6.6.3 Where production management could be applied?

Recent business success stories include many firms for whom production management is a strategic competitive weapon. Wal-Mart for example cut warehouse inventory to a minimum allowing (and sometimes forcing) suppliers to manage shelf inventory at the store level. It is no surprise that many competitors have closed their doors.

One lesson that arises from comparative research among several industries regarding production management importance is that top-managers of successful firms are directly involved with setting aggregate inventory and production planning policies. They rightly consider it an integral part of corporate strategy.

Managers at a chemical firm set an inventory budget for each plant. Needles to say, every plant manager allowed inventories to grow to that level, without considering the benefits of inventory reduction. The owner of a mid-sized manufacturing firm directed his managers to reduce inventory by one-third, across the board. What he missed was the consequences for customer service. Later investigations revealed that inventories could, in fact, be reduced without sacrificing service, but by significantly less that one third.

Clearly to properly recommend an inventory management or production planning and scheduling system, you need to know more than just the industry in which a firm operates. You need to understand the attitude of top managers toward these issues and you need to be prepared to patiently work to establish the necessity of change and the magnitude of the benefits.