Production Planning

Production planning is a set of measures for management and control of business processes, by which tasks and step-by-step actions are defined.

When preparing a plan at the entity, factors such as the size and specialization, product range, equipment repair schedule, production line switching costs, raw material and supplies, personnel needs, availability, and other relevant factors are taken into account. For successful sales and profits, a company must establish a planning system whereby it can produce a wide range of quality goods at minimal cost, while increasing sales and the volume of orders fulfilled on time.

Production Planning: Fundamentals and Meanings

Accounting and production planning are essential tasks in the management and administrative functions. Their successful resolution determines the amount of raw material purchases, staff size, speed of processing and order fulfillment, as well as numerous other crucial issues. Planning should consider the following information:

• The company's marginal profit;
  
• Product quality control;
  
• Number of items to purchase;
  
• The cost of original commodity;
  
• The number of workers in production and their condition;
  
• Facilities’ capacity;
  
• Rules of reporting documents.
  

This is general information that can be supplemented depending on the profile.

The planning system, when properly organized, should answer the following questions:

• What the entity produces and sells, in what form/configuration;
  
• What it takes to make and sell products;
  
• What's already in place;
  
• What the entity needs to purchase;
  

Also:

• On what dates to make deliveries of raw materials and shipments of finished goods;
  
• When it’s optimal to maintain and repair equipment;
  
• How to increase the volume and number of orders filled;
  
• How to distribute the workload of production lines.
  

The answers decide performance and ranking.

Productivity refers to the actual item and the quantity produced by the entity. Productivity depends on the resources an entity has at its disposal: money to make and to pay labor, the labor force that creates goods, and the technology that helps create products. Production capacity is the volume of tasks performed by workers over a given period of time.

Priority is the answer to the question of acquiring products: which ones, in what quantities, and in what timeframe. They are subject to market conditions, thus necessitating vigilant and targeted market analysis.

Why Planning is Important

Development planning is frequently conducted without a precise set of actions, leading to either failing outcomes or inadequate effects. A well-designed plan helps to solve the following problems:

• Customer loyalty, expanding the customer base;
  
• Improving the quality of goods/services;
  
• Reducing and optimizing production costs;
  
• Reserves and stocks of finished goods/raw materials in case of a difficult situation.
  

The larger the entity, the more it needs effective planning, because large business have a more complex structure, so without a clear plan, the absolute amount of unsustainable costs can be significant.

Types of Planning

There are several species that differ in certain features, which are further divided into subspecies. The first type is by lead time, that is, calculations depend on the time spent, dividing into:

1. Perspective;
   
2. Current;
   
3. Operational.
   

Perspective planning works as forecasting the output of goods over a certain period. Ongoing involves making a plan for the year, dividing all tasks into quarters. Finally, operational one is applied in cases when it’s necessary to make and release a certain number of products in the required assortment in a specifically set time.

Stages of Planning

This procedure involves several steps:

1. Planning. A detailed plan is created to solidify what needs to be produced, responsible persons, and a list of performers. To determine the quantitative and qualitative characteristics of initial products, they analyze the market and the dynamics of sales. Additionally, a scheme for distribution of products, management of employees' responsibilities, and specifications for the standard of raw materials is necessary. Planning significantly reduces operating and raw material procurement costs, cooperates work between divisions, and creates a basis for organizational control.
   
2. Routing (production plan development). The plan should spell out the sequence of operations, the paths, and the defined order of actions. A typical process flow chart contains the right information that will help you create the right sequence of processes. Routing is one of the most important steps for control because the functions are completely dependent on the routing system within production.
   
3. Developing a schedule helps determine the timeframe in which the initial product needs to be ready and how much time is required for production to maximize the production time without sacrificing quality and to meet the deadline. Schedules come in master and detail. The former is used for the assembly and manufacture of goods, while the latter is used for general production.
   
4. Release of goods, or Dispatch. The purpose of this stage of product planning is to control the systematicity of each step in the manufacturing process, according to the developed route. At this stage, management assigns tasks that are specify:
   

• Quantity of goods;
  
• Equipment and the dates;
  
• Number of operations to be performed, order of execution, process description;
  
• Name of materials;
  
• Order No.
  
• The tools you need for each stage of creation;
  
• Division responsible for each stage of production.
  

5. Execution control is the final step needed to track the correct execution of the production process, which ultimately minimizes rejects. Enforcement controls function as follows:
   

• Creates reports for supervisors that show all deviations from the norm: it is needed to correct rejects.
  
• Checks the availability of raw materials and supplies for production.
  
• Records the processes and ensures compliance.
  

Stages of Operational Planning

To form a calendar plan, you must first create a medium-term and operational plan for implementation. In operational planning, the following shall be considered:

• Number of customer requests/orders;
  
• The size of insurance stock;
  
• Release forecast;
  
• Amounts in storage;
  
• Supply chain stages and their duration;
  
• The cost of switching production lines;
  
• Product features (shelf life, minimum lot sizes, finished or semi-finished condition, etc.).
  

This type of planning helps with point-by-point calculation of production volumes, process start-up and release dates. The operational plan depends on:

• Manufacture-To-Stock (MTS);
  
• Assemble-To-Order (ATO);
  
• Make-to-Order (MTO).
  

The MPS plan (Master production schedule) is created in dynamics and changes when new calls come in, when the planning horizon moves after each new task. Once all the requests have been included, the MRP (Material Requirements Planning) plan, i.e. the calculation and planning of material requirements, can be started.

The planning of realization depends on the technologies used in the enterprise, as well as the MPS and the item-operation schedule.

For example, if each product is unique (has its own specification) and is produced with a direct customer order with a prepaid or postpaid order, then the order-by-order method of production is well suited. Accordingly, single-level order planning can be applied because it generates dynamic order plans. This ensures that the assortment is filled and that items of the same type are considered as separate accounting and planning units. A single-level MRP plan allows you to plan all activities by workshop. These instruments are defined by the following conditions:

• APS/MES (operational calendar optimization management with constraints);
  
• MRP and CRP (Capacity Requirements Planning) planning with constraints;
  
• MRP implementation planning without constraints.
  

Most common mistakes in Accounting and Planning

What are the mistakes to avoid when making a production plan:

Surplus Purchases. Excessive amounts of raw materials increase the costs that will cause you to lose money: storage capacity costs, risks that raw materials may spoil in storage, capital frozen in raw materials.

It is necessary to calculate the optimal purchase volumes.

Inappropriate Use of Resources. Incorrectly assigned tasks, irrational line switching, lack of optimization in workforce allocation and schedules of equipment and people. Such occurrences result in interruptions and disruptions to the processes.

It’s important to apply mathematical models.

Temporary Shutdown. Whether it was a planned shutdown or due to a breakdown of equipment, for example, due to a failure to carry out maintenance, it leads to an interruption of the work process, which causes deadlines to be missed and a new production plan to be drawn up.

Repairs and maintenance also require planning to determine the ideal downtime for equipment. This includes calculating the optimum period for shutdown.

Technologies and Methods of Production Planning

The methods of production planning are divided into:

• Program-Targeted;
  
• Balance;
  
• Graph Analytical;
  
• Calculative/Analytical;
  
• Economic/Mathematical.
  

The Calculative/Analytical method helps to deal with planned indicators, analyze their dynamics. This method determines the stock level of indicators in the plan and their dynamics in a certain period. Based on a comparison of the stock level and the period taken, an index of change in the indicators is calculated.

The Economic/Mathematical method identifies and models changes through calculations of plan indicators using statistics. In this way, you can make several variations of the plan and be guided by the most appropriate one.

Graph analytical method helps to visualize the results in graphs. Graphs clearly show the relationship between indicators that are paired with each other. A sub-species of the graph analytic method is the network method. Network schedules model the work in space and time at complex sites.

The programmatic method develops a plan as a set of actions that are united by a single goal and deadline. Its basis is the general goal, which is subdivided into local objectives. In turn, tasks are assigned to specific shops or employees.

Modern Methods of Production Planning

It is worth noting that all modern technologies for production planning are based on the classical methods we wrote about above. There are many solutions that simplify production scheduling: for example, the Goodsforecast.Scheduling system. It’s a state-of-the-art APS system that optimizes production planning and automates scheduling. In addition to the planning tool, with the help of other modules, this program can solve the following tasks:

• Automatically forecast demand using machine learning models;
  
• Realize raw material and supply accounting for production;
  
• Increase the volume of customer orders executed on time.
  

The results of implementing the program into your media:

• Automatic schedule optimization allows you to increase the efficiency of your output;
  
• Reducing the likelihood of errors by minimizing the impact of human factors;
  
• Spot planning will ensure that processes are optimized.