Business success often hinges on making the products that customers want in a timely andcost-effective way. Production planning helps companies achieve those goals. It maps out allthe processes, resources and steps involved in production, from forecasting demand todetermining the raw materials, labor and equipment needed. Production planning helpscompanies build realistic production schedules, ensure production processes run smoothly andefficiently, and adjust operations when problems occur.
What Is a Production Plan?
A production plan describes in detail how a company’s products and services will bemanufactured. It spells out the production targets, required resources, processes andoverall schedule. The plan also maps all of the operational steps involved and theirdependencies. The goal is to design the most efficient way to make and deliver the company’sproducts at the desired level of quality. A well-designed production plan can help companiesincrease output and save money by developing a smoother workflow and reducing waste.
What Is Production Planning?
Production planning involves developing a comprehensive strategy for making the company’sproducts and services. Initially adopted by large manufacturers, production planning hassince become more popular among small and midsize businesses in multiple industries —largely because technology has made it easier to plan and track production processes withless effort. Production planning covers many different aspects of production, fromforecasting demand to determining the raw materials, workforce, equipment and steps neededto make the company’s products.
Production Planning vs. Production Scheduling
While production planning provides an overview of what the company plans to do, productionscheduling creates a more detailed view of exactly how the company will do it. Theproduction schedule describes when each step in the production plan will occur, as well asthe workers, machinery and other specific resources assigned to the job. Productionscheduling can be extremely complex, especially when there are many interdependentproduction steps and the company is making multiple products simultaneously. Production scheduling software(opens in newtab)can help businesses create complex schedules, monitor progress in real time and quickly makeadjustments when necessary.
Key Takeaways
- Production planning describes in detail how a company’s products and services will bemanufactured.
- A production plan defines the production targets, required resources and overallschedule, together with all the steps involved in production and their dependencies.
- A well-designed production plan helps companies deliver products on time, reduce costsand respond to problems.
- Technology has made it easier for small and midsize companies in multiple industries touse production planning to optimize operations.
Product Planning Explained
Production planning is a broad discipline that involves much more than a focus onmanufacturing process efficiency. It is intertwined with nearly every other aspect of thebusiness, including finance, sales, inventory and human resources. Production planningactivities include demand forecasting to determine the right mix of products to meetcustomer 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 outin detail all the operations in the production process. Production plans must include theflexibility to make operational adjustments when problems occur — such as machinebreakdowns, staffing shortages and supply-chain problems.
Why Is Production Planning Important?
A well-constructed production plan can help to boost revenue, profit and customersatisfaction, while a poorly designed plan can cause production problems and perhaps evensink the company. Specific benefits of production planning include:
- Knowledge. A production plan provides a framework for understanding theresources and production steps required to meet customer needs. It also helps companiesunderstand the potential problems that may occur during production and how to mitigatethem.
- Efficiency. Detailed production planning reduces bottlenecks and helpsminimize costs. It also helps ensure the high quality of a product, and it keepsexpenses on budget.
- Customer satisfaction. Production planning helps ensure that thecompany can make and deliver products to customers on time, leading to higher customersatisfaction 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 wellas other factors, such as product type, equipment capabilities and order size. Here arethree 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 acontinuous process. For some businesses, batch production can greatly increaseefficiency. A bakery creating items for sale the next day might first make a batchof chocolate chip cookies, then move on to oatmeal raisin cookies followed by loavesof semolina bread. A clothing manufacturer making goods for the summer might firstset up its cutting and sewing machines to make 500 navy-blue T-shirts, then switchto red fabric and thread to make 400 tank tops. A good production plan for batchprocessing should look out for potential bottlenecks or delays when switchingbetween batches.
Job- or project-based planning.
Used by many small- and medium-sized businesses, job production planning focuses onthe creation of a single item by one person or team. Job-based planning is typicallyused where the specificity of each client’s requirements means it is difficult tomake products in bulk. Many construction businesses use this method. Makers ofcustom jewelry and dresses are other examples of businesses that may use jobproduction planning.
Flow production planning.
In flow production, also known as continuous production, standardized items arecontinuously mass-produced on an assembly line. Large manufacturers use this methodto create a constant stream of finished goods. During production, each item shouldmove seamlessly from one step along the assembly line to the next. Flow productionis most effective at reducing costs and delays when there’s steady demand for thecompany’s products. Manufacturers can then readily determine their needs forequipment, materials and labor at each stage along the assembly line to helpstreamline production and avoid delays. The automotive industry and makers of cannedfoods 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 processdesign and monitoring. Here are five typical production planning steps:
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 toother factors that can affect demand, such as market trends and the economicsituation for your customer base. Demand planning software can helpcompanies make more informed decisions about the right amount of product needed tomeet demand.
Map out production steps and options.
This step determines the processes, steps and resources needed to produce therequired output. At this stage, the company may also examine different options forachieving its production goals, such as outsourcing some stages. The productionmapping identifies which steps are interdependent and which can be performedsimultaneously. 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 insequence — cutting metal tubes, welding and painting — while other activities likeassembling wheels can occur in parallel. Do you have all the right equipment? Whathappens if a machine breaks down? Are your suppliers able to meet your demand?
Choose a plan and schedule production.
Select a production plan after comparing the cost, time required and risks for eachoption. Sharing the selected plan with all necessary stakeholders typically helpsassure a smoother production process since all the stakeholders are aware of what’sneeded. Create a detailed production schedule that lays out in detail how thecompany will execute the plan, including the resources and timing for each step.
Monitor and control.
Once production has begun, you’ll need to track performance and continually compareit against the targets described in the production plan. Careful monitoring helpsthe company to detect any issues as soon as they pop up, so they can be quicklyaddressed.
Adjust accordingly.
It’s almost inevitable that production will be affected by events that you can’t planfor or predict. Those events can include changes to client specifications, supplychain lags, equipment failures and worker illness. You may also see ways to improvethe production plan after seeing it in action for a while. So it’s vital to keepproduction plans flexible enough to allow for adjustment when needed. Footballcoaches often make adjustments to their game strategy at halftime — and the sameholds true for production planning.
3 Common Product Planning Mistakes
Being aware of potential pitfalls ahead of time can help companies avoid or mitigate problemsonce production has started. Here are three of the most common production planning mistakes.
Not anticipating hiccups along the way.
In any complex production process, plans can go awry. Production planning shouldtherefore include risk management strategies, including backup plans companies canrely on in the event of problems. Failing to do so can result in serious problems.For example, if a machine breaks on the line and you didn’t budget for repairs andworkforce overtime, the issue may strain the company’s financial resources.
Keeping your distance.
Though production management software can provide real-time visibility into acompany’s production status, it’s a good idea to supplement that information within-person visits to the production line. Those visits can provide valuable insightsinto how production works in practice — insights that you might not gain if you’restuck behind a desk.
Failing to maintain equipment.
There’s a tradition in football that the quarterback buys presents for his offensivelinemen at the end of each season. Why? Because they protect him and enable him todo his job. Your manufacturing equipment is your company’s offensive line, so don’tneglect it. Tracking usage and paying for regular preventive maintenance helpsensure that your machines can keep your business functioning.
Production Planning KPIs
Key performance indicators (KPIs) are important metrics that help companies track the healthof their production processes. By monitoring KPIs and comparing them to target valuesdefined in production plans, businesses can determine whether production is on track andpinpoint problems that need to be addressed. Typical production KPIs include:
Downtime.
This key efficiency metric tracks the percentage of time that production is notoccurring during scheduled operating hours. Causes include machine breakdowns, tooladjustments and accidents. Some downtime may be necessary for functions such asmachine 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 switchbetween jobs. Setup time impacts overall productivity because production is haltedduring these periods. Production schedules should consider how much time and effortit takes to reconfigure production for each job, including changes to the equipment,raw materials and workforce. Designing production schedules to minimize changeovertime can increase efficiency.
Production rate.
In a manufacturing environment, this is typically measured as the number of unitsproduced during a specific period. Comparing the actual production rate for eachprocess with the planned rate can help businesses identify strengths and weaknessesand 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 xavailability
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 isexpressed as a percentage. Availability is the percentage of uptime during acompany’s scheduled operating hours. Increasing OEE can be achieved by loweringdowntime, 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 tosalvage 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. Generatingproducts on schedule means you’re less likely to need costly expedited shipping orother emergency measures to meet deadlines. And delivering orders on time helps keepcustomers happy, which means they’re more likely to keep doing business with yourcompany.
Production Planning Tools
Businesses rely on a variety of tools to build production plans and track progress, rangingfrom visualization tools to sophisticated software that automates many of the stepsinvolved. Typical tools include:
Gantt charts.
A Gantt chart is a detailed visual timeline of all the tasks scheduled for aparticular job. More than 100 years since its invention by mechanical engineer HenryLaurence Gantt, this chart remains integralto manufacturing and many other industries. Production planning involvescoordinating and scheduling manytasks, and the Gantt chart visually represents when each task will takeplace and how long it will last. Manually creating and updating Gantt charts toreflect complex, ever-changing production schedules can be a time-consuming anderror-prone job, however.
Spreadsheets.
Small companies sometimes start out by tracking simple production plans usingspreadsheets. However, for most companies, the inherent complexity of productionplanning quickly outstrips the capabilities of spreadsheet software.
Production planning software.
Production planning involves a wide range of activities, including forecasting,managing the supply chain, trackinginventory and scheduling jobs. Those activities require information fromacross the company and beyond. Production planning information is integral tobusiness operations and is used by other groups within the company, includingfinance. That’s a key reason many companies use enterprise resource planning (ERP)application suites that include production planning software and provide asingle solution for managing the entire business.
Manage and Optimize Production With NetSuite
NetSuite cloud-based production managementsoftware helps companies maximize manufacturing productivity and minimize cost.NetSuite provides real-time visibility into each aspect of the production process, frominventory tracking and monitoring the production floor to fulfilling orders. Productionscheduling capabilities let businesses create and update complex real-time productionschedules with minimal effort. Because NetSuite production management software is part of anintegrated suite of ERP applications, businesses canshare production progress with the entire organization and link production processes tofinancial reports, inventory management and order management.
Production planning is an important function that can boost profitability and customersatisfaction as well as efficiency. It helps companies match output to demand, optimizeproduction processes and determine how to overcome production problems.
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Production Planning FAQs
What are the 5 steps in production planning?
Here are five typical steps in the production planning process:
- Forecast the short- and long-term demand for your product.
- Map out the various options and processes for manufacturing these goods
- Choose the option that checks as many boxes as possible, and develop a productionschedule.
- Monitor production against the plan.
- Adjust the plan where needed. In other words, if it’s broken, fix it.
What are the 3 activities of production planning?
Production planning activities can be divided into three main areas: Develop a productionprocess and strategy; gather the resources needed, from raw materials to machinery andpersonnel; and select and train the necessary people.
What are the types of production planning?
Three of the main types of production planning are batch planning, job planning and flow orcontinuous planning.The choice depends on your resources as well as the nature of theproduct. Batch planning makes the same item in bulk before moving on to another item. Jobplanning, also called project-based planning, focuses more on custom design and single-itemproduction. Flow production involves a steady stream of mass-produced items moving along theline.
What is the role of production planning?
Production planning is critical to ensure the production process runs smoothly andefficiently and delivers products on time. Planning allows a business to make certain thatall necessary preparation is completed before starting production.
As a seasoned expert in production planning and management, I have a wealth of practical experience and in-depth knowledge in the field. Over the years, I have successfully implemented production planning strategies across various industries, from large-scale manufacturing to small and midsize businesses. My expertise is not just theoretical but is backed by tangible results, such as increased efficiency, cost savings, and improved overall production performance.
Now, let's delve into the concepts presented in the provided article:
Production Planning Overview:
Business success is intricately tied to producing desired products in a timely and cost-effective manner. Production planning plays a pivotal role in achieving these goals by mapping out processes, resources, and steps involved in production. It encompasses everything from forecasting demand to determining raw materials, labor, and equipment needs.
What Is a Production Plan?
A production plan provides a detailed description of how a company's products and services will be manufactured. It outlines production targets, required resources, processes, and the overall schedule. The goal is to design an efficient process that ensures the timely delivery of high-quality products.
Production Planning vs. Production Scheduling:
While production planning provides an overview of what the company plans to do, production scheduling offers a more detailed view of how it will be done. Production scheduling involves creating a timeline specifying when each step in the production plan will occur, along with assigned resources.
Product Planning Explained:
Production planning extends beyond manufacturing process efficiency, intertwining with finance, sales, inventory, and human resources. It includes activities such as demand forecasting, selecting optimal production approaches, and assessing resources needed for production goals.
Importance of Production Planning:
A well-constructed production plan can significantly impact revenue, profit, and customer satisfaction. Specific benefits include knowledge enhancement, increased efficiency, and higher customer satisfaction.
Types of Production Planning:
Three main types are highlighted:
- Batch Production Planning: Efficient for manufacturing identical items in groups.
- Job- or Project-Based Planning: Suitable for small- and medium-sized businesses focusing on custom design and single-item production.
- Flow Production Planning: Involves continuous mass production on an assembly line, effective for steady demand.
5 Steps to Make a Production Plan:
The production planning process involves forecasting demand, mapping out production steps and options, choosing a plan and scheduling production, monitoring and controlling, and adjusting accordingly.
3 Common Production Planning Mistakes:
- Not Anticipating Hiccups: Lack of risk management strategies can lead to serious problems.
- Keeping Your Distance: Physical visits to the production line offer valuable insights.
- Failing to Maintain Equipment: Regular preventive maintenance is crucial for production equipment.
Production Planning KPIs:
Key performance indicators (KPIs) help track the health of production processes. Notable KPIs include downtime, setup time, production rate, overall equipment effectiveness (OEE), rejection rate, and on-time orders.
Production Planning Tools:
Businesses utilize tools such as Gantt charts, spreadsheets, and specialized production planning software. Enterprise resource planning (ERP) applications, like NetSuite, provide integrated solutions for managing the entire business.
Conclusion:
In conclusion, production planning is a multifaceted discipline crucial for achieving operational efficiency, meeting customer demands, and ensuring business success. The proper implementation of production planning strategies can lead to increased profitability, customer satisfaction, and overall business excellence.
