Recommended reading: Production planning and control
The system of production planning and control serves as the nervous system of a plant. It is a co- ordinating agency which co-ordinate the activities of engineering, purchasing, production, selling and stock control departments. An efficient system of production planning and control helps in providing better and more economic goods to customers at lower investment. It is essential in all plants irrespective of their nature and size.
The importance of production planning and control are summarized below:
- Better Service to Customers: Production planning and control, through proper scheduling and expediting of work, helps in providing better services to customers is terms of better quality of goods at reasonable prices as per promised delivery dates. Delivery in time and proper quality, both help in winning the confidence of customers, improving relations with customers and promoting profitable repeat orders.
- Fewer Rush Orders : In an organization, where there is effective system of production planning and control, production, operations move smoothly as per original planning and matching with the promised delivery dates. Consequently, there will be fewer rush orders in the plant and less overtime than, in the same industry, without adequate production planning and control.
- Better Control of Inventory : A sound system of production planning and control helps in maintaining inventory at proper levels and, thereby, minimizing investment in inventory. It requires lower inventory of work-in-progress and less finished stock to give efficient service to customers. It also helps in exercising better control over raw-material inventory, which contributes to more effective purchasing.
- More Effective Use of Equipment : An efficient system of production planning and control makes for the most effective use of equipment. It provides information to the management on regular basis pertaining to the present position of all orders in process, equipment and personnel requirements for next few weeks. The workers can be communicated well in advance if any retrenchment, lay-offs, transfer, etc. is likely to come about. Also, unnecessary purchases of equipment and materials can be avoided. Thus, it is possible to ensure proper utilization of equipment and other resources.
- Reduced Idle Time : Production planning and control helps in reducing idle time i.e. loss of time by workers waiting for materials and other facilities; because ensures that materials and other facilities are available to the workers in time as per the production schedule. Consequently, less man-hours are lost, which has a positive impact on the cost of production.
- Improved Plant Morale : An effective system of production planning and control co-ordinates the activities of all the departments involved in the production activity. It ensures even flow of work and avoids rush orders. It maintains healthy working conditions in the plant thus ,there is improve plant morale as a by-product.
- Good public image: A proper system of production planning and control is helpful in keeping systematized operations in an organization .Such an organization is in a position to meet its orders in time to the satisfaction of its customers. Customers satisfaction leads to increased sales,increased profits ,industrial harmony and, ultimately, good public image of the enterprise .
- Lower capital requirements: Under a sound system of production planning and control , everything relating to production is planned well in advance of operations. Where, when and what is required in the form of input is known before the actual production process starts .Inputs are made available as per schedule which ensures even flow of production without any bottlenecks .Facilities are used more effectively and inventory levels are kept as per schedule neither more nor less. Thus, production planning and control helps, in minimizing capital investment in equipment and inventories.