Production planning is defined as the planning of production models in an organization or an industry. To serve different customers, production planning makes use of resource allocation of activities of employees, Production capacity, and materials.
In simple terms, production planning is nothing but to fix the goals of production and give an estimation of the resources which will be required to achieve these production goals. A detailed plan is chalked out to accomplish the production goals in a cost-efficient way as well as in a given time.
Every step of the production process is forecasted, along with possible hurdles that may be encountered. The problems which may be encountered are tried to be removed with the help of proper production planning.
Many functional areas of an organization like marketing financing revolve around production planning. Many policies are introduced to initiate production planning, and it is seen that the plan is executed in a predefined manner. The ultimate aim of production planning is to achieve maximum output with minimum input in the given time.
Wastage of materials that happens during the production needs to be minimized so that the resources are utilized efficiently. The entire process of production planning is primarily concerned with designing various production policies. Using the available men and machines and methods to get an exemplary output is the aim of every production policy.
Objectives of Production Planning
Since production planning is concerned with not on the plan of production but also implementing the production process is the right way following are few of objectives of production planning:
1. Effective resource utilization
Planning is required to achieve proper and predefined results. When production is planned, it results in appropriate and effective utilization of available resources and inputs which go into production. Avoiding wastage of available resources and optimum use of required resources is one of the objectives of production planning.
2. Constant production flow
Proper planning is ensured so that a continuous and steady production flow of products is there in the factory. All machines are used to a maximum extent, and a regular production will ensure consistent supply to the employees, workers, as well as the customers.
3. Resource estimation
Production planning will help to estimate the required resources of men and materials which are necessary for the production process. This estimate will be used in sales forecasting so that there is a proper sync between production and sales. This also affects inventory management directly.
4. Inventory management
A planned production will ensure optimum inventory and always avoid under or overstocking. Required stocks are still maintained, and because the production supply is steady, the production demands are met. Required inventory is always available for customers because of continuous production in a planned way, which is happening in the factory.
5. Coordination of different departments
Many departments come together to coordinate production planning. For instance, the marketing department coordinates with the production department as well as the sales department.
The marketing department will ask for a projection from the sales department, which, if appropriately done, goes to the production department and the production can be planned accordingly. Senior management is also involved in production planning since their knowledge of the market, and a deep understanding will add up and make necessary changes in the sales forecast.
6. Wastage minimization
Proper production planning ensures minimum wastage of raw materials. It is also involved in the adequate utilization of inventory in material management. This not only minimizes the wastage of raw materials but also ensures that the right quality products are produced.
7. Productivity improvisation
Production planning is directly associated with improving labor productivity. Maximum utilization of the workforce is done, and workers are trained. Since the production does not stop, the profits are earned continuously, and the workers get increased wages and incentives.
Motivated workers perform and improve the production process further which results in labor efficiency and an increase in productivity
8. Capturing the market
Production planning helps to give on-time delivery of products to the customers, which is because of the continuous flow of good quality production. The company can face the competition effectively because the output does not stop, and it can beat the competition and get a competitive edge based on market availability.
9. Improved work environment
Since all of the production is planned in production planning, there is no excessive pressure on the workers. There are no untimely notices, and the workers are not overworked. This results in improved working conditions for the workers since they can plan their leaves and working hours and also holidays.
10. Improvement in quality
Production planning helps to improve the quality of the production. Quality consciousness is promoted among the employees, and the production is planned accordingly.
11. Customer satisfaction
A consistent and regular supply of goods is maintained to the customers at a reasonable price, which results in improved customer satisfaction. All of this happens because of proper production planning.
12. Reduction of production costs
Since optimum utilization of resources is the primary objective of production planning, and it reduces the wastage of natural resources and other raw materials, it automatically results in lower production costs. With lower production costs, the company can have improved profit margins.
Types of Production Planning
1. Advanced scheduling and planning
Advanced planning and scheduling is the management process in which the production capacity and raw materials that are going to be used are allocated to meet the demand. This method is suited where the planning methods are simple and less complicated.
A stepwise procedure is used to allocate the required materials following the production capacity. The capacity and materials are planned separately.
2. Capacity Planning
It is the type of production planning in which the required production capacity is determined by the organization and planned accordingly. This production capacity is such that it meets the changing demands of its products.
The production capacity is designed in such a way that production can be done for a maximum amount of work. The calculation of capacity is done as follows:
Capacity = Number of machines or Workers * no of shifts * utilization * efficiency
3. Master Production Schedule
The master production schedule is a type of production planning, which is a plan for individual commodities that are produced in a specific time, such as inventory, staffing, production, etc. The master production schedule is linked to indicate how much of each product is to be produced following the sales forecasting.
A very high level of accuracy is expected from the schedule, and there is the involvement of various variables which affect the master production schedule. The Master production schedule takes into consideration the customer demands from sales orders and builds a schedule with the help of planned orders in an actual scheduling environment.
The production schedule avoids a shortage of supply and last-minute scheduling or insufficient allocation of resources so that the production is continuous and uninterrupted.
4. MRP II
The manufacturing resources planning or MRP II is a method for production planning for a company. It is operational planning in units and as well as financial planning, which has the capability of simulation and capacity to answer ‘what if’ questions.
It is a concept that can be used not only for production planning but also for allocating efficient company resources and their utilization more productively.
The process of controlling, arranging, and optimizing work as well as workloads in the process of production, is called programming. It is used to allocate machinery and manufacturing plant resources and also plan human resources and production processes. It is an essential tool for engineering and manufacturing, which has a significant impact on the process of productivity.
The ultimate aim of scheduling is to minimize the production costs and production time by dictating production facility what to use, when to use, how much to use, and who should use the production planning.
A Repeatable pattern of activity that is enabled with the help of the planned organization of resources that are involved in transforming input into an output that is materials into products is called workflow. A series of operations are used to depict the workflow and the work of a group or a person.
A stepwise flow is formed to write from the import of raw materials, active packaging, and every step is represented in a proper well-defined manner in case of the workflow. Workflow is a fundamental building block which is combined with different parts of the organization’s structure such as technology, information, teams, project, and hierarchies.
Importance of Production Planning
Production planning is essential from the organizational point of view for the following factors:
- The utilization of adequate resources is propagated by production planning. It ensures that the available resources are utilized to their optimum extent without causing the delay.
- Production planning makes the easy production study regular and consistent, which provides that customers are satisfied with the continuous availability of the goods. The steady supply is also suitable for inventory management.
- The available production resources can be estimated with the help of production planning. The estimated funds can be used to manage the future requirement of raw materials and their availability and help the organization to plan.
- The existing stock levels can be maintained with the help of production planning because a continuous flow of finished goods is coming from the factory. The raw materials, as well as the finished products, are maintained in sync to the market demand and thus helps to get and generate continuous business.
- Production planning helps to improve the coordination between different departments. This is because many departments are involved in production planning, such as marketing, sales, production, higher management, finance, etc. All of these departments have to interact with each other more often, which improves their communication and reduces the communication gap, thereby promoting interdepartmental harmony.
- Production planning helps to minimize the wastage of available resources, thereby reducing costs for the organization. Minimum wastage also ensures that proper planning is done to avoid stockouts or overstocking.
- Production planning helps to improve labor efficiency by promoting the planned system in the factories. There is optimum utilization of the available workforce, and because everything is planned, the workers can plan their work accordingly, which improves labor efficiency.
- Competition can be countered with the help of the continuous availability of the product in the market. Even in cases where the raw material is not available, it is because of proper production planning that the organization can predict and prepare themselves for the future stockouts of raw materials and plan their production so that the customers get the product without interruption.
- Production planning also helps the laborers to plan their working hours, leaves, holidays, bonuses, incentives accordingly. It provides them with a better work environment.
- A major reduction in production costs is seen because of production planning.
Advantages of Production Planning
- Because everything is planned in case of production, the organization can have improved profitability. Better profitability is always appreciated by all the elements involved in the organization right from labor up until the top management.
- The organization can still avoid the risk of overproduction or underproduction because of production planning. This also prevents the unnecessary cost and expenditure which the organization may incur because of a Lack of production management.
- There is a reduction in uncertainty, which may cause additional costs for the organization.
- The more precise the production planning, the better is the utilization of resources and production processes. The entire organization can benefit from proper production planning since almost all departments are involved in the same.
Disadvantages of the production plan
- It is considered as an accident process for efficient preparation of production. But if there is even a margin of error in the prediction of production planning, then it will cause a ripple effect, and all of the processes will be affected. The production planning, if done incorrectly, will cost a lot more to the organization then if never done at all.
- Talented staff is required to plan the production process, and not every organization can afford to have such dedicated people in their company. Production planning, although followed in every organization, may not be extremely accurate.
- Unforeseen circumstances such as natural disasters or industrial changes can affect the production even though it is carefully planned.
- Governmental or Political factors affect production planning since if the Governance is non-conducive, then the planned production has to change to meet requirements, which will be cumbersome for the organization.