Agriculture Reference
In-Depth Information
primary function of procuring the necessary inputs for the production of the fi nished goods.
With the right quantity of inputs available, production control directs the internal logistics
function creating detailed internal scheduling of sub-assemblies, machines, and coordinating
the overall production process. Production control is focused on any last minute changes
in the quantities of products produced, and accounts for production lost through scrap or
downtime.
Once the products have been produced, they are then shipped for distribution or put into
inventory. Many factors determine inventory levels as will be seen later. Distribution can
take on many facets in terms of how goods are channeled to the end customer. This brings
us full circle to complete the supply chain management functions. Customers purchase the
fi nished goods and they drive forecasted demand for additional products. This quick
overview of the activities of supply chain management is followed now by more detailed
descriptions of the various functions.
Forecasting demand
Forecasting demand
, a marketing function, was described in
Chapter 7
and is briefl y sum-
marized now to put its role into perspective with the supply chain functions that follow.
Highly seasonal demand, unpredictable weather, volatile market prices, and an evolving
market characterize the agricultural industry. These market characteristics require extensive
planning on the part of fi rm management. As described earlier, the general economic, market,
and sales forecasts provide the foundation for many management planning decisions includ-
ing supply chain management decisions.
General economic and market forecasts (i.e., long-range forecasts) drive decisions con-
cerning distribution facilities, warehouse size, transportation equipment, and long-term sup-
plier contracts. Market and sales forecasts (i.e., short-range forecasts) drive the short-term
purchasing of raw materials for conversion into fi nished goods, inventory control decisions,
and aggregate production planning.
Aggregate production planning
Aggregate production planning
is the process of developing the specifi c production quan-
tities and rates, and workforce sizes and rates, while balancing customer requirements and
capacity limitations of plant and equipment. Monthly, quarterly, and annual aggregate pro-
duction plans are developed using the longer-term general economic and market forecasts.
Besides maximizing customer service, aggregate production plans strive to minimize inven-
tories, minimize changes in workforce levels and production rates, and to maximize utiliza-
tion of the plant and equipment.
For example, a food company may be forecasting future demand of its packaged cereals
and cereal bars. Examining the past quarter's consumption of food products in the United
States, the production planner notes the increased consumption of high-energy cereal bars.
In addition, upcoming promotions and increasing interest by stores in stocking cereal bars
provides valuable customer demand information. In aggregate production planning, these
demand forecasts are combined with current production capacity limitations, inventories,
and other information to plan how much ingredients, labor, and equipment are required for
the next three to 12 months. Where aggregate planning shows a bottleneck in an item, such
as a piece of equipment or a specifi c labor skill, plans can be put into place to alleviate the
shortage temporarily or permanently.
