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Provided that there are several production segment in the factory & Management want to stop the production of only one segment. For strategic decision making of running the production or stop what factors should be considered??
If the stock in stock is large. And there are factories that produce that product continuously. The reason to stop production Need to distribute goods quickly. And in the way of promoting products is to sell cheap, so that consumers want to reduce the decision-making process to buy. It is distributed by locations that directly reach consumers, such as department stores, schools, hospitals and communities. When the product is delivered straight to the consumer. The operator will reduce the burden of advertising.
Hello Team,
When larger quantities are ordered or produced, average inventory obviously is larger. This larger inventory results in increased inventory-carrying charges. If a reduction in carrying costs is desired, smaller quantities should be ordered and orders should be placed more often. However, the practice of ordering smaller quantities can have the side effect of increasing ordering costs. To balance these two costs, the concept of economic order quantity (EOQ) was developed. The EOQ formula derives the point, or order quantity, where inventory carrying costs and ordering or setup costs are the same. An order of this quantity will minimize the sum of the two costs.
However, the EOQ formula is flawed. While carrying costs and ordering/setup costs are obvious, other costs that can significantly affect lot size are not considered. The user of the formula often fails to consider quality, scrap, productivity, and worker motivation and responsibility. In addition, the EOQ formula user frequently fails to consider that even though setup costs are significant, they are not unalterable. American manufacturing managers traditionally considered setup costs as a necessary evil and made little or no effort to reduce them.
The lean/JIT philosophy suggests that a firm should eliminate any reliance upon the EOQ formula and seek the ideal production quantity of one. Of course, a lot size of one is not always feasible, but it is a goal used to focus attention on the concept of rapid adjustments and flexibility. Naturally, a reduction in inventory levels means an increase in setups or orders, so the responsibility rests with production to make every effort to reduce setup time and setup costs. It should be noted that this assumes setup time and cost are positively related. This is not always true because the cost to reduce setup time could be very high if retooling or equipment redesign were involved.
Regards,
Saiyid
