Saint Louis College

City of San Fernando 2500 La Union

11

Hospitality Management and Tourism

HAND-OUT

Lesson 5:
THE PRODUCTION PLAN
Objectives.
At the end of the lesson, the students are expected to:
a. discuss the parts of the production plan; and
b. craft out their own production plans.

INTRODUCTION
Production planning is crucial for efficient production. Production planning is vital to fulfil orders
on time. If you don’t know your stock levels, workstation availability, or job schedules, you won’t be
keeping your customers happy.

PRODUCTION PLAN

A production plan serves as a guide for your company’s production activities. It establishes and
sequences activities which must be carried out to achieve a production target, so that all staff involved are
aware of who needs to do what, when, where and how.

A production plan will help you meet product demand while minimizing production time and cost
by improving process flow, reducing the waiting time between operations, and optimizing use of plant,
equipment and inventory. In order to do this, you must align your production plan to your business
strategy and business plan, and support production planning by coordinating with other departments, such
as procurement, finance and marketing.

WHAT IS PRODUCTION PLANNING?

Production planning is the planning and allocation of raw materials, workers, and workstations
to fulfil manufacturing orders on time. It is an administrative process that takes place within a
manufacturing business and that involves making sure that sufficient raw materials, staff and other
necessary items are procured and ready to create finished products according to the schedule specified.

A good production plan makes the best use of available resources to deliver orders on time.
Production planning helps to plan the procurement of raw materials based on the quantity of finished
products to be manufactured. It also affects inventory, cash flow, sales, and distribution.

(THC 10) Entrepreneurship in Tourism and Hospitality

 There are several important points which an entrepreneur has to consider in production
planning:

1. Plan the delivery and supply level of materials and purchased parts so that you never run out of
stock.

2. Plan the jobs to be done so that as soon as a worker has finished one job, there is another ready
for him.

3. Plan your machine maintenance so that machines stop only when you want to and don’t
breakdown during the production.

COMPONENTS OF PRODUCTION PLANNING

In production planning, the components are: facility location, facility layout, materials-
requirement planning (MRP), and inventory control.

A. FACILITY LOCATION

Of all the pieces of the planning puzzle, facility location is the most strategic and critical. Once
you build a new manufacturing facility, you have made a substantial investment of time, resources, and
capital that can’t be changed for a long time. Selecting the wrong location can be disastrous.

Where will the business locate its factory? In deciding where to locate, there are several factors
which need to be considered by the entrepreneur.

A checklist for consideration is as follows:

 distance from raw materials sources

 distance from the target market
 availability and accessibility of transportation and other facilities
 labor availability
 power availability and reliability
 water availability and reliability
 availability of waste disposal facilities
 rental cost or construction cost
 land / space needs and availability

It is important to have prospective entrepreneurs evaluate each of the foregoing consideration as

there are inherent costs associated with each. The best location would be that place where the project will
incur the lowest initial investment and the lowest cost of operations.

B. FACILITY LAYOUT

After deciding on the location the next important thing is to have the prospective entrepreneur
map out the floor plan of the area to be used for the business. This means determining what is the step-by-
step process flow in producing the product and what machines will be needed if any? The floor plan
should be adapted to the process flow for production efficiency.

(THC 10) Entrepreneurship in Tourism and Hospitality

 The primary aim of facility layout is to design a workflow that maximizes worker and production
efficiency. Facility layout is complex because it must take into account the available space, the
work processes, the delivery of components and parts, the final product, worker safety, and operational
efficiency. A poorly laid-out production facility creates inefficiencies, increases costs, and leads to
employee frustration and confusion.

C. PROCESS LAYOUT

A process layout aims to improve efficiency by arranging equipment according to its function.

Ideally, the production line should be designed to eliminate waste in material flows, inventory handling,
and management. In process layout, the work stations and machinery are not arranged according to the
production sequence. Instead, there is an assembly of similar operations or similar machinery in each
department (for example, a drill department, a paint department, etc.).

D. PRODUCT LAYOUT

In a product layout, high-volume goods are produced efficiently by people, equipment, or

departments arranged in an assembly line—that is, a series of workstations at which already-made parts
are assembled.

E. MATERIAL-REQUIREMENTS PLANNING (MRP)

After the facility location has been selected and the best layout has been determined, the next
stage in production planning is to determine our material requirements.

Material-requirements planning (MRP) is a production planning, scheduling,

and inventory control system used to manage manufacturing processes.

An MRP system is intended to meet the following objectives simultaneously:

 Ensure that materials are available for production and products are available

for delivery to customers
 Maintain the lowest possible material and product levels in store
 Plan manufacturing activities, delivery schedules, and purchasing activities

What types of machinery and equipment will be needed? How will they be acquired? It is
important that prospective entrepreneurs make the right decision in acquiring the machinery and
equipment needed for the business.

Failure to do so may give rise to any or all of the following:

 paying more than what is necessary to buy the equipment;

 acquiring equipment that is not actually needed;
 incurring high overhead expenses due to machine breakdown, repair costs, high energy
consumption, etc.;
 prolonged machine downtime because of non-availability of machine replacement parts
and /or services;

(THC 10) Entrepreneurship in Tourism and Hospitality

  poor quality products / high percentage of rework because of wrong machine specifications;
and
 cash flow problems.

Next, it is important to determine how many units will be produced initially to meet the proposed
share of the market. From here, the entrepreneur should be able to estimate his/her:

a) raw material requirements and their attendant costs;

b) daily production volumes;
c) direct labor requirements and attendant costs;
d) indirect labor requirements and attendant costs; and
e) indirect cost or overhead.

JUST-IN-TIME (JIT) MANUFACTURING

Just-in-time (JIT) manufacturing is strategy that companies employ to increase efficiency and
decrease waste by receiving goods only when they are needed in the production process, thereby reducing
inventory costs. In theory, a JIT system would have parts and materials arriving on the warehouse dock at
the exact moment they are needed in the production process. To make this happen, manufacturers and
suppliers must work together closely to prevent just-in-time from becoming just-isn’t-there. Operations
managers must accurately forecast the need for materials, since even the slightest deviation can result in a
slowdown of production.

It is always wise to have potential entrepreneurs practice the following production objective:
Work for the optimum utilization of resources (materials, labor, equipment and capital) to reduce
production costs and improved productivity; but never sacrifice quality for the sake of reducing costs.

(THC 10) Entrepreneurship in Tourism and Hospitality