Paper Example on Level Production Strategy

Introduction

The team used the level production strategy. The strategy was used because the company produces electronic car aerials with regard specific regard to the average demand. Based on the total demand, the scheduling consistently focuses on the quantity of the required goods. This production strategy is used by large companies because it helps in trimming expenditure which benefits companies that produce items in thousands (Jeunet, 2006). There were changes made to the strategy because it is the best strategy for this case. Level production strategy is used by many multinational companies due to its advantages, the ease of adoption and its reliability to companies. To explain further, this study provides the advantages that come with the use of level production strategy in a company.

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Advantages of Level Production

This production strategy plays a major role in reducing labour costs. In situations where there is an increase in demand, it is necessary for an organization to pay the employees' overtime, hire more workers or increase the number of shifts. In contrast, when the company experiences slow periods, it may be bound contractually to pay workers some of which may be idle. Using the level production strategy ensures that a company can make more products during the slow period that can be put in the inventory and sold during the peak season (Jeunet, 2006). As such, the labour costs are kept steady at all times. Also, the chances of responding to special customer requests increase with the use of level production strategy. The strategy maintains the production capacity of the company to by ensuring that it is neither overbooked nor fully booked. This provides better customer service to clients because, in a scenario where the customers fill in last minute and the production facility is overbooked, they may not get the required services. It helps production facilities to work closely with customers so as to accommodate their needs in advance.

Additionally, the strategy helps in improving quality control in a production facility. Increase the production pace is likely to impact the quality of the goods. The level production strategy provides facilities with adequate time to inspect goods before they are sold. Unquestionably, the production style ensures better cash flow within the production facility because it facilitates better cash flow planning (Jeunet, 2006). For instance, the peaks and lows of production affect the receivables and payables. The strategy can be used to convince clients to order and pay for goods in advance because they have a guarantee to get the goods whenever they need it. Further, the strategy assumes that the workforce will maintain the production levels with the required levels of output. If everything works as expected, the level production schedule strategy gains some level of predictability. This is because it allows both the client and manufacturer to exactly know the number of products that will be produced within a specific period of time (Jeunet, 2006). The level production strategy does not drain material and financial resources. It ensures that the management is able to plan in advance before the production commences hence, preventing some of the chaos that occurs during the production process. Another advantage of the strategy is that it maintains production throughout the expected cycle. The surplus product may be used in the period where demand is high and therefore eliminating the need to an extra production of goods.

Disadvantages of Level Production

Although level production strategy is one of the best, it has a number of disadvantages that make the decision-makers to change their preferences over it. One of the disadvantages associated with it is that it can be complex. When involved with this strategy, then one must keep a track record on what the production team is working on, which raw materials are being used, and which products are expected to be produced (Jeunet, 2006). In the case where this strategy is applied in a large manufacturing firm, it can result in a lot of work to the person who is in charge. There are a lot of details needed for this strategy and it can be tedious. Another potential demerit of this strategy is that it can be costly, especially when a firm needs to buy a system and other resources needed to implement it. Further, a firm must acquire the services of a trained employee to handle the system or trainee the available employees, costing the company money. In the process of implementing this strategy, the management must consider if the costs to be incurred in the process are worth it before adopting it.

Lack of flexibility for level production strategy and its propensity to be skewed are the other disadvantages that a company adopting it can face. As already indicated in the study, it may be difficult to schedule all the processes in a production firm that level production needs to effectively function. While one may choose to stick to a specific schedule, it does not take a great deal to see the whole schedule off. For instance, if one of the machines in a company goes down for an hour, this case can render the entire productions level strategy non-functional (Jeunet, 2006). Also, because many processes in production can go wrong rapidly, it is vital that a firm changes and adapts well. With this strategy, it may not be possible for a company to change and adapt quickly to avoid problems. If the raw materials have been dispatched and workforce assigned to work upon the raw materials, it can be very difficult to stop the process and do something else, in the event that a problem is experienced.

Master Production Schedule

A master production schedule (MPS) plays a significant role in the running of a manufacturing firm and is essential in keeping the inventory in such firms. In master scheduling, there are various processes that are embedded in it and that must be provided. Among these processes are forecast demand, amounts to be produced, staffing levels, production costs, customer orders, the capacity of the firms, production lead time, and many other processes (Jeunet, 2006). A master scheduler is responsible for the schedule and thus, the schedule becomes a set of planning numbers that drives production. The MPS is ideally meant to meet the demand of the customers as well as maintain a level of inventory where there is a balance between the stock-in and stock-out. However, a MPS should not be taken as sales forecast that represents the demand; it is a representation of what a company plans to produce, expressed in specific configurations, amounts and dates.

A master production only includes the items that are relevant to the production in the firm. The logic behind the above MPS was the inclusion of the data that was needed. The forecasted demand figures are very vital because they propel the company to reach those projected figures. This is why the MPS contains a demand forecast row. Further, the company needs to know the amount it will cost it in acquired the raw material (Jeunet, 2006). Production cannot commence without raw material, hence, the row of the total cost of material was included in the MPS. Similarly, the cost of labour was included in the MPS since the company needs to know how much it will spend to acquire the services of technicians and any other kind of labour needed in production. Finally, the selling prices and the expected profits are included in the MPS since the company has to know the expected returns after the production has been completed and the products sold.

Customer Service Level

In any inventory management, the service level is one of the most important facets and that the decision-makers should not overlook. Ideally, service level can be described to be the expected probability of not hitting a stock-out during the subsequent cycle of replenishment cycle or simply, the probability of not losing sales to the competitors (Jeunet, 2006). The service level of the inventory is usually determined by the levels of stock the company has. As such, the safety level of the stock must be very high enough to cover the delivery times, enough to cover the demands of the customers' demand. However, it should not be too high that the company suffers money loses due to carrying costs. The main reason to always maintain this balance is that the demand is always fluctuating and is not enough consistency to predict future variability.

Retailers and producers are always attempting to attain high levels of satisfaction within the client basis to maximize their sales. Maintaining a high level of stock is expensive and presents different types of challenges including storage, lowering prices etc. However, setting high levels of stocks is imperative and service delivery is essential. The service level is a consensus between the operation cost and the opportunity costs (Jeunet, 2006). It should also be stated that optimizing the service level to get maximum returns for the company is a complex affair and the analysis required is very sensitive. If the company wants to measure the preparedness in delivering according to the number of units sold, then the formula would be

Service level=number of qualities delivered in time/total quantity of the demand

This would be the general formula for service level. Customer service level is also a function of many different performance indices. To calculate customer service level, the formula would be;

P=(2ln12pMH)

Where:

p is the level of service, that is, the probability that a firm will not have a stock-out

H is the cost per unit of stock carried for the time the service is delivered to the customers and,

M is the marginal cost of stock-out

It is essential to note that the time scope considered in the above formula is the lead-time. Therefore, H=d365Hy. Hy is the more unusual annual carrying cost.

is the cumulative distribution function (CDF) associated with the normal distribution and is easily calculated in Microsoft Excel. In addition to this information, for the sake of computation,

Although the above formula is very useful in the calculation of the service level, it is important to state that some conditions must be met. The first feature of the above formula that is interesting is that the optimum customer service level is solely dependent on the cost of inventory H and the cost of stock-out M. However, the formula also dependents on the lead time, since H has can be described as the cost per unit stock for the duration of the lead time. The second interesting part of this formula is that a greater cost of inventory has the propensity of lowering the optimal service level. In the same manner, a greater cost of stock-out has the effect of increasing the optimal service level. This relationship is however, intuitive since the service level is a balance or a consensus between more stock-outs and more inventories. Therefore, this formula may not have validity for all the assigned values of M and H. First all, 2p*MH>1, so that the algorithm does not produce a negative value, which would render it futile given the outside square root. Consequently, M>2pH, and can then be computed to be M>2.5H. It is vital to observe that this condition must be fulfilled. In the event that condition fails to be met, then it implies that the initial function o...