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What is Production Planning and How Does It Work?

Rubber ducks on a conveyer belt

September 28, 2023

The success of a manufacturing business can hinge on the timely, cost-effective creation of in-demand products. This can be achieved with effective production planning that maps out the steps, processes and resources required for production. This includes forecasting demand and identifying the raw materials, equipment and labour that will be needed.

With good production planning, companies can develop realistic production schedules and ensure the smooth, efficient processing of all production. When problems occur, there will be contingencies in place to adjust.

What is production planning?

Broadly speaking, production planning is the creation of a detailed plan that outlines the manufacturing of a company’s products and services. It is a discipline that extends beyond manufacturing process efficiency. In fact, it ties into virtually every aspect of a business, including:

  • Finance.
  • Sales.
  • Supply chain.
  • Human resources.
  • Machine resources.
  • Inventory.

The activities involved in production planning include demand forecasting to determine future customer needs and selecting the most effective ways to meet that demand. When creating a production plan, you also assess the resources required to meet your production goals. There will be detailed strategies for all operations involved in the production process.

A production plan must include flexibility to make specific operation adjustments if the circumstances call for them. If machines break down, supply chain problems occur or staffing shortages arise, there must be contingency plans in place.

Why is it important to have a production plan?

With an effective production plan as the foundation of your operations, you can boost revenue and achieve high customer satisfaction. Conversely, a poorly-designed plan can result in production problems and even lead to a company failing.

Key benefits of production planning include:

  • Efficiency: With comprehensive production planning, there will be fewer bottlenecks and more optimised spending. Everything will remain on-budget, and the quality of products/services will remain high.
  • Knowledge: With a production plan in place, you have a framework that determines the resources and production steps to deliver for your customers. It also helps to be prepared for potential problems and have strategies to mitigate them.
  • Customer Satisfaction: With a streamlined and optimised strategy for delivering products in a timely fashion, customer satisfaction increases and you are more likely to win repeat business.

What are the main types of production planning?

The production method your company uses determines the nature of your production plan. Your product type, equipment capabilities and order sizes are also key factors. There are three main types of production plans.

Flow Production Planning

This is also known as continuous production, wherein standardised items are mass-produced continuously on an assembly line. This is often used by larger manufacturers for a constant supply of finished goods, most effective when there is ongoing demand for those products. With flow production planning, manufacturers can determine their needs for equipment, materials and labour throughout the assembly line. This streamlines production and reduces delays.

Batch Production Planning

This is where identical items are manufactured in groups. This can be the most efficient approach for many businesses, creating batches of certain products when demand spikes or peaks. A good production plan for this approach should forecast potential bottlenecks or delays when switching between batches.

Job-based or Project-based Planning

This is often used by small-medium businesses. It focuses on the creation of bespoke single items by an individual or team. When clients have very specific requirements, these items cannot be produced in bulk. This is true for many construction businesses or purveyors of customised items, and job production planning is important.

How do you make a production plan?

Production planning is a sizable undertaking. It starts with forecasting and involves the designing of processes and constant monitoring. Here are 5 basic steps to creating a production plan.

  1. Forecast product demand using historical data. Sage 200 Manufacturing for example offers specific tools for analysing historical data to create forecasts, and will also incorporate other factors like market trends and economic circumstances to help you make informed decisions about meeting demand.
  2. Create a roadmap of production steps, incorporating processes, stages and resources to produce the requisite output. This is an opportunity to examine various options for achieving production goals and identifying interdependent steps and departments.
  3. Identify the best approach and schedule production. Your decision should be made after comparing costs, time required and associated risks for each option outlined in the previous step. Ensure all stakeholders are up to date on the chosen plan and create a detailed production schedule that helps execute the plan.
  4. Monitor and control your processes, tracking performance and evaluating it against the targets outlined in your plan. If any issues arise, you will detect them early and address them before they become significant.
  5. Make adjustments as required, identifying when unplanned issues or events arise. Unforeseen things are inevitable, and you need to be agile enough to adjust to stay on target.

What are some common production planning mistakes?

It’s important to be aware of common pitfalls when creating a production plan.

  • Failing to include backup plans and contingencies for when problems arise.
  • Not involving yourself in the production processes.
  • Failure to maintain your equipment.

Analyse Your KPIs for Success

There are many key performance indicators (KPIs) for tracking the health of your production processes. They include:

  • Setup time.
  • Downtime.
  • Overall equipment effectiveness (OEE).
  • Production rate.
  • Rejection rate.
  • On-time orders.

These can help you determine whether production is running in line with your plans. The tools you will need for your production plan include Gantt charts, spreadsheets and production planning software.

ERP systems like Sage 200 Manufacturing or NetSuite Manufacturing incorporate a range of features that are ideal for production planning. They are a single solution for business management, with comprehensive production planning tools aligned with resources for other areas of your operations. This facilitates a single solution for managing the entire business and viewing everything from a singular point of truth.

Final Thoughts

Production planning helps you manage and optimise production effectively. It is a complex and robust process that makes strategies for every eventuality. It relies on the analysis of data and key decision-making, and its ongoing success depends on your diligent monitoring and the availability of real-time visualisation of progress.

Speak to us about how ERP software could help you create successful production plans for your business.

Why choose Eventura as your manufacturing ERP implementation partner?

Eventura has been providing robust manufacturing solutions to countless organisations for over two decades. We are manufacturing ERP experts and can identify all of your business needs, and deliver a comprehensive ERP solution that works for you.

As Sage 200 Partners and NetSuite Solution Providers, we can help you identify which solution will fit your business needs the best. Our expert team of business analysts, developers, consultants, technicians and support staff can guide you through your entire project, from initial scoping through to implementation and on-going support.

We’re also managed IT service providers meaning we can help you identify your entire IT infrastructure requirements from day one. If you would like to speak to one of our ERP experts, you can request a free call back here.

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