What Is Production Planning?
Production planning is the process of generating a general output level called a production plan. This process also includes other activities required to meet current overall sales levels. Also, as stated in the general business plan of the company, it meets overall goals of profit, efficiency, lead time, and customer satisfaction. The managerial purpose of production planning is to develop an integrated plan, in which the operations department will be the focus of the production plan. In this case, besides linking the strategic goals of the company to its operations (production function), a production plan should coordinate the processes with sales targets, resource availability, and financial budgets.
Besides generating production plans, the production planning process also includes comparing sales requirements with production capacities and including budgets, preparation of financial statements, and support plans for material and labor requirements.
The Main Purpose of Production Planning
The main purpose of production planning is to determine the production rates, which will allow the management to achieve the goal of meeting customer demand. Employment satisfaction can be achieved by maintaining, increasing, or reducing inventories or backlogs while keeping the workforce relatively stable. If a company implemented the right philosophy in time, it will use a follow-up strategy, which means satisfying customer demand, while keeping its inventories at a minimum. Since the plan affects many company functions, it is naturally prepared with data from marketing and coordinated with manufacturing, engineering, finance, materials, etc. functions. Recently, another concept, sales planning, and process planning have been used to more accurately express the concern about coordinating various critical activities within the company.
Production planning sets key objectives for working in each of the main functions. It should focus on the best sales and marketing objectives, cost of manufacture, planning, error-free inventory objectives, and financial objectives for the firm as a whole. All these should be integrated with a strategic view of where the company wants to expand its operations to. The production planning process typically begins with an updated sales projection covering between 6 to 18 months. Any desired increase or decrease in inventory or backlog levels can be included or removed from the production schedule. However, the production plan is not a demand projection. It plans the production on a total basis. An effective production planning process often uses open timesheets as it is not known when the overall plan can be changed (increased or decreased). Also, there may be restrictions on the degree of change (amount of increase or decrease).
Production planning also provides direct communication and consistent dialogue between the operations function and top management, as well as between operations and other functions of the company. Therefore, the production plan should be stated in definitions that make sense to everyone within the company but not just the business manager. Since production planning has a significant role in production, this process can be responsible for a company’s success or failure in these key areas of responsibility. Production planning also helps organizations examine how sales and distribution and materials management are carried out. Improving these areas has a positive outcome in all departments of a company.
As a result, production planning has a direct influence on finance. Also, since planning can monitor how organizations reach their customers and make sure that the optimal number of staff is available for the different processes, it is related to other fields such as quality management and human resources.
Production Planning and Projected Demand
You need to research how much product you need to produce in a given time frame and achieve a rate with a 10% fire rate. This includes both confirmed orders and projected orders. There are different methods used for projection. Product demand projection can be determined based on historical data (orders placed by customers in the past) or you can consider events that may change past patterns in your business environment (new market trends, a stagnant economy, new marketing campaigns, etc.).
Determining Production Options
Investigate different production options to meet anticipated demand. Start by mapping all the steps of your production process by using tools such as flowcharts. This will help you examine how to improve the process flow by considering challenges.
Later, identify the resources you need to complete each task involved in your production process. This should include the combination of resources such as human resources, machinery, equipment, materials, and inventory. Analyzing these resources will provide you with a better view of your production options.
Using Resources Most Effectively
A comparison of the production cost and production time of each production option should be carried out and the most accurate steps should be taken to maximize the company’s operating capacity. You need to make sure that you can afford the associated costs, which include purchasing supplies, office rent, paying salaries, leasing, and more. You need to share the production plan with the departments and personnel related to the process and make the processes more seamless by predicting which materials and equipment will be needed for the tasks in the production process.
Monitoring and Control: The plan must be compared with the possible scenarios to ensure that it will work as intended. When this control system is established, it will help you to identify the problems and provide you more time to develop solutions to them.
Revision / Adjustment: Get ready to revise or adjust the plan if necessary. A company must have some financial flexibility to meet changes in customer demand. This plan should also include a risk reduction plan, which covers if certain risks arise in the production process, such as machine failure, employees getting sick, or suppliers not delivering on time.