part of this type of forecasting
Delphi Method

• The agreement of a group of experts in consensus is

required to conclude in the Delphi method. This
method involves a discussion between experts on a
given problem or situation. An argument or
brainstorming is done to complete that everyone
involved in the debate agrees to.
Market Survey

• In a market survey, interviews and surveys of

customers are made to understand the ask of the
customer and tap the trend well in advance to deliver
the right product or service according to the changing
needs of the customer.
 Executive
Opinion
• As the name suggests, the executives or managers
are involved in such forecasting. This method is very
similar to the Delphi method; however, the only
difference here is that the executives may or may not
be experts of the matter in question, albeit they have
the experience to understand the problem or situation
and formulate a forecasting method that would bring
out the best possible result.
Sales Force
Composite

• The information and intuition of the salesperson

determine the needs of the customer and estimate
the sales in the particular region or area assigned
to the salesperson. This information is vital in
forecasting the needs of the customer, which can
be used to make necessary changes in the
business to meet the needs of the customer and
identify the sales volumes beforehand.
Quantitative method

• These methods depend wholly on

mathematical or quantitative models. The
outcome of this method relies entirely on
mathematical calculations. Time Series and
Associative Models are a part of this type of
forecasting.
Time Series
Models

• Time series models look at historical data and

identify patterns in the past data to arrive at a point
in the future based on these historical values. Since
the historical data has a pattern, it becomes evident
that the data in the future should also have a
pattern, and this method looks at cracking the
pattern in the future so that there is very little
deviance from the actual calculations and the
outcomes in the real world. Below is the example of
a time series model
• Example:Straight line method,Moving average
method
Straight Line Method;
• One of the simplest methods in forecasting is the Straight Line
Method; This uses historical data and trends to predict future
revenue.
• ABC Ltd. looks to achieve a YoY growth of 6% for the next three
years. In a straight-line method, the first step is to find the growth
rate of sales used in our calculation. For 2019, the growth rate is
6%, as per historical data.
 Moving average
method
• Moving averages are averages that
move with the underlying data,
thereby providing accurate information
relevant to the current scenario. In the
below example, the Sales generated
for the year 2019 for ABC Ltd are
represented. The moving averages for
Bi-Monthly, Quarterly, and Half-yearly
are calculated below. The excel shows
the formulae used to arrive at the
moving averages.
Associative
Models
• Associative models look at the variable that is being
forecasted as being related to other variables in the
system, which means each variable is associated
with the other variable in the system. The forecast
projections are made based on these associations.
• Example: interest rate may be used to forecast the
demand for home refinancing
Inventory
and types

JAWAHAR KUMAR P K
ASSISTANT PROFESSOR
MBA DEPARTMENT
Inventory

Inventory is the accounting of

items, component parts and raw
materials that a company either
uses in production or sells.
 Transaction motive-every firms need to maintain a
certain level of inventories to meet its daily
requirements related to the production and sales. In
order to meet these requirements ,a firm maintains an
inventory of raw materials and finished goods

Need for Precautionary motive-A company may face a raw

material shortage due to any natural causes or strikes
inventory etc, due to face that causes a firm has to maintain
some inventory for smooth business

Speculative motive- a company may maintain

inventory to grab various opportunities for making
profits such as sudden increase in prices. Such motives
are speculative in nature and may help the firm to
earn more profit
 Raw materials

Work in progress

Elements of Consumable
inventory
Finished goods

Stores and spares

Fcators affecting inventory
management

Financial Suppliers Product type Management External

factors factors
Financial factors
• Factors such as the cost of borrowing money to stock enough inventory can
greatly influence inventory management. In this case, your finances may
fluctuate according to the economy, and it is wise to keep an eye on changing
interest rates to help plan your spending.
• The tax costs associated with stocking inventory is another factor that can
influence inventory management. This is especially salient when preparing for
the end of year tax returns.
• Other financial factors include the expenses associated with warehouse
operations and transportation costs changes in these factors may
require you to alter your inventory management processes accordingly.
Fluctuations in the cost of fuel, for example, may require you to rethink your
transportation methods to reduce costs. You may choose to purchase your
own trucks or use outside contractors for transportation, which again will
change the way you manage inventory.
Suppliers
• Suppliers can have a huge influence on
inventory control. Successful businesses require
reliable suppliers in order to plan spending and
arrange production. An unreliable or
unpredictable supplier can have huge knock-on
effects for inventory control. It can be a good
idea to ensure you have a reliable back up
supplier to prevent product shortages or delays
in the manufacturing process.
lead time

• Lead time is the time it takes from the moment an item is ordered to the
moment it arrives. Lead time will vary widely depending on the product type
and the various manufacturing processes involved, and therefore changes in
these factors can require changes to inventory management.
• Outsourcing manufacturing processes to other countries due to lower
production costs may result in longer waiting times. Producing the same
goods locally may cost more but take less time, and therefore you may need to
adjust your stock levels accordingly.
Product type
• Inventory management must take into
consideration the different types of products in
stock. For example, some products may be
perishable and therefore have a shorter shelf life
than others. In this case inventory must be
managed to ensure that these items are rotated
in line with expiration dates.
Management

• Ultimately, responsibility for managing your business’ inventory sits with you
and any co-owners. While you may have multiple employees acting as
managers to oversee inventory processes, they typically will not have the
same stake in the business as you do.
External factors

• There are multiple external factors that may affect

inventory control. For example, economic downturns
may occur and this is something that you will generally
have very little control over. Assessing the economy is a
must in order to guard against stock outs or a buildup of
excess inventory.
• Other factors may include the real estate markets or the
extent of local competition. These factors are also
largely out of your control, so it is a good idea to assess
the external climate regularly in order to stay prepared.
Raw
materials
• It comprises of all direct
materials used in product
manufacturing, so it is
important to hold a raw
material inventory to avoid
any delay in production
Work in
progress
• It refers to holding of partly
finished goods and
materials between
manufacturing stages
consumable

• These are the products

bought by the customers
more frequently like office
products such as
pen,paper,files,inkcatridges
etc which are consumable
Finished
goods
• These are the final products
which are available for the
customers
Stores and
spares

• These are the

components
formed with the
main product, for
selling.
• They can be nuts
,bolts, clamps,
screws etc
Types of inventory

Seasonal Decoupling Cycle

inventory inventory inventory

Pipeline Safety Anticipation

inventory inventory inventory
Direct
inventories
• This includes the items which are
directly used for production or
manufacture and are a part of
goods/service produced or provided
• It is classified into
1. Production Inventories
2. Work in progress Inventories
3. Finished goods Inventories
4. MROInventories
5. Miscellaneous Inventories
 • These inventories contains items such
Production as raw materials, components,
Inventories subassemblies used to produce the
final products
• Example : Coffee seeds
 • The components which are in progress
,neither raw materials nor finished food
but semi finished goods lying in
machine is called work in progress.
• The work in progress inventory(control)
Work in helps in
progress 1. Maintain uniform production
2. Flexibility in planning each operation
Inventories
3. Reduce material handling cost
4. Checks the wastage
Example:- inventory for bike engine
Finished goods
Inventories

• This includes final products

ready to dispatch to the
customers/distributors
• This inventory helps in
1. It is economical to have
inventory that constantly
placing orders
2. Shortage of store may be
unacceptable
3. Products can be displayed
for the customers
Ex : bike inventory
MROInventories

• M-maintenance
• R- repair
• O-Operating items
• These items such as spare
parts and consumable
stores that do not go into
final products but are
consumable during the
production process
• Example: bike battery for
replacement
Miscellaneous
Inventories

• All other items such as

scrap, unsaleable
products, stationary and
other items in office ,
factory and sales
department
• Example : scarp materials
In direct
inventories
• This includes the items which are
indirectly used for production or
manufacture and are not as a part of
goods/service produced or provided
Example: fuel, lubricants, tools etc
• It is classified into
1. Transportation Inventories
2. Buffer Inventories
3. Decoupling Inventories
4. Seasonal Inventories
5. Lot size Inventories
6. Anticipation Inventories
Transportatio
n/pipeline
inventories
• Pipeline inventory, also known
as pipeline stock is used to refer
to those goods that have left
firms warehouse but are still in
Transportation chain as they are
yet to be bought by ultimate
consumers.
• Example: coal is in the stage of
transportation, from coal fields to
thermal power plant
Safety/buffer
inventories
• Safety stock inventory, sometimes
called buffer stock, is the level of
extra stock that is maintained to
mitigate risk of run-out for raw
materials or finished goods due to
uncertainties in supply or demand
• Example :
Consider a manufacturer and
wholesaler of jams and jellies. They
keep extra levels of raw materials like
fruit and sugar on hand to account for
disruptions from their supplier. This is
their safety stock
 Decoupling
inventories
• Decoupling inventory involves separating
inventory within a manufacturing
process so that the inventory associated
with one stage of a manufacturing
process does not slow down other parts
of the process. In simple terms,
decoupling inventory is a safety stock of
sorts.
Seasonal
inventories
• Seasonal inventory is stock
which is in high demand during
particular times of the year, such
as during Christmas or
Halloween. These periods of
time often coincide with the
different seasons, and managers
need to be proactive in preparing
for the waxing and waning of
demand during these key times
• Example: AC stock in terms of
summer supply
Lot-size
inventories
• These are held to take
advantages of discounts which
are usually available for
purchase of large quantities
• Example : A simple example of
lot size is : when we buy a
pack of six chocolates, it
refers to buying a single lot
of chocolate. Description: In
the stock market, lot size refers
to the number of shares you
buy in one transaction
Anticipation
inventories
• Anticipation inventory or
speculation inventory refers
to extra finished products or
raw materials a business
purchases to meet an
anticipated jump in demand.
• Simply it is for expected future
demand
• Example : store for planned
shut down
Functions of
inventory
• (i) Inventories Serve as Cushions:
• Against shocks due to demand/supply
fluctuations, it separates different
manufacturing operations from one another
and makes them independent so that each
operation can be performed economically.
• For example, an organization has to deal
with several consumers and vendors and
due to their unpredictable behaviour there
are always fluctuations in demand or supply
of goods which disturbs the schedule of the
enterprise.
• Inventories absorb these fluctuations and
help in maintaining undisturbed production
i.e., we decouple the manufacturing
activities from the consumer and vendor
successfully by cushions of stocks.
(ii) Inventory Provides Production Economies:
• Purchase in desired quantities nullifies the effects of change in prices or
supply. Stocks bring economy so purchase of various inputs due to
discounts on bulk purchase.
(iii) Maintenance of Smooth and Efficient Production Flow:
• Maintains smooth and efficient production flow thus keeps a process
continually operating.
(iv) Creation of Motivational Effect in Decision Making:
• Creates motivational effect in decision and policy making e.g. a person may
be tempted to purchase more if inventories are displayed in bulk.
Thank you
BALANCING
DEMAND
AND SUPPLY
INTRODUCTION
∙ One of the largest (and oldest) challenges facing any
retailer is the difficulty of effectively balancing supply
with demand. Though it may be hard to find, there is
a balance that satisfies the need to both sell as
much as possible without incurring the costs of
excess stock. In this guide to supply and demand
balancing, you’ll find practical insights on how to
manage supply and demand, as well as demand
planning tactics to maximize customer satisfaction
and company profitability.
UNDERSTANDING DEMAND AND SUPPLY

Understanding supply and demand can help

companies predict the reaction of the consumer to a
Supply and demand are key factors that impact
price change. For example, when the price increases
businesses. Having a basic knowledge of economic
the consumer demand for a product is expected to
theory will allow a retailer to successfully recognize
decrease. Furthermore, using the concept of supply
changes to consumption. The definitions of supply
and demand aids business people in determining how
and demand are quite straightforward. Supply is the
to price their goods. The ideal price of a product is
amount of a good or service that a supplier is willing
the market equilibrium price. This occurs when the
or able to produce at a given price. Demand is the
quantity suppliers produce of a product is equal to
amount of a good or service that a consumer is
the quantity consumers demand of that product. It is
willing or able to purchase at a given price.
critical to balance supply and demand in order to
make the most of your product.
BALANCING
DEMAND AND
SUPPLY
∙ In the least amount of words possible, supply and
demand balancing is the process of making
products available at the right place and time for
the customer. This balance is achieved when the
sales rate (Time/Unit of Sale) for a given product
equals the throughput (Time/ Unit production and
delivery) of your supply.

∙ Though supply and demand balancing can be

expressed in a simple equation (Time/Unit of Sale =
Time/ Unit production and delivery), it’s harder to
achieve than it might seem.
LAWS OF DEMAND AND SUPPLY
 First Law of Supply and Demand – If demand increases but supply remains
unchanged, then it leads to higher price and quantity.

 Second Law of Supply and Demand – If demand decreases and supply remains
unchanged, then it leads to lower price and quantity.

 Third Law of Supply and Demand – If supply increases and demand remains
unchanged, then it leads to lower price and higher quantity.

 Fourth Law of Supply and Demand – If supply decreases and demand remains
unchanged, then it leads to higher price and lower quantity.