Page 261 - DMGT206_PRODUCTION_AND_OPERATIONS_MANAGEMENT

Production and Operations Management

Notes (b) During periods of high demand, the method of back logging orders can be adopted
but depends upon the willingness of the customer if he could wait for that
much time. However, backlogging of orders is not without danger of loosing
goodwill.
2. Change in Production Level: The change in production level is done to the extent possible
to contain the fluctuation in demand. This is achieved as follows:
(a) When demand is on the increasing side, the output rate can be changed by
hiring workers temporarily. Wherever, it is possible to increase production through
change in workforce or by keeping workers on overtime (OT) or through
some special Incentive Schemes/by altering the capacity through increase of
a few equipments/machinery or sometimes by changing the planned plant shut
downs.
(b) When demand is decreasing, changing the output rate by logging off
Casual/Temporary Workers/by paying full salary to employees but reducing output
rate for a short period – Without demoralising/demotivating the workforce or by
reducing capacity by switching off part machinery whenever possible.

3. By Appropriate Inventory Level: Inventory of furnished goods is increased during periods
of low demand and the same can be used to meet high demand/seasonal demand in other
periods. Manufacturing firms can use this strategy very well.
4. Sub Contracting: Sub contracting means meeting demand through acquiring part of goods
from other manufacturers/producers rather than making in-house. House benefits must
be weighed against cost and quantity.
5. Capacity Utilisation: Capacity Utilisation is very common to service industries,
organisations or companies which cannot store products or services. They must arrange to
meet peak load through sharing capacity utilizations.

Examples: Telephone Companies, Electric Power Companies & Computer Time Sharing
Companies.

Self Assessment

Fill in the blanks:
5. The first step involved in aggregate planning is the ……………of resource for a reasonable
period.

6. …………………..means meeting demand through acquiring part of goods from other
manufacturers/producers rather than making in-house.
7. Special techniques available for Aggregate Planning are ……………..Method and Linear
Decision Rule.

13.4 Material Requirement Planning

13.4.1 Material Planning

Material Planning is a technique of determining the requirements of raw materials, components,
spares etc., required for the manufacturing of the product. If the delivery date of the finished
product is known in advance, then the ordering time and quantity of other work-in-progress can

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