Production Planning: How to Make a Production Plan (2024)

Let’s say three friends, all avid cyclists, decide to start a bicycle manufacturing business. They have conducted market research and expect the bicycle market in the United States to grow in the next few years. Rather than building a makeshift workshop in the back of their bike shop, they are considering setting up a manufacturing business. To do this, they need to start with a key element of the manufacturing process: production planning.

What is Production Planning?

Production planning is part of a manufacturing strategy that details how much capital, labor, raw materials, and manufacturing space a company needs to produce enough goods to meet customer demand. The production planning process also helps companies understand where problems may arise and determine how to solve them to keep production on track to deliver to buyers.

Production planning organizes all aspects of manufacturing while improving communication and cooperation between employees, suppliers, and contractors. It also helps to allocate resources efficiently, reduce costs, and control operations. supply chain.

Production planning and scheduling

Although production planning and production scheduling are both steps in the production process, they are different. Production planning determines what and how much a company will produce. On the other hand, scheduling, which is part of the planning process, determines when and who will complete various production tasks.

Production planning method

The type of production process depends on the type and size of the product. Some processes are intermittent, where there are periods when a company does not produce anything, while others are continuous, where production is interrupted little or not at all. Some of the most common production planning methods include:

Job Methods

Job production, also known as project production or shop production, is for making a single product, usually with a unique feature. Small-scale examples of job production include bespoke furniture, custom-made clothing, and unique jewelry. Larger scale examples include custom-made homes and yachts.

Job production is a production process that is generally labor-intensive and each unit is different. This is the opposite of mass production, where companies produce large quantities of uniform products at low cost through automated processes. Also, unlike mass production, there are generally no economies of scale because each job and each product is different rather than the same.

Batch Method

Batch production is the production of groups of identical goods. Examples of batch production include baked goods, basic clothing items such as t-shirts and socks, and print publications such as newspapers and books.

The batch production planning process focuses on determining the appropriate production volume while avoiding over- or under-production. For example, a sock manufacturer does not want to produce 1,000 pairs when the demand is only 500 pairs.

Some businesses can increase efficiency through batch production. A sock manufacturer can set up their machines to produce 500 black socks, then quickly switch to produce 500 gray socks, and then switch again to 500 dark blue socks because they know that these are their three most popular colors. Batch manufacturers want to minimize changeover time between batches because delays and bottlenecks between product production can be costly.

Flow or mass production

Flow production, also known as mass production, is a manufacturing process for standardized goods defined by the continuous movement, or flow, along a factory assembly line. It is usually an automated process with minimal human intervention, making it quicker and more cost-effective than job or batch production. An automobile factory is a good example, as cars and trucks are assembled and flow through various steps on a production line towards completion. Processed foods, such as canned soups and bread, are another example.

Building this type of production process requires a large capital investment and is generally limited to larger companies.

The two main principles of flow production are extensive automation and division of labor: each employee is responsible for a specific task in the production process, which differs from batch or job production, where an employee handles multiple tasks.

Processing method

Process methods are similar to flow methods in that they both use continuous production. The main difference is that process manufacturing typically uses raw materials to produce bulk products or everyday items such as liquids and gases, rather than discrete products such as individual cars or food cans. Refined oil products and chemicals are examples of process products.

Careful planning of process manufacturing is essential due to the potential for overproduction or underproduction.

How to make a production plan

1. Demand forecasting
2. Create a budget
3. Create a production sequence
4. Set production schedule
5. Management and Evaluation

The production planning process involves creating a comprehensive overview of your business. Here are the main steps in putting together a production plan:

1. Forecast demand

We start by estimating production requirements based on forecasted customer demand. Historical sales data is used to Demand forecastingHowever, you should also consider other factors that may affect demand, such as recent market trends and the impact of economic conditions on your customer base. Market research can help you predict whether demand for your product is changing, which may affect your production plans.

Production planning software for demand forecasting helps in making decisions regarding matching production with demand. This software also typically tracks inventory and can influence production planning for new products.

2. Make a budget

Budgeting helps you identify the cost of resources needed to produce your desired output. This includes materials, facilities, and labor. Create a production plan based on your current production capacity (the maximum amount you can reasonably produce with the staff, materials, and facilities you have available).

3. Create a production sequence

Planning the production process and the steps needed to produce your goods may include purchasing the necessary equipment and tools or outside services. Depending on the type of production, some steps in the process may be performed simultaneously, some one at a time, and other steps may be outsourced.

Production planners can also use the production sequencing phase to plan for contingencies such as equipment breakdowns, labor shortages, and supply disruptions.

4. Set a production schedule

A production schedule involves assigning tasks to different employees or teams, communicating the production plan to all involved, and setting timelines for each stage of production.

Create a detailed production schedule that details how your company will execute its plan, including resources and timing for each step. A production schedule keeps manufacturing on pace and helps you avoid common production planning mistakes like overproducing or underproducing.

5. Management and Evaluation

Once production begins, you need to track performance and continually compare it to the targets outlined in the production plan. Key Performance Indicators Key performance indicators (KPIs) are the most relevant metrics to track. For a manufacturer, KPIs might include production rates, such as the number of cars assembled per day, or downtime, or the amount of time when nothing is being produced.

Carefully monitoring your manufacturing process can help you detect problems and correct them quickly, and it can also help you find ways to improve your manufacturing process after production has begun, building in margins for equipment failures, supply chain disruptions, and product defects.