Level Production (Strategies To Manage Operations)
A level production strategy is one in which manufacturing firms retain a stable workforce over time to ensure that output levels remain constant. The rate at which products are manufactured is determined by an estimation of the averaged demand for the product. The total production at the end of a year is thus equivalent to the projected annual demand. These firms use inventory to absorb variations in demand. During periods of low demand, products are accumulated in storage facilities while products in storage are availed to markets during periods of high demand.
Level production plans have several advantages and disadvantages that businesses have to consider before full implementation. One of the advantages of this strategy is that it can work in different types of demand environments. This strategy works extremely well in environments where demand in constant throughout the year. Companies that produce perishable products can thus select this strategy to ensure that they meet demands across the year.
The level production can also be used in a dynamic demand environment where manufacturers can store products for significant durations without degrading the value of the product. This strategy also suits organizations that have limitations when it comes to production abilities. These firms can use this strategy to ensure that they achieve maximum productivity across the year. Another advantage of the level production strategy is that the company retains a fixed workforce throughout the year. Manufacturers do not have to bother with finding additional workers or paying for overtime since the firm can achieve its targets with existing employees and work hours.
The most significant disadvantage of this strategy is that businesses need to spend a lot in product storage. Additional warehouses have to be built in order to accommodate products designed during periods of low demand. Storing products for long periods also expose them to risks such as vandalism and unpredictable disasters which might wipe out significant amounts of inventory. The other disadvantage is that it is difficult to make an accurate demand forecast, meaning that a company can end up with excessive products in storage after the peak demand period. Alternatively, higher than expected demands can create a situation where manufacturers have no inventory to meet product demands.
Level production plans can be designed using three simple steps. The first step is the most critical step, and it involves making forecasts of the anticipated demand. Once this demand is predicted, a manufacturer can get a rough idea of the output that will be required on a weekly or monthly basis. The second step involves deciding the amount of inventory that should remain at the end of the year. The inventory at the beginning of the year is then subtracted from the inventory that will be required at the end of the year. A positive result will mean that production will need to exceed the anticipated demand. On the other hand, a negative value will indicate that production will be lower than the forecasted demand. The third and final step involves dividing the number of products that the firm will need to manufacture in order to meet the anticipated demand by the number of work periods in weeks. The manufacturer will need to consider factors such as holidays and scheduled maintenance work when determining the number of weeks.
The level production strategy can be applied in a number of business settings. A business setting that is appropriate for this strategy is a business that wants to change its inventory levels. This applies to products that have seasonal variations in demand with peak demand seasons where demand is extremely high. A relevant example of this setting can be found in the agricultural industry which is seasonal. Manufacturers of products such as fertilizers can change inventory levels in order to prepare for planting seasons that require vast amounts of fertilizers.
Firms that have plans for expansion also create a business environment in which the level production strategy can be used. These firms can use level production to increase inventory at a gradual pace as they prepare to expand or enter new markets. Expansion into new markets requires businesses to lay a lot of groundwork in these markets. Some of these requirements include constructing sales branches, advertising, renting storage space and arranging for the transportation of products. The level production strategy can help to reduce the costs of expansion since manufacturers do not have to increase production suddenly to meet the demands of a wider market.
Another setting in which the level production can be used is when a manufacturer is obsessed with quality. Products that have the highest quality often require production to be handled at a pace that is carefully specified. A relevant example can be found in the auto industries where vehicles stay on the manufacturing line for a specified duration. The level production strategy allows businesses in such industries to ensure that the quality of their products remains consistent. In addition to this, it would be impossible for manufacturers to alter productivity radically in order to meet sudden demands. This is because the processes in such environments depend on machines that are time constrained meaning that employees can do nothing to alter productivity.
The level production strategy can also be used in business settings that require highly skilled labor. One of the beneficial aspects of this strategy is that work is spread across the year. This is advantageous because the manufacturers can afford to retain highly skilled labor throughout the year. This increases their motivation since the constant work flow helps to give workers a sense of job security. Manufacturers also avoid having to find these highly skilled workers who are in demand during peak demand seasons, or force them to work extra hours to meet demand.
Team member organization can also apply these concepts in managing their operations. The main difference is that the forecasting needs to consider the capabilities of individual teams so that production can be shared according to the abilities of the various teams. Another difference is that provisions for team failures will need to be created so as to ensure that the organization can meet its overall production goals. These provisions can be in the form of allowing some teams to operate below their maximum capacity so that they can be able to increase production when the other teams face problems or shut down for maintenance.