Production And Inventory Control

Three of the major objectives in most manufacturing firms intent upon earning profit are:

• Maximum customer service

• Minimum inventory investment

• Efficient (low-cost) plant operation

The major problem in meeting these objectives is that they are basically in conflict. Maximum customer service can be provided if inventories are raised to very high levels and the plant is kept flexible by altering production levels and varying production schedules to meet the customer's changing demands. The second and third objectives thus suffer in meeting the first. Efficient plant operation can be maintained if production levels are seldom changed, no overtime is incurred and machines are run for long periods once they are set up on a particular product; however, this results in large inventories and poor customer service while meeting the objective of maximum plant efficiency. Inventory can be kept low if customers are made to wait and if the plant is forced to react rapidly to changes in customer requirements and interruptions in production. In the business world few companies can afford to work toward one of these objectives to the exclusion of the other, since all are about equally important for sustained success.

In a large manufacturing company today, the responsibility for customer service rests with one organizational group, the sales department, which seldom recognizes much responsibility for either plant efficiency or for the levels of inventory. On the other hand, manufacturing people usually feel little responsibility for inventories and perhaps little for customer service. In fact, many plant managers and supervisors have probably never thought of their activities from a customer's point of view. Frequently, the performance of these people is measured not on their contributions to overall company objectives but only on their abilities to meet their assigned, limited goals. Very few first-line supervisors, for example, are rated on their abilities to control lead times and keep items in stock, but they know that their careers depend greatly on how they get out production, work well with the union and meet their budgeted expense goals. By the same token, very few sales persons are judged by their contributions to profit; they are rated solely on their abilities to sell more products.

Reconciling these conflicting objectives in a modern company, where responsibilities have been sharply divided and where managers have been encouraged to sub optimize by their performance measures, becomes a challenging problem; attempting to solve this problem is the primary function of production and inventory planning and control. Working through an information system, planning, measuring actual performance against the plan and then presenting information to line managers who must take corrective action, the function of production and inventory control is to reconcile these objectives to meet the overall profit goals of the company. There is no other group to do this job.

MEConsult staff have a wide hands-on experience in designing and conducting various training programs in the field of production and inventory control. Participants in such programs have come from diverse engineering and management backgrounds and from within both the corporate and industrial sectors. A major project at hand relates to a Material Handling Study for a large multinational concern.