Latest news with #productioncapacity
Forbes
2 days ago
- Business
- Forbes
A Unified Framework For Inventory Optimization And Capacity Management
Dileep Kumar Rai is a global supply chain optimization expert, Oracle Fusion Cloud architect and demand forecasting leader. Modern supply chain operations present companies with two essential challenges: managing inventory levels properly to prevent excessive and insufficient stock and maintaining production capacity that matches changing market demands. While the separate management of these challenges creates siloed approaches, their combined impact determines customer satisfaction, operational efficiency and profitability. The core issue remains basic, yet resolving it is extremely difficult: • Excessive inventory leads to increased holding costs, which reduces profit margins and blocks essential working capital. • Insufficient inventory levels create stockout situations, which results in missed orders, revenue loss and harm to customer trust. • Production bottlenecks operate in the background to reduce throughput, which restricts a company from fulfilling orders even when inventory is present. Maintaining optimal inventory levels becomes critical in industries producing custom orders and storing products with high value and low sales velocity. The supply chain experiences multiple friction points because of procurement lead times, variable demand, multi-stage assembly and quality testing. I suggest the integrated inventory-capacity optimization (IICO) framework to tackle these interconnected challenges. This organized method aligns inventory policies with production conditions, employing a closed feedback loop to foster improvement. The framework consists of four core pillars: Knowing when and how much to reorder to meet demand without overstocking is at the heart of effective inventory management. We apply the classic QR Model (order quantity-reorder point model) to calculate: 1.1 Q = sqrt((2 * λ * S) / h) Where: 1.2. ROP. = dL + Z * σL Where: This model ensures optimal replenishment timing and quantity while incorporating variability and service level requirements. By integrating it directly into an ERP or procurement system, companies can automate purchase triggers when inventory approaches the calculated reorder point (ROP). Meeting demand is not just about having inventory—it's about the ability to process it. The next step is to measure capacity utilization across production or assembly stations: Utilization(U) = Actual Throughput / Machine Capacity A station operating near or at full utilization (>90%) may become a bottleneck, limiting overall throughput. This metric must account for both initial production and any rework or retesting loops that increase the effective load on machinery. Once high-utilization stations are identified, companies must determine: A bottleneck analysis quantifies the cost of capacity constraints in terms of lost orders and revenue compared to the investment required to expand capacity. This provides leadership with a clear ROI case for capital expenditure. Production systems seldom operate in a steady state. The IICO framework includes a feedback loop: This cycle ensures that capacity adjustments and inventory policies evolve as demand, process efficiency and supplier reliability change. While this framework originated from a real-world solution implemented within a high-stakes aerospace supply chain, its principles apply broadly to any operation where: The IICO framework provides a scalable, adaptable roadmap for synchronizing procurement, inventory management and production capacity in industries ranging from electronics to pharmaceuticals, automotive to luxury goods. By bridging inventory optimization and capacity management, organizations avoid a common pitfall: addressing stock levels without considering production constraints. Conversely, adding capacity without aligning inventory policies risks idle assets or ongoing shortages. A unified approach ensures: Operational agility is non-negotiable in a world of rising customer expectations and global supply chain disruptions. The IICO framework offers a structured, actionable pathway for companies balancing cost, capacity and customer satisfaction. This model transforms inventory and production management from reactive firefighting into proactive, strategic control by embedding predictive analytics, continuous improvement and cross-functional collaboration. Organizations ready to close the gap between inventory decisions and capacity realities will find in this framework not just a tool but a competitive advantage. Forbes Technology Council is an invitation-only community for world-class CIOs, CTOs and technology executives. Do I qualify?
Times of Oman
23-05-2025
- Automotive
- Times of Oman
Honda to invest Rs 9.2 bn to expand production capacity of its fourth plant
New Delhi: Honda Motorcycle & Scooter India Pvt. Ltd (HMSI) on Thursday announced plans to expand production capacity at its fourth plant at Vithalapur, Ahmedabad district, Gujarat. This step is likely to raise the annual production by 650,000 units, which will bring the total capacity of the fourth plant to 2.61 million units and will be operational by 2027. "HMSI currently has four production plants in India with a total annual production capacity of 6.14 million units. In addition, the cumulative production volume reached 70 million units in April of this year, after 25 years since start of production in 2001," Honda said in a release. Honda set up its fourth plant in February 2016 and during that time annual production capacity was at 600,000 units. However, subsequently Honda added two more lines to its fourth pant, which brought annual production capacity to 1.96 million units. Honda is committed to invest approximately 9.2 billion rupees, for the construction of its fourth line, which likely to add 1800 new jobs. "Honda has long been investing and expanding its production capacity in India, the world's largest motorcycle market, to bring joy to its customers. 25 years on, with much support, HMSI has reached the milestone of 70 million units of cumulative production," said Tsutsumu Otani, President & CEO, HMSI. Honda expects to increase its total annual production capacity from the current 6.14 million units to approximately 7 million units in 2027 through further expansion of production capacity planned for other plants in India. On the other hand, Honda's cumulative global production of engine/motor-powered motorcycles has reached 500 million units, 76 years after the company began mass production of motorcycles in 1949 with the Dream D-Type. Honda has an annual production capacity of more than 20 million units in 23 countries and regions and 37 production entities. The company deliver products and services to customers worldwide through a network of more than 30,000 Honda dealers.
