Get to know the vital terms of Logistics and Supply Chain Management.
It is the firm planned order, which is the confirmed production or purchase order where all details such as the number of items and when they should be produced or delivered are agreed upon. The FPO is locked because of the adjustment in demand or schedule, hence, it cannot easily change. It is a standard critical part of production or inventory management.
For an FPO, the quantity for its production or order is decided in advance. Similarly, the scheduling of the production or delivery is set. This makes it very important in order to maintain consistency in planning and in the supply chain.
An FPO is regarded as an integral part that truly indicates a company’s desire to stick to a set or proposed production and/or purchase schedule. This minimizes uncertainty and conflict in complex supply chains where last-minute changes may lead to costly disruptions.
After an order is made to a firm, there is little flexibility left to change the order. This is why FPOs are normally applied if the forecasts regarding demand are very assured, or if the production dates have to be followed strictly, such as in industries with long lead times and high degrees of customization.
In more recent supply chain and production management systems, FPOs will often be part of material requirements planning (MRP) or enterprise resource planning (ERP) systems. In this way, it can be guaranteed that the raw materials and resources needed are indeed available.
FPOs are especially ideal when companies wish to retain stability or prevent inconvenience. They could be used, for instance, in a custom or specialty product manufacturing arrangement in which a change to the manufacturing schedule would be expensive or even endanger the entire process. They also prove to be an integral part of any business with long lead times in the acquisition of the right materials or production slots ahead of time to produce to order.
In conclusion, a firm planned order is strategic at the production and supply chain management levels. Setting fixed quantities and schedules, it enables firms to commit to specific production plans while ensuring that all resources are allocated to the right places and times. FPOs will stabilize and predict flux while being required to plan very carefully not to force changes that may seem to have to be made as a constraint to inefficiencies or delays.