Production planning is an area for top management decisions through which production plans, programmes and targets are spelled out. Production planning process starts well before the completion date so that sufficiently long time is given to the management to enable it to consider “alternative courses of action and authorize major commitments for materials, manpower, and plant facilities.”

Materials planning are a part of production planning. In fact for an effective inventory control, production plans should be converted into materials plans. This enables the management in clearly defining the quantity and schedule of the equipments. In the integrated materials arrangement, production and materials planning get a pride of place. Inventories consume a larger part of working capital. For best possible utilization of available capital resources, a material, planning is resorted to. It enables the management to anticipate the future materials demands. Such anticipation helps in managing the materials in a manner in which it enables the organization to
accomplish the given objectives. Infact, materials planning provides a mechanism for inventory control.

Materials planning defined
Materials planning” is the scientific way of determining the requirements of raw materials, components, spares and other items that go into meeting production needs within the economic investment policies.” As the definition goes, materials planning are a function and are a system which evolves methodology to plan the requirements of materials in a scientific manner. It is positively related with production which follows market conditions and sales forecasts. Further it cannot ignore the economy and the investment policy of the organization. These two factors also go side by side.

Factors affecting Material Planning
The following are the two factors which affect materials planning substantially:

1. The external Factors, and
2. The Internal Factors.

In economic terminology, external factors may be termed as macro factors which may be enumerated as under:
1. National Economy
2. Price Trends.
3. Monetary and Fiscal Policy of the Government:

  • Credit Regulations,
  • Direct and Indirect Taxes,
  • foreign Exchange regulations,
  • Import Policy, and
  • International Market, etc.

4. Business Cycles, and
5. Other factors which usually fall under factors not within the reach of the organization, that is, uncontrollable factors.

The internal factors, affecting materials planning may be termed as micro factors or incorporate factors, are as listed below.
1. Corporate objectives and plans;
2. Technology available;
3. Market demand
4. Lead time and rejection rates
5. Working capital available
6. Nature of the inventory required and help;
7. Plant capacity and its utilization
8. Inventory levels;
9. Seasonal variations and market supply position;
10. Information and data available;
11. Delegation of power;
12. Communication system
13. Warehousing facilities available; and
14. Overall materials policy

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