After a little break for a week (necessitated due to the China Tour),
let us resume our Logistics study. Now, we have to move on to the next factor
of the Logistics: Production Planning.
Production Planning is the administrative process that ensures that
all the resources, all the materials required for production are available in
adequate quantity in right time. While getting all the materials for
production, Production Planning foresees problems and attends to them so that
for want of necessary materials, production does not stop. Among other things,
production planning aims at avoiding wastage in any form; waste of time when materials not available on
time, waste of money when excess materials are available; waste of resources when what is needed is not
produced but what is not immediately needed is produced; so on. Careful planning totally avoids wastage which
results in increase in profit for the company.
Let us look at the major functions of Production Planning.
Effective utilization of Resources
Resources are precious and they should never be wasted. Over production is considered one of the most
disadvantageous practices. That is, when you require just 100 products, say 100
shirts to answer the sale need, producing 120 shirts is overproduction. These 20 shirts are not for immediate sale;
and the resources they have utilized are actually lying idle. The money spent
on these 20 shirts are ill-spent because it brings no profit and it cuts into
your capital. The overproduced commodities need space for storage and needs
people to shift them to a different space which means wages for them. All these cut into your finance; moreover,
just because you overproduced them and have incurred more expenditure due to
them, you cannot sell those shirts for an extra cost. All such related problems pose a serious
problem to the business if we waste resources by over production. Supposing a family of five members needs
about 25 idlies or chappathies for breakfast, cooking to have just 25 idlies or
chappathies is intelligent way of dealing with the breakfast issue. If you
prepare, on the other hand, 40 dishes, definitely it is a waste of resources.
Imagine, if thousand families do like this, the wastage will be massive. Of course, fridges are there to store the
extra food. But in wholesale businesses,
this simple easy way of storing is not there and not possible at all. Money is
locked up in extra production and this unnecessary investment does not fetch
any advantage to the business. It is the basic principle that says that
production is sale-linked.
Effective utilization of resources ultimately ends up in low-cost
which as a consequence entails higher returns for the business, for the
We will look into some more facts in relation to production planning.