What is production planning and inventory control? Both are strategic and important within a company, for the achievement of its objectives. So, we will explain everything related to these areas. As always in simple language.
Production planning concept
So that you can understand it better, we are going to break down the words. Planning is used to determine the objectives or to reach the desired situations, and what we need to achieve it. And production refers to work that provides added value, this can be in the form of products or services. We must not confuse productivity with production.
If we unite both concepts, we can say that production planning refers to work plans to establish in advance the objectives or scenarios that the company wants to achieve and the means to achieve it.
The benefits of production planning
The fact that a company has good planning brings great advantages. Y Ensures that procedures meet the 3 E’s. Effectiveness, effectiveness and efficiency. Now how is it done? We will detail it shortly:
-
Efficiency is related to the means or resources used and the result obtained. In a company that lacks planning and does not control what it produces, it will be difficult to meet its objectives and it will not have control over the resources it uses. Most likely this will generate waste or expenses in every way.
-
Effectiveness defines what you have to do to reach the goal. If you do not plan, you will not be able to know if the current processes are leading you to achieve the desired scenario.
-
Effectiveness is the result of a company applying efficiency and effectiveness. In other words, he achieves the outlined results by doing what he thought was necessary with the planned resources.
inventory control
We call inventory control when a company manages the products it keeps in the warehouse. Its objective, to gather information on the supply and demand in which the market moves. The company will determine the net inventory and absolute inventory. Based on the collected data, sound decisions can be made. Inventory includes raw materials, intermediate goods, and finished goods. Having said this and as in any process, it should be noted that an inventory control brings benefits, advantages and disadvantages for the company or company.
Methodologies for inventory control
-
FIFO method. Also known as FIFO. This procedure determines the first products that enter the warehouse and ensures that they are the first to leave, either for use in production or for sale. This mechanism encourages the merchandise to run the risk of being devalued or expired in the warehouse. To achieve this, it uses a Kardex (registry that includes a detailed description of the product, including the date of entry). You can compare the PEPS method with the UEPS and verify which of these two models is better suited to your inventory control needs.
-
The EOQ method. It is a simple and at the same time effective inventory control. Its main objective is to reduce costs, based on a simple principle. Locate the point where the cost of demand for an item and the cost of holding it in inventory are equal.
Importance of production and inventory
Something that we must not forget is to incorporate planning over a period of time. This will help us gain alignment and control between capacity and prevent demand for a product. Short-term planning contributes to having control of daily operations. In the medium term, it allows us to plan based on demand. And in the long term, it helps us focus on aspects related to the money to invest and the facilities.
Bearing in mind this wealth of information, the important thing is that we put it into practice in our business, so that we can perceive the benefits. Let’s not even forget to include technology. This will help us optimize our resources. If you have put it into practice, tell us about your experience.
