Designing a Production Plan Unit 4

goals To be complete the components of an effective production plan for their chosen venture Specifically: describe the process involved in producing a new product or delivering a new service; determine the production process that is most appropriate for their chosen venture; determine the goods (e.g., raw materials, supplies, equipment) and potential suppliers that are required for their chosen venture; identify the principles of inventory management and explain the importance of inventory management for an entrepreneur.

Production Process What goods to produce How to produce them The costs of producing them Optimizing the mix of resource inputs (materials, labour, equipment)

Production plan - Manufacturing Description of the steps in the production process Physical plant requirements, (size, cost, floor layout) Machinery and equipment and their cost (new or used, leased or purchased) Personnel required (full-time, part-time, skill level, training required) Raw materials used Suppliers of materials

Production plan – retail/Service Description of the method of delivery of your retail outlet or service Purchasing plans of materials inventory Inventory system, (seasonal demand, method of inventory control - explained later in this activity ) Space requirements (floor space, layout design, expansion capability) Personnel required (full-time, part-time, skill level, training required) Equipment required (cost, new or used, leased or purchased)

INVENTORY CONTROL AND MANAGEMENT "Inventory Management is the direction and control of activities with the purpose of getting the right inventory in the right place at the right time in the right quantity." Whether your business ventures will be distributing products that they manufacture themselves or redistributing products made by others, controlling the flow of inventory from producing to consumer is extremely important. There is more to inventory control than simply buying new products. You have to know: what to buy when to buy it how much to buy You also need to track your inventory, whether manually or by computer, and use that knowledge to hone your purchasing process.

PLANNING INVENTORY LEVELS Your business's basic stock should provide a reasonable assortment of products and should be big enough to cover the normal sales demands of your business. If you're a start-up, you won't have actual sales and stocking figures from previous years to guide you. You must project your first year's sales based on your business plan . When calculating basic stock, you must also factor in lead time. LEAD time is the time it takes to receive the ordered material from when it is ordered.

INVENTORY CONTROL If you don't have enough inventory when you need it, it could mean lost sales lost customers to your competition costly, time-consuming back orders increased operating costs if you run out of raw materials or parts that are crucial to your production process employees getting paid to sit around because there's no work for them to do; when the inventory does come in, they'll be paid for working overtime to make up for lost production time buying emergency inventory at high prices.

COMMON INVENTORY CONTROL METHODS Manual Depending on the size of the company, one of the most basic methods is to manually fill out inventory sheets, fill out order sheets, and do physical counts of your stock. If you have ever worked in retail, doing a physical count usually means working late or on Sunday to count your products when the customers are not around.

COMMON INVENTORY CONTROL METHODS Automated With the growth of computers and technology, most businesses have adopted some form of automated system. One of the most common forms still used today is a barcode. The barcode can be scanned in the process of transportation, (to know where the products are), and finally when the product is sold to a customer. By scanning the product at the point of sale, the sale is recorded and inventory levels are automatically updated. Orders can be automatically sent to the company's suppliers and new product shipped by the suppliers to the company. The main limitation of a barcode is that a business cannot add information to the code. The numbers only stand for what they were meant to stand for.

COMMON INVENTORY CONTROL METHODS Radio Frequency Identification ( RFID ) is an automatic identification method, relying on storing and remotely retrieving data using devices called RFID tags or transponders. An RFID tag is an extremely small and flat object that can be attached to or incorporated into a product, animal, or person, for the purpose of identification using radio waves. Chip-based RFID tags contain silicon chips and antennae. Unlike barcodes, the chip can be programmed with various types of information and can transmit the information without having to be physically scanned. This can allow for various applications and ease of product shipment, especially across borders where the information can be automatically scanned and the information transmitted. It is then possible for any company to know where its products are.

RFID Examples The following are some applications of RFID tags: The Canadian Cattle Identification Agency began using RFID tags as a replacement for barcode tags. The tags are required to identify a bovine's herd of origin and this is used for tracing when a packing plant condemns a carcass. High-frequency RFID tags are used in library book or bookstore tracking, pallet tracking, building access control, airline baggage tracking, and apparel and pharmaceutical item tracking.

RFID Examples Some companies with security issues have had employees voluntarily have RFID tags inserted under the skin on their hands. This has allowed employees to wave their hand over a scanner and open a door to allow access to a secure part of the company instead of carrying around a security pass that could be stolen or copied. High-frequency tags are widely used in identification badges, replacing earlier magnetic stripe cards. These badges need only be held within a certain distance of the reader to authenticate the holder. The American Express Blue credit card now includes a high-frequency RFID tag.

FOR YOUR VENTURE PLAN The Operating Strategy (Include all costs in the financial section) Detailed description of the production process or service delivery Source raw materials/products, names of suppliers, method of delivery of materials to company Inventory control method Layout design of retail store or point of sale vehicle. (i.e. chip stand)