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A formal production plan should be able to answer how much raw materials are needed to procure, when to make the product, and how much of the product to make. Developing a successful production plan will allow a company to make adjustments when demand differs from the forecasted demand. There are three different production approaches that a company can take: “Made to Stock”, “Made to Order”, and “Assemble to Order”. The “Made to Stock” approach deals with most consumer products that are made for inventory in anticipation of a certain number of orders. The “Made to Order” approach deals with more expensive products or high-customization products that are specifically made to fulfill orders. Finally, the “Assemble to Order” approach is taken when the final product is assembled from stock for a specific customer. When systems are un-integrated, it is common for production problems to arise, especially in the areas of accounting, communication, and inventory. Thus, it is crucial for a company to have a formal production in order to be successful.
A Production plan answers the following questions EXCEPT:
A. When to make the product
B. How much raw material to obtain
C. The forecasted customer demand
D. The quantity of the product to make
In order to succeed, company should be very careful about the relationship among three diferent approaches. It would be a lot better if the company has done a great job to differentiate all the products, so the results will be in favor of the company.
Fitter Snacker suffers from some major communication problems. For example, marketing personnel rarely exchange information with production personnel. Production is not included in any marketing meetings, is not consulted during the planning of promotions, and is not notified of planned promotions. Similarly, there is no communication between sales and production. Therefore, production is never warned when large orders are taken that could affect the production process. This often results in production being forced to meet unexpected increases in demand. This has several negative results on the company. First, the warehouse inventories are depleted. In order to make up for this, overtime production must be scheduled, resulting in higher production costs. Also, shortages or stock outs of materials or ingredients may occur. The company is often forced to pay for expedited shipping in order to get these materials and keep the production process moving. Finally, production personnel are evaluated based on how well they keep production costs down and stable. It is very difficult for production managers to get good ratings since they never know when to expect an increase in demand. The company could run much more efficiently if production, marketing, sales, and all other departments were integrated.
Which of the following is not a result of unexpected increase in demand?
A. Depleted inventory
B. Overtime production and higher production costs
C. Increased communication between production and marketing
D. Shortages of key materials
I think this post does a good job explaining the effects of unintegration and how it hurts all aspects of a company and not just any single unit of the company.
Also, to build on this post, higher production costs will translate to higher prices for the consumer, so unintegration ultimately hurts the consumer also.
Also building off of you guys, the company and its profits get damaged farther due to lack of communication between different branches. If the marketing team doesn’t inform the production team, inventory will be too low. As a result, the salesmen will have to call up the customers because of incomplete orders which will lower customer satisfaction and in the end, the marketing promotions will not be as high as they were hoping or could possibly hurt the company’s profit and lose customers.
You summed up the issue with communication well, outlining the cause and effect of each specific issue. I suppose after today’s activity, I look at this communication issue with more significance. It was bad enough that we were unable to predict orders, but if my team didn’t communicate at all…I couldn’t even imagine how that would have multiplied the chaos. It hurts my head even thinking about it.
A key part of Fitter Snacker’s profitability and efficiency is knowing when and how much to produce in order to meet customer demands. The company must be able to accurately forecast demand, and plan adjustments to change in demand. There are three general approaches to production: Make-to-stock, Make-to-order, and Assemble-to-order. Make-to-stock orders are made in anticipation of customer orders, the make-to-order approach produces products to fill specific orders, thus, it can be used in situations where production is expensive, or customers have specifications regarding the product. The Assemble-to-order approach is a combination of the previous two. It uses make-to-stock components to create the final product for a specific order.
Which production approach would a company like Dell employ?
A. Make-to-stock; the computers are built, sent to distribution stores, and customers can pick them up when they need one.
B. Make-to-order; the entire production process does not begin until the customer specifies to Dell what kind of computer (hardware and software) they want.
C. Assemble-to-order; the company uses already-made components to assemble a computer with customer specifications
I feel like Dell would actually use both A and C. You see computers made all the time prior to when a customer requests specs on them…Dell and most computer companies today use the Make-to-stock method to make specialized computers for different niches in the markets that they see lucrative. They make computers that are meant for business, movies, video games, solely internet, and other things and keep them on shelves of retailers. The customization of Assemble-to-order, however, is also prevalent. They advertise that side of them making specific computers to specific people at greater costs. Considering this I would say both A and C fit Dell’s model.
I agree, I feel like Dell would be unsuccessful if they were to only use one of these methods. I think they would mostly operate on an assemble to order basis; however, they would also benefit by using a made to stock system for equipment that is standard to every computer.
I agree with A & C. It would be inefficient for a large company such as Dell to stick to one approach. Although Dell may charge more for customized products, there are consumers who are in the market for just the basics, or a product for a specific purpose. In this case, I believe Dell makes a batch production of computers solely for that purpose (ie. business) which is a “make-to-stock” approach.
Now Dell can also take the Make-to-stock approach, as it begins to penetrate the retail-consumer market. Not sure if they send their products to distribution stores, though.
Dell use made-to-assembly is not perfect. It takes a lot longer to get the real product. Customerize the computer is a selling point, which draw great attention from the shoppers, since it offers the most variety and freedom. But, it definitely consume more time compare to other company. My point is, any company looking forward to using such an approach should seriously take the time into account.
I feel that although it may take more time, it is worth it for Dell. You have to look at it as, they can charge more since people are personalizing it so it’s Dell was of saying you can have whatever you want just put the money out. But on the same, I am sure Dell has some kind of system worked out that they can speed up the personalization of their computers. It still takes for the most part the same amount of time it does to get an unpersonalized standard computer from them. So as long as communication is a must, I don’t see time playing a huge part in Dell’s disadvantages especially when they can easily up the price.
Fitter Snackers does not have a problem with the actual production of their products, but with when and how many to produce. This problem, if not correctly dealt with, would cause major inventory problems. Because production is not linked to expected sales level or the marketing department, it is hard for the production manager to plan the production schedule in an efficient fashion. If there was integration between the departments, there would not be as much of a loss from changeover and low inventory. If the warehouse had information regarding sold but not shipped products or inventory levels, there would be a more systematic way to produce enough to fill existing orders, as well as forecast ones. Thus, the inventory level would be at a sustainable level.
Which of the following is not an inventory problem with unintegrated production systems?
A. The Production manager knows exactly how much to produce by looking at inventory level in the warehouse.
B. With shared data, the production department knows when to boost productions to raise inventory levels for an active marketing campaign.
C. When big orders of one product deplete its inventory level, the manager can produce more of it by changing the production schedule with no affect.
D. Since the production staff can flag inventory that has been sold and not shipped, the warehouse department knows not to sell those to other customers.
I totally agree with you. There are will be even more problems created if they have a disjointed system. As referred to Chapter 3, with a disjointed system, the information can be delayed and people are just not exactly sure of how many in stock, etc.
So the summary you provided is just “another level” of the problem of the company, which is more complicated and will result in a bigger loss of the company if the process is not handled properly.
The “Detailed Scheduling” portion later in the chapter introduces a solution to this problem, and I think it is really important to the currently production industry.
The main problem with Fitter Snacker is the production process, which is not efficient nor effective. In the highly competitive marketplace of today, companies must be prepared to produce an order immediately and accurately. Because each section of Fitter Snacker is not integrated, the telephone game must occur across departments in order to fill an order. If between sales and the warehouse and manufacturing and accounting an error occurs, a customer suffers the consequences. A salesperson could even sell something the warehouse does not have in stock, simply because the systems are not integrated. If Fitter Snacker wants to grow into a large company, they need to streamline their production process in order to remain competitive.
Fitter Snacker’s Production Problems
While they have no problems producing product, Fitter Snacker has key problems in communication, inventory, and accounting. For communication, the marketing and sales departments do not share vital information with the manufacturing department. They do not tell the manufacturing plant when they are expecting periods of high or low demand so as a result, they either produce too much which can go bad or not enough so overtime is needed. Also this inventory is not kept in real time so the production manager has to estimate how much of each bar to make. Because they don’t have a real time inventory system, they cannot properly account for inventory and costs. Instead of accurate accounting, they rely on standard costs and estimations.
Fitter Snacker has problems in all the following areas except:
I agree. Fitter Snacker desperately needs an integrated system. Their lack of an integrated system is the root of their problems. Fitter Snacker’s inaccuracy is due to lack of communications, which can be solved with an integrated system.
I agree as well, being that fitter snacker’s product can go bad and their need for updates on the shelf life of their products. An integrated system is necessary so that the information gets passed off without any delay so the company can work more efficiently.
I have few words to the question. It seems that Fitter Snacker have so many problems besides production, but think about the relationship among communication, inventory, and even accounting. They all have, more or less, impact on production. For example, if inventory is on a high level, the company may slow down producing bars, but what if the inventory level is inaccurate? So a better way to put the question might be that the production is least affected.
I am confused by your post… Are you saying the production team is least affected by lack of communication? If so, then you are not taking into account that the bars to expire or more importantly, what will happen in times of high sales. If FS has high sales and the production team doesn’t know, then they are going to be spending extra money on overtime hours, as well as money to spend up obtaining raw materials and if they fall behind, they will be spending more money on shipping quickly to their customers, if they still decided to stay with FS. So if I understood your question, maybe the production team isn’t as affected as you might think, but they can greatly impact the net income for the period.
I strongly agree with your last statement, Fitter snack uses the same standard costs for all their information. This way of accounting can be extremely dangerous to use for all periods of the year. What if their is an extremely busy or slow time? The data will be skewed and results will therefore not be accurate.
Within the previous chapter, we learned that ERP systems can greatly improve the efficiency of a business by aiding in the integration of the different segments of a company. In this chapter, it is evident that ERP systems can also greatly improve not only the production, but the production planning of a company as well. The primary goal of production planning is to find the most cost-efficient method of producing goods and then shipping and delivering these goods to the customers. When it comes to production methods, there are 3 different types: make-to-stock, make-to-order, and assemble-to-order. Make-to-stock includes items that are made in advance of sales orders and placed in inventory. Make-to-order items are produced to meet the specific orders of customers. Assemble-to-order items included those goods that are produced using both make-to-stock and make-to-order processes, and then assembled for a specific order from make-to-stock components. Fitter Snackers is an example of a company who uses a make-to-stock production approach.
What is an example of a make-to-order item?
b. Canned corn
c. Personal computer
I agree that an ERP would make Fitter Snacker’s production planning much more efficient. Without an integrated information system there is no communication between the different departments which makes production planning, inventory management, and accounting very difficult. An integrated information system would help FS’s bottom line.
a computer would also be a made to order item, no?
Yes, I agree. I believe the airplane is not the only “made-to-order” item in this list of answers. The option of customizing your computer order online is an example of a “made-to-order” approach.
I definitely agree, we have mentioned Dell countless times in class touching upon the fact that their product is made to order. Similar to my mac computer, when ordering online you can see that you can add and subtract different features and software according to your liking. I also believe that as times like today’s you will see more and more products become made to order; since the generation Y is said to like things to be more personalized companies will adapt.
Because fitter-snacker is a make to order comapny, it really slows down their production, ordering, and delivery. In your question you state that airplanes are make-to-order. In comparison to airplanes, fitter snacker has products that are nearly not as tough to make as airplanes, so it does not make sense for them to operate this way.
One of the most glaring production problems that Fitter Snacker has is the communication problem. Currently, due to the lack of an intergrated information system, the different departments do not share information with each other. For example the marketing department does not inform the production department that it will be having promotion for the company’s products, which will most likely increase sales and therefore production. This makes it difficult for the production department to plan for future sales. Currently production has to deal with many unexpected increases in sales. This results in a depletion of inventory because large stocks of inventory cannot be held in the warehouse without it spoiling. Production then has to pay for overtime labor to make extra cases of bars. They may also run out of raw materials needed to make the bars. This will back up production even further. With an ERP marketing and sales information is sent directly to production so they can prepare for all of this in advance.
Which of these is not a problem which arises from FS’s lack of communication
a. depleted inventory
b. overtime costs
c. overstocked inventory
d. lack of raw materials
I agree that the lack of communication between departments in Fitter Snacker is having an incredibly detrimental affect on the company’s success. Fitter Snacker would definitly benefit from implementing a integrated information system because it would allow for more efficient sharing of information between departments. This would of course reduce the various problems mentioned above that are a result of poor communication.
it could be possible that fitter snacks lack of communication causes overstock of items. This is especially the case if there unaware of boxes of bars that have been opened to fill other orders.
Inventory was often to plentiful, causing waste and inaccurate estimates.
Inventory being too plentiful would definitely be a result of the lack of communication. If production does not communicate with marketing, then marketing does not know when there is an overstock and they should run a promotion.
One problem that the book brings up about an unintegrated production plan is the communication factor. One communication issue from having an unintegrated production system is that different sectors of the business are unable to properly talk with one another. The example that the book gives is if the marketing and sales department gives a special order or sale and the production side doesn’t know anything about it. The other side is that sales and marketing might not know about material shortages or scheduled maintenance, which shuts down production.
This miscommunication can cause tons of problems within an organization. Sales is selling products that don’t exist or that production doesn’t have the capacity to make. And manufacturing is doing maintenance while sales is still selling product. This could become a disastorous scenario for Fitter Snacker, which could cost them many customers.
Question: Communication problems usually arise because of?
B. Lazy workers
D. Natural disasters
Fitter Snacker’s current production plan would work fine in a perfect world, but unfortunately the world is not perfect. Demand for products is constantly changing and Fitter Snacker does not currently have a way to adapt to these changes. The entire production plan depends on the production manager’s wishes which, while based on years of experience, are somewhat inflexible. There is also little communication between Marketing and Production, meaning that Production often cannot meet demand during promotional events. Additionally, sales often does not give advance warning to production when a large order is received.
How would an integrated system improve Fitter Snacker’s production plan?
A. It would allow for more accurate sales forecasts.
B. It would facilitate communication between different departments.
C. It would increase the speed at which the assembly line can run.
D. A & B but not C.
A production plan is supposed to aid in the organizational process of a company. It’s supposed to provide accurate and concise information about orders, influx of raw materials and timing of production. While Fitter Snacker has the concept of the Production Plan down, it does not have an actual production plan. FS’ plan is based on the manager’s premonitions and past experiences, which are not always correct. As a result, there is almost no cooperation between the individual sections of the company. Marketing does not provide sales forecasting info to the Manufactures and the manufactures do not provide inventory data to the salesmen/women, resulting in wrong orders, major surplus or shortage of inventory and a general loss of money. If these systems could be integrated then there would a smaller amount of errors and a greater amount of profit due to efficiency.
Why is a production plan based on premonitions and past experiences not a viable plan?
A. Because premonitions and past experiences may not always reflect the current situations
B. Because premonitions and past experiences are perfect
C. Because premonitions and past experiences are always correct
D. Because premonitions and past experiences are the only tool to solve everyday problems.
A production plan is very important for the operation of production lone. The production manager can not just rely on their intuition like those at FS did. This will lead them to surely fail. Production managers have to rely on hard data that they receive from other departments with in the company.
Every production process is supposed to have a production plan. A production process answers questions that makes the production process simpler. An effective production plan answers the following questions:
1. How much product to make?
2. When to make it?
3. How much raw material to buy?
Unfortunately , Fitter Snacker’s production plan could not answer these questions. The marketing team would not communicate with the production department, which resulted in chaos. The production department would be unaware of promotions run by the marketing team. As a result, the production department would have trouble completing orders because they were not prepared to take on so many orders. Fitter Snacker also had inaccurate books and inventory because of their failed system.
Which of these question does a successful production plan NOT answer?
a. How much product to make?
b. When to make it?
c. How much raw material to buy?
d. How much profit will the company make?
Answer is D
I agree with your analysis. Clearly, Fitter Snacker did not have an effective production plan in place, and it led to the problems that you described in your post. The initial problems in the marketing team led to disarray in the production and accounting arms of the company as well.
definitely. a fully developed big picture plan is the real solution to any business.
To adequately meet demand, you must first have an estimate of how much you think you will sell. This prevents you from having a surplus in supplies or from running out of supplies prematurely which could hurt your business. An ERP system in this case would help to share information from many different parts of your business so that the people at marketing can provide the important information about estimated demand that is needed for the people at purchasing for example. Fitter Snacker is doing a great injustice to its own well-being by not integrating their business. Marketing fails to communicate with production which seems like a silly and easily-fixable problem.
a. how many people can fit in an elevator
b. the ability a person has to do something
c. the number of goods that can be produced
d. a measure of volume
I agree that integration is essential to FS’s survivial. By centralizing it’s information base, it not only becomes more efficient in the manufacturing arena of the business, but it provides itself with information that it can use to plan and negotiate better prices.
You never want to over estimate what you can produce. Customers expectations are often high about exciting products. Finding out they are not available after an order can be quite embarrassing.
Ideally, Fitter Snacker would have a completely revamped production planning process. This entails many different aspects, first of which would be developing aggregate production plans for groups of the company’s different products. Next, Fitter Snacker would have to break down these bigger aggregate plans into smaller plans specific to each product for shorter time periods. This would enable the company to make an informed decision about how much raw material needs to be ordered, based on the plan.
Which of the following is NOT part of the production planning process?
A. Develop aggregate production plan for groups of products
B. Determine raw material requirements based on plan
C. Break down aggregate plan into product-specific plans for smaller time periods
D. Determine which product lines to revamp based on aggregate plan (CORRECT ANSWER)
Communication between the many department in a company is vital for the smooth operation of a production line. When production is unaware of future increases in demand several things can go wrong.
1. ware house inventories depleted
2. Overtime labor needed
3. Depletion of production materials
4. Possible need for expedited shipping
Production managers are graded on how well they keep track of ware house stock and keep down production costs. When there is communication between the production and marketing periods of high sales can be foretasted so that more product can be made in down times and less over time will be needed during periods of high demand.
How does good communication help a production line.
A. Lets production line know if people like product
B. Decreases the cost of production
C. Helps build a brand name
D. Helps track customer accounts payable
employees with separate mindsets causes an uproar within the company. Communication is key to prevent a potentially prosperous business from falling flat.
I agree employees can cause uproars within companies so communication is very important. Also the production line takes many orders from different people, so they must have good communication skills with people in order to make sure orders are completed properly. Poor order completion will lead to unhappy customers.
I find it interesting that you touched upon the employee’s behavior and how a dissent among the employees versus the hierarchy of the business can cause enough turmoil for the business to fail. But, for that very reason companies are starting to cater to their employees just as much as they cater to their customers if not more, happy employees make for better work.
WHZpkP 52. “The road will be overcome by that person, who goes.” I wish you never stopped and be creative – forever..!!
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