6.6.2 Why production strategies are important?

A typical medium-sized manufacturing concern keeps an inventory of approximately 10.000 types of raw materials, parts and finished goods. Items produced and held in inventory can differ in many ways. The may difference is cost, weight, volume, colour or physical shape. Units may be stored in barrels, on pallets in cardboard boxes or loose on shelves. They may be perishable because of deterioration over time, perishable through theft and pilferage or subject to obsolescence because of style or technology.

Demand for items can also vary in many ways. Items may be withdrawn from inventory by the thousands, by the dozen or unit-by-unit. They may be substituted for each other, so that, if one item is out of stock the user is manually willing to accept another. Items can also be complementary; customers will not accept one item unless another is also available. Units could be picked up by a customer or they may have to be delivered by company-owned vehicles or shipped by rail, boat, airplane or truck. Some customers are willing to wait for certain types of products while others expect immediate service on demand. Taking into account all the above considerations there is no unified model for production strategy as there are many internal and external factors involved in a real production system and most of them uncontrollable.

Did you know that some big manufacturing SMEs stock more than 500.000 distinct items in inventory while big retailers, such as department stores, carry about 100.000 goods for sale?