problems relating to facility location

Facility Location Issues

Both established businesses and new ones struggle with facility location issues. Business climate, accessibility to clients, infrastructure quality and availability, total prices, and labor quality are all factors that affect where a plant is located. Others are suppliers, political risk, free trade zones, environmental laws, government obstacles, competitive advantage, trading blocs, as well as the host community and other facilities that may be accessible (Xie & Ouyang, 2013).

Challenges for Service Facilities

Service facilities typically have specific difficulties that businesses need to take into account, even though it is frequently more expensive to create a manufacturing plant than a service facility. It is typically crucial for a firm to maintain a close relationship with the customers (Xie & Ouyang, 2013). The criteria for choosing appropriate facility locations have evolved beyond a single focus of minimizing distance and cost. The long-term success of a company, therefore, depends on the ability of its managers to make a comprehensive evaluation of the various issues that may affect the facility’s location (Xie & Ouyang, 2013).

Inputs to Production Planning

The various inputs to production planning include the company’s available resources, demand forecast, as well as the policies that relate to employment levels (Maguire, 2012). Additionally, the performance of an effective production planning process requires the production planning team to have a broad range of information, including process designs, human resource information, purchase of materials, as well as operations or manufacturing information. Production planning also requires the company’s financial and accounting information, as well as the information regarding the product marketing, distribution, and sales (Maguire, 2012).

Level Scheduling

Level scheduling refers to a technique that focuses on creating a smooth production flow over a given period (Shim, 2012). It aims at minimizing disruptions resulting from abrupt changes in the levels of demand by matching or leveling the product-by-product schedules with product family schedules (Shim, 2012). Besides, achieving the level scheduling objectives requires both the company’s production and sales departments to have an agreement on a fixed level of output duration and output volume (Shim, 2012).

Benefits and Challenges of Inventory

One of the benefits of inventory is that it helps in improving the accuracy of a company’s inventory orders since it makes it easy for businesses to figure out the exact amount of inventory they need to have on-hand. It, therefore, helps companies to prevent product shortages, thus allowing them only to keep enough stock. Additionally, inventory helps in the establishment of more organized warehouses, thereby enhancing the order fulfillment process, as well as keeping customers happy (McLeod, 2008). The inventory also helps businesses to save money and time. By keeping proper records of the ordered products and those on-hand, companies save the time of stocks recount. Besides, Inventory helps businesses to save money that otherwise would be wasted on various slow-moving items. The inventory also helps in improving a company’s productivity and efficiency through the use of various devices such as inventory management software and barcode scanners (McLeod, 2008).

On the other hand, inventory also has different challenges. One of such challenges is inefficient processes. Most inventory management systems are dependent on manual processes or outdated software, a situation which creates an extremely challenging work environment for individuals responsible for inventory management. Additionally, with the growing competition and customer demand, it becomes more difficult for companies’ stocks to meet the changing unique needs of consumers (McLeod, 2008).

MRP Structure

Material Requirement Planning (MRP) refers to a computer-based production planning, as well as inventory control system (Kim, 2014). It plays both the roles of inventory monitoring and production scheduling and attempts to maintain adequate inventory levels to ensure the availability of necessary materials when needed (Kim, 2014). The MRP structure involves a four-step process which starts with the end items. The first step entails the establishment of gross requirements, while the second step involves the determination of net requirements by subtracting on-hand inventory and scheduled receipts from the gross requirements. The third step entails time-phasing the net requirements, while the final step involves the determination of the planned order releases. Table 1 below shows an MRP structure (Kim, 2014).

Table 1: MRP structure

Impact of Inventory on Company Resources

The impact of inventory on the resources of a company depends on inventory levels. If a company’s stock increases, the company has the option of reducing its prices since it has more units to sell to meet its base income goal. On the other hand, if the inventory is low, the company may need to increase the prices so as to meet its base income goal (Ogbo & Ukpere, 2014). Additionally, companies usually use either the first is First-in, first-out (FIFO) or the Last-in, first-out (LIFO) methods of moving inventory. The FIFO method allows the company to sell its oldest stock first, which usually translates to higher gross profit and a greater amount of taxable income if the economy prices increase (Ogbo & Ukpere, 2014). The LIFO method allows the company to sell its new stock first, which translates to lower gross profit and a lower amount of taxable income. Regardless of the method used, an increase in inventory can make a company pay higher taxes and vice versa (Ogbo & Ukpere, 2014).

References

Kim, K. (2014). Material Resource Planning (MRP): Will You Need MRP without the Customer?. Open Journal Of Social Sciences, 02(04), 256-261. http://dx.doi.org/10.4236/jss.2014.24027

Maguire, S. (2012). Special Issue – Production Planning & Control: Service Science. Production Planning & Control, 23(7), 477-479. http://dx.doi.org/10.1080/09537287.2011.640029

McLeod, J. (2008). Understanding Data and Information Systems for Recordkeeping. Records Management Journal, 18(2). http://dx.doi.org/10.1108/rmj.2008.28118bae.003

Ogbo, A., & Ukpere, W. (2014). The Impact of Effective Inventory Control Management on Organisational Performance: A Study of 7up Bottling Company Nile Mile Enugu, Nigeria. Mediterranean Journal Of Social Sciences. http://dx.doi.org/10.5901/mjss.2014.v5n10p109

Shim, S. (2012). Line Level Scheduling by Integrating Area Level Scheduling in Manufacturing Systems. Applied Mechanics And Materials, 267, 83-86. http://dx.doi.org/10.4028/www.scientific.net/amm.267.83

Xie, W., & Ouyang, Y. (2013). Dynamic Planning of Facility Locations with Benefits from Multitype Facility Colocation. Computer-Aided Civil And Infrastructure Engineering, 28(9), 666-678. http://dx.doi.org/10.1111/mice.12034