Supply chain management is a process conducted by several business entities, which involves planning, implementing and controlling any production and supply activities, with an aim of providing it to consumers in efficient ways. While supplying, there are intermediaries who play a role in connecting producers and consumers, who ensure efficiency in the supply chain too. Supply management is done to ensure collaboration between the intermediaries (Catholic Relief Services, 1999, pg 14). Planning and control system aids in define rules under which the business operates and within a given set of resources. Planning and controlling department depend on the information given by supply department for effective control of the business (Muehlen, 2004, pg 35).
Primary forecasting techniques
For a product-producing firm, it often uses primary forecasting techniques to determine the amount of goods demanded in the near future, with several quantitative and qualitative techniques initiated. Qualitative techniques involve rating schemes from informed judgment, and this technique is used, by top-sales executive or top management, to forecast a given trend in the market. Qualitative method also known as subjective technique or management judgment, and usually depends on the relationships between suppliers and consumers. Quantitative technique involves forecasting using the current, available resources. Forecasting techniques chosen by the firm depends on the usefulness of the information to the business, nature of forecast decision, important of the forecast, time available for the forecast and the usefulness of the available information that will enable the forecast. These techniques include; chain-ratio method to develop a forecast (sales forecast), Delphi method of forecast, executive method of judgment and sales-force composite method of forecast (Zimmerman, pg 73).
Sales forecast method is a quantitative technique of forecasting, used to tell supply chain of products effectively, until it reaches the consumers. It helps the management to determine the extent of supply at each level, and directives in the entire chain process. Chain-ratio forecasts manage stocks at various levels, schedule for all available resources at the various link levels and manage the available stock at various levels. Accurate forecast of chain-ratio technique implies proper management of stock supply, hence proper management of supply chain process by the management. It, also, enables the management to determine various alternative techniques to use to make the supply chain effective.
Delphi method of forecast
It is a qualitative technique of forecasting. It involves ideas of top management and their predictions, which are put into consideration and conformity to a highly structured form of mechanism. Top management asks questions via questionnaires concerning expected future sales, which anonymous person compiles the data and determines what is to be expected in the later days, depending on information from top management. It is necessary for the business, as it helps to forecast demand of a given commodity over a long period, and appropriate when there are no unique, or no data available to predict demand trend.
Executive method of judgment
It is a qualitative technique of forecasting, and the most used method, by top management of a business, to predict future judgments. Top executives from different departments come together and gather their information about a certain product, and tend to predict its chain of demand as one unit. Executives use historical at hand to come up with predictions about the upcoming products in the market. It is essential to a business while making short-term predictions about demand of a new product in the market.
Sales-force composite method
It is also a qualitative method of forecasting and predicts demand patterns of business's product, depending on how the suppliers are well-known with the customers, existing market trends, demand and competitions. This forecast enables the sales person to set goals and boosts them to achieve the desired levels (Hutt and Speh, 2009, pg 143-144).
Impacts of production plans to business budget
Short-term and long-term plans of a business play a leading role in determining the effects of its budget. Short-term plans are short and precise, while long-term plans are long and take more time. Production planning activities provide input for a budget development. With effective planning, the budget is approved and implemented by controlling activities that provide a backbone for the organization to work under the set budget set.
Master production schedule is an effective method of planning of manufacturing companies. It operates, ideally, with all units under the manufacturing company that is business planning, financial planning, master scheduling and material requirements. Output accruing due to various departments is analyzed under one financial report depending on the department, and in turn master production schedule controls the financial of different departments, hence, the budget of the company.
Rough-cut capacity planning aims at balancing long-term workloads of demand at higher and unusual levels, and entirely considers critical part of the company. It usually takes place, whenever the company needs to cut-off customers purchasing power, and increase the companies purchasing power of resources, in order to produce the goods in shortage. This goes hand-in-hand with master planning, which needs to be adjusted and make the budget of the company feasible.
Workforce is one of the core inputs required by an organization for effective production of goods. Without workforce, then there is no corresponding output, which is a paramount goal for every firm. As organization productivity often changes in size, so do the workforce. This, clearly, stipulates that any reduction in the budget by an organization has the same impact on workforce.
Carrying out inventories by managers of a given organization is often done to maintain their activities within the given budget set. Different working environments determine the nature of inventory carried out, with bigger companies holding more inventories than smaller companies. Inventories reduce the impacts of risk and reduce uncertainties that may accrue while managers are carrying out a company project. This, hence, renders inventory cost-effective as it reduces the impact cost of the firm.
Material requirements planning
It involves a four-step process by an organization, which is, net-lot-offset-explode, and ensures right things are in the rightful place, manner and time to ensure proper and smooth flow of activities in an organization. Material requirement planning play a leading role in laying down the plans of the company, and can be further adjusted to apply in fields such as marketing, finance and personnel in a given organization. It uses two methods to process data that are, net or regenerating net process. Regenerating net process re-plans the whole process of material requirement on a regular basis, while net process reacts differently and continuously to changes brought forth by inventory file, master schedule and other files and done online. Currently, several manufacturing companies use net process since it changes with changes faced by the company under new technology. Regenerating net process is not highly applied since it lags from any change that might arise in the company.
Material requirements planning are highly used by manufacturing companies, since it involves ordering, assembling and manufacturing of a product. Complex applications also render difficult to apply material requirements process, due to production of large-volume of goods. However, material requirements planning are advantageous to chemicals processing industries such as food, paper industry and metal industry. Weakness of material requirement renders not appropriate to use, especially when it lack feedback that will handle any deviations from the original plan.
For service providing companies, it is appropriate to apply capacity requirements planning, which offer similar duty as that of material requirement process. Capacity requirement process aims at measuring the production capability per unit time, and applies primarily to medium-range of activities. It involves planning, re-planning till a reasonable goal is achieved and revision of available capacity, similar to material requirement planning (Monks, 1996, pg 283).
Material requirements planning concepts
There are two MRP concepts, that is, MRP 1 and MRP 11. The two are networking concepts applied under manufacturing industries.…