PRODUCTION PLANNING

What Is a Production Plan?

A production plan describes in detail how a company’s products and services
will be manufactured. It spells out the production targets, required resources,
processes and overall schedule. The plan also maps all of the operational
steps involved and their dependencies. The goal is to design the most efficient
way to make and deliver the company’s products at the desired level of
quality. A well-designed production plan can help companies increase output
and save money by developing a smoother workflow and reducing waste.

Production planning involves developing a comprehensive strategy for making

the company’s products and services. Initially adopted by large
manufacturers, production planning has since become more popular among
small and midsize businesses in multiple industries — largely because
technology has made it easier to plan and track production processes with
less effort. Production planning covers many different aspects of production,
from forecasting demand to determining the raw materials, workforce,
equipment and steps needed to make the company’s products.

Product Planning
Production planning is a broad discipline that involves much more than a
focus on manufacturing process efficiency. It is intertwined with nearly every
other aspect of the business, including finance, sales, inventory and human
resources. Production planning activities include demand forecasting to
determine the right mix of products to meet customer needs, as well as
selecting the optimal approach to building those products. Production planning
also assesses the resources needed to meet production goals and lays out in
detail all the operations in the production process. Production plans must
include the flexibility to make operational adjustments when problems occur
— such as machine breakdowns, staffing shortages and supply-chain
problems.

Why Is Production Planning Important?

A well-constructed production plan can help to boost revenue, profit and
customer satisfaction, while a poorly designed plan can cause production
problems and perhaps even sink the company. Specific benefits of production
planning include:

§ Knowledge. A production plan provides a framework for understanding

the resources and production steps required to meet customer needs. It
also helps companies understand the potential problems that may occur
during production and how to mitigate them.
§ Efficiency. Detailed production planning reduces bottlenecks and helps
minimize costs. It also helps ensure the high quality of a product, and it
keeps expenses on budget.
§ Customer satisfaction. Production planning helps ensure that the
company can make and deliver products to customers on time, leading
to higher customer satisfaction and a greater likelihood of repeat
business.
Types of Production Planning
The design of a product plan depends on the production method that the
company uses, as well as other factors, such as product type, equipment
capabilities and order size. Here are three of the main types of production
planning:

§ Batch production planning.

Refers to manufacturing identical items in groups rather than one at a
time or in a continuous process. For some businesses, batch production
can greatly increase efficiency. A bakery creating items for sale the next
day might first make a batch of chocolate chip cookies, then move on to
oatmeal raisin cookies followed by loaves of semolina bread. A clothing
manufacturer making goods for the summer might first set up its cutting
and sewing machines to make 500 navy-blue T-shirts, then switch to
red fabric and thread to make 400 tank tops. A good production plan for
batch processing should look out for potential bottlenecks or delays
when switching between batches.

§ Job- or project-based planning.

Used by many small- and medium-sized businesses, job production
planning focuses on the creation of a single item by one person or team.
Job-based planning is typically used where the specificity of each
client’s requirements means it is difficult to make products in bulk. Many
construction businesses use this method. Makers of custom jewelry and
dresses are other examples of businesses that may use job production
planning.

§ Flow production planning.

In flow production, also known as continuous production, standardized
items are continuously mass-produced on an assembly line. Large
manufacturers use this method to create a constant stream of finished
goods. During production, each item should move seamlessly from one
step along the assembly line to the next. Flow production is most
effective at reducing costs and delays when there’s steady demand for
the company’s products. Manufacturers can then readily determine their
needs for equipment, materials and labor at each stage along the
assembly line to help streamline production and avoid delays. The
automotive industry and makers of canned foods and drinks are among
the companies that use this method.
5 Steps to Make a Production Plan
Production planning is a robust undertaking that starts with forecasting and
includes process design and monitoring. Here are five typical production
planning steps:

1. Forecast product demand.

Estimate how much of each product you’ll need to produce over a
designated period. Historical data can help with forecasting, but you’ll
also need to pay attention to other factors that can affect demand, such
as market trends and the economic situation for your customer
base. Demand planning software can help companies make more
informed decisions about the right amount of product needed to meet
demand.

2. Map out production steps and options.

This step determines the processes, steps and resources needed to
produce the required output. At this stage, the company may also
examine different options for achieving its production goals, such as
outsourcing some stages. The production mapping identifies which
steps are interdependent and which can be performed simultaneously.
Let’s say the job is to produce 1,000 children’s bicycles. Manufacturing
the bicycle frames consists of a series of steps that must happen in
sequence — cutting metal tubes, welding and painting — while other
activities like assembling wheels can occur in parallel. Do you have all
the right equipment? What happens if a machine breaks down? Are
your suppliers able to meet your demand?

3. Choose a plan and schedule production.

Select a production plan after comparing the cost, time required and
risks for each option. Sharing the selected plan with all necessary
stakeholders typically helps assure a smoother production process
since all the stakeholders are aware of what’s needed. Create a detailed
production schedule that lays out in detail how the company will execute
the plan, including the resources and timing for each step.
 4. Monitor and control.
Once production has begun, you’ll need to track performance and
continually compare it against the targets described in the production
plan. Careful monitoring helps the company to detect any issues as
soon as they pop up, so they can be quickly addressed.

5. Adjust accordingly.
It’s almost inevitable that production will be affected by events that you
can’t plan for or predict. Those events can include changes to client
specifications, supply chain lags, equipment failures and worker illness.
You may also see ways to improve the production plan after seeing it in
action for a while. So it’s vital to keep production plans flexible enough
to allow for adjustment when needed. Football coaches often make
adjustments to their game strategy at halftime — and the same holds
true for production planning.

Production Planning KPIs

Key performance indicators (KPIs) are important metrics that help companies
track the health of their production processes. By monitoring KPIs and
comparing them to target values defined in production plans, businesses can
determine whether production is on track and pinpoint problems that need to
be addressed. Typical production KPIs include:

§ Downtime.
This key efficiency metric tracks the percentage of time that production
is not occurring during scheduled operating hours. Causes include
machine breakdowns, tool adjustments and accidents. Some downtime
may be necessary for functions such as machine maintenance, but
generally, the less downtime the better.

§ Setup time.
Also referred to as changeover time, this is the amount of time it takes
to switch between jobs. Setup time impacts overall productivity because
 production is halted during these periods. Production schedules should
consider how much time and effort it takes to reconfigure production for
each job, including changes to the equipment, raw materials and
workforce. Designing production schedules to minimize changeover
time can increase efficiency.

§ Production rate.
In a manufacturing environment, this is typically measured as the
number of units produced during a specific period. Comparing the actual
production rate for each process with the planned rate can help
businesses identify strengths and weaknesses and begin to address
problems.

§ Overall equipment effectiveness (OEE).

This is a measure of overall manufacturing productivity that accounts for
quality, performance and availability. The formula for OEE is:

OEE = Quality x performance x availability

Quality is typically measured as the percentage of parts that meet

quality standards. Performance is how fast a process is running
compared to its maximum speed, which is expressed as a percentage.
Availability is the percentage of uptime during a company’s scheduled
operating hours. Increasing OEE can be achieved by lowering
downtime, reducing waste and maintaining a high production rate.

§ Rejection rate.
This is the number or percentage of products that failed to pass quality
checks. Depending on the nature of the product and the problem, it may
be possible to salvage some rejected items by reworking them, while
others may need to be scrapped.
 § On-time orders.
Production delays can be costly both in terms of money and reputation.
Generating products on schedule means you’re less likely to need
costly expedited shipping or other emergency measures to meet
deadlines. And delivering orders on time helps keep customers happy,
which means they’re more likely to keep doing business with your
company.

Production Planning Tools

Businesses rely on a variety of tools to build production plans and track
progress, ranging from visualization tools to sophisticated software that
automates many of the steps involved. Typical tools include:

§ Gantt charts.
A Gantt chart is a detailed visual timeline of all the tasks scheduled for a
particular job. More than 100 years since its invention by mechanical
engineer Henry Laurence Gantt, this chart remains integral to
manufacturing and many other industries. Production planning involves
coordinating and scheduling many tasks, and the Gantt chart visually
represents when each task will take place and how long it will last.
Manually creating and updating Gantt charts to reflect complex, ever-
changing production schedules can be a time-consuming and error-
prone job, however.

§ Spreadsheets.
Small companies sometimes start out by tracking simple production
plans using spreadsheets. However, for most companies, the inherent
complexity of production planning quickly outstrips the capabilities of
spreadsheet software.

§ Production planning software.

Production planning involves a wide range of activities, including
forecasting, managing the supply chain, tracking inventory and
 scheduling jobs. Those activities require information from across the
company and beyond. Production planning information is integral to
business operations and is used by other groups within the company,
including finance. That’s a key reason many companies use enterprise
resource planning (ERP) application suites that include production
planning software and provide a single solution for managing the entire
business.

Example of a Gantt chart tracking planning, research, design, implementation, and follow-up
phases of a project.