Operations

Production Plan

Production planning is “the 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”, as defined by the Business Dictionary.

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.

The diagram above shows the production planning and control process divided in
five steps:Estimate your demand, so that you know how many products you need to
produce during a specific time period. You may have already some confirmed orders
for the next couple of month, but on top of that, you need to predict how many more
may come.

Different methods exist to forecast your product demand. A traditional technique to

estimate product demand is based on historical information (e.g. orders placed by
your customers in the past). While this is a very common method, you need to
consider external and internal events in your business environment that could alter
past patterns. For example, new market trends, a slowdown in the economy, or a
new marketing campaign that could increase or decrease your product demand
compared to what happened in the past.Determine the different production options
available to meet the forecasted demand of your product. For example, if you want to
produce 100 shirts, you need to use a certain number of machines, human
resources, materials, and time. Different combinations of these inputs can lead to
different production times and costs.

a. Start by mapping all the steps of your production process. When doing so,
take into account if tasks are sequenced or dependent on other tasks, or if they
happen simultaneously or independently. Below is an example of how a simple
process-mapping flowchart could look. Each box represents a task of your
production process. The map of the production process will be different and unique
to each company. Think about how to improve process flow by eliminating
bottlenecks.
b. Determine the resources needed to complete each task involved in your
production process.

Look at how different combination of resources lead to different production times and
costs:

Human Resources. Determine the number of staff that will be involved in each
phase of the production process, their availability, and the cost. Make sure their time
is well utilized.

Machinery and Equipment. Identify the machines needed and their availability,
including any maintenance or replacement that may be needed.

Materials. Make a list of all the materials needed for production and how you obtain
them. Assess the reliability of your suppliers, including delivery time. Having
materials available when needed is crucial for the production process.

Inventory. It is important that you consider how to optimize your inventory. Keeping
a large inventory is expensive, but keeping a low inventory is risky if demand
fluctuates on a regular basis. Having a good inventory control system in place can
help your firm accommodate variations in demand and mitigate possible problems or
delays that may occur during the production process.Compare the cost and time of
each potential production option and choose the option that uses the most efficient
combination of resources and that allows you to meet product demand. The chosen
option should maximize the operational capacity of your firm.

Always make sure you can cover the costs involved in the production process
(purchase of materials, office rent, payment of staff salary, leasing, etc.)

You need to share your production plan with all the departments and staff that
contribute or interact with the production process, including human resources,
procurement, finances, marketing, etc. If everybody knows what to do, and what
materials and equipment should be used for each task of the production process,
operations will be smoother.You want to ensure that your plan is working in the way
it is intended. Monitoring and controlling is about comparing what is happening with
what should be happening. Having a control system in place helps you detect
problems as soon as they occur, allowing you more time to correct before it is too
late.

Be prepared to adjust the plan if needed. The production plan needs to be flexible to
accommodate changes in customers’ demand (e.g. an important order that gets
cancelled). Also, you need to take into account possible risks that may arise during
the production process (e.g. a machine breaks, a worker gets sick or a supplier does
not deliver on time) and have a risk mitigation plan.
Inventory is the value of materials and goods held by an organization (1) to support
production (raw materials, subassemblies, work in process), (2) for support activities
(repair, maintenance, consumables), or (3) for sale or customer service
(merchandise, finished goods, spare parts).