Production and Inventory Management Report on Business Strategy

This report provides a comprehensive analysis of production and inventory management, focusing on the crucial aspects of production planning. It emphasizes the significance of demand forecasting, where the report highlights how future demand, derived from sales budgets, forms the foundation for strategic decisions. It further explores how the accounts department uses these demands to estimate raw material requirements, subsequently determining inventory costs. The report delves into the role of the production department in estimating production capacity based on resource costs like manpower, equipment, and logistics. The analysis underscores how these factors collectively influence production planning, which is then presented to management for fund allocation. The report references sources such as Albey et al. (2015) and Seitz & Nyhuis (2015) to support its arguments, emphasizing the interconnectedness of demand, costs, and production capacity in shaping business strategies.

Running head: PRODUCTION AND INVENTORY MANAGEMENT
Production and Inventory Management
Name of the Student
Name of the University
Author note

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PRODUCTION AND INVENTORY MANAGEMENT
Part (i):
Introduction:
Production cost, inventory costs, production capacity and demand play important
role in production planning. The essay would explore the role of these concepts towards
production planning in business organizations.
Analysis:
Business organisations while forming production strategies take into account the future
demand for products which the companies are liable to face in the future. Albey et al. (2015)
mention that demand for products from consumers forms the base of production planning in the
companies. The marketing department based on the available orders for products for future time
periods like the following financial year already received as well the orders which could be
received in the future makes the sales budget. The accounts department consider these future
orders as future demands to estimate the future requirement of raw materials which in turn shows
that amount of inventory costs which the company would be have to incur to acquire the
materials. Seitz and Nyhuis (2015) point out that the production department uses this information
to estimate the future production capacity which would be required to satisfy the demand. The
department in addition to the cost of raw materials consider the cost of manpower, equipment,
fuel, technology as well the logistics charges which would be incurred to obtain these resources
to form the production cost. All the above expenditures are considered to form the production
planning by the department which is submitted before the management and the accounts
department to sanction and release of funds towards the production activities.

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PRODUCTION AND INVENTORY MANAGEMENT
Conclusion:
It can be concluded from the discussion that demand for products from the end customers
is the base of decisions regarding production cost, inventory costs and production capacity.
These factors form the basis of production planning in business organizations.

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PRODUCTION AND INVENTORY MANAGEMENT
References:
Albey, E., Norouzi, A., Kempf, K. G., & Uzsoy, R. (2015). Demand modeling with forecast
evolution: an application to production planning. IEEE Transactions on Semiconductor
Manufacturing, 28(3), 374-384.
Seitz, K. F., & Nyhuis, P. (2015). Cyber-physical production systems combined with logistic
models–a learning factory concept for an improved production planning and
control. Procedia CIRP, 32, 92-97.