What is production planning?

Production planning involves the process of planning production activities for an upcoming period. Good production planning takes into account factors such as available production resources, current orders, and efficient use of labor, materials, and equipment. We distinguish between longer-term or high-level planning (for example, the coming year or six months), planning for the upcoming period (for example, the next 2 weeks), and short-term planning (today and the next few days).

A production planning process incorporates a number of things, including capacity planning, inventory planning, resource planning and production scheduling. An accurate demand forecast is also an important input to production planning. Planning itself includes a production schedule, an allocation of machines, raw materials & people, and performance indicators (KPIs) that can be monitored to ensure that production goals are met. The ultimate goal of production planning is to maximize productivity, minimize costs and ensure customer satisfaction.

Production planning versus production scheduling

Production planning and production scheduling are closely related. Production scheduling provides an overview of what the company wants to produce at what time. Production scheduling then provides a detailed schedule of when each step in production will occur, including the deployment of workers, machines and other specific resources assigned to each task. Production scheduling can be extremely complex, especially when there are many interdependent production steps and the company is making multiple products at the same time. Scheduling software can help companies create complex schedules, track progress in real time and make quick adjustments as needed.

Read more about the distinction between production scheduling and production scheduling in our blog “Production scheduling: a daily production schedule.

Why is production planning important?

Having good production planning is critical for several reasons:

• Efficient use of resources: Production planning allows companies to make the best use of their resources, such as labor, machinery and raw materials. This helps reduce waste and lower operating costs.
• Customer satisfaction: Effective production scheduling enables companies to consistently meet customer demand by delivering products on time. This contributes to increased customer satisfaction and loyalty.
• Cost control: Through well-thought-out production planning, companies can better control their costs by being able to produce more efficiently, minimize excess inventory and avoid unnecessary expenses.
• Flexibility: Robust production planning enables rapid response to changes in market demand, technological developments or unexpected events, making companies more flexible and agile.
• Capacity Optimization: Through production planning, companies can better plan and utilize their production capacity, enabling them to maximize productivity while avoiding overload or underutilization of resources.

Effective production planning thus contributes to overall operational efficiency, competitiveness and profitability. It enables companies to effectively manage their resources, minimize risks and seize opportunities in a dynamic business environment.

What are you planning for what term?

Production planning is a container concept and, as indicated earlier, can cover different time frames. The shorter the time frame, the more detail the planning covers. The longer the time frame, the more the planning supports business decisions. We can use the following classification:

• Long-term production planning: This type of planning focuses on a period of several months to several years and focuses on strategic decisions, such as investment in new facilities, capacity planning and product portfolio analysis.
• Medium-term production planning: Here we look at planning for a period of several weeks to several months. It focuses on matching production capacity with expected demand, balancing inventory levels, making supply arrangements around procurement of raw materials and planning production activities such as staff schedules and material requirements planning.
• Short-term production planning: This planning covers a period of a few days to a few weeks and focuses on the day-to-day management of production activities. It includes detailed tasks such as production scheduling, resource allocation, scheduling machine maintenance and troubleshooting operational problems.
• Real-time production planning: This type of planning focuses on continuously monitoring production activities and dynamically adjusting plans in response to changing conditions, such as machine downtime, material shortages or unexpected demand fluctuations.

Production planning by type of production

In addition, certain industries or manufacturing processes have specific forms of production planning, such as just-in-time planning, lean planning and batch production planning. Choosing the right type of production planning depends on the nature of the business, industry, market demand and other factors.

Batch, job and flow production planning are different approaches to organizing and planning production activities, and they differ in their focus and application:

Batch production planning

Batch production planning focuses on producing products in batches or batches, producing a group of similar products together. When the batch is finished, it is switched to another group of similar products.

It is often used in situations where production processes differ for different product groups, or when it is more economically advantageous to produce products in batches because of setup costs or equipment efficiency.

Example: A large bakery that produces different types of bread in batches, with each type of bread baked in separate batches.

Job production planning

Job production planning focuses on producing custom, unique products that are often customized to meet the specific requirements of individual customers.

It is typically used in industries such as custom furniture, machine building, and contractor work, where each product is unique and the production process requires a lot of variability and customization.

Example: A furniture maker who produces unique furniture pieces according to each customer’s specifications and preferences.

Flow production planning

Flow production planning focuses on the continuous production of products in a streamlined, sequential order, with each product moving through a series of steps in the production process without interruptions.

It is often used in mass production environments where production processes are well standardized and where efficiency and speed are crucial.

Example: A car factory that produces cars on an automated production line, with each vehicle going through a series of planned operations and assembly processes.

In short, the main difference between these approaches is how manufacturing operations are organized and what factors determine how products are produced: in batches, tailored to specific orders, or in a streamlined, continuous flow.

Steps in the production planning process

So the production planning process depends on the nature of the industry, the company and the specific needs, but in general it includes the following key steps:

• Demand forecasting: The process begins with analyzing demand for products or services. This includes evaluating historical sales data, gathering market research, identifying trends and forecasting future demand.
• Capacity planning: Here, available production capacity is evaluated in relation to expected demand. This includes assessing the capacity of machinery, labor and other resources to determine whether they are sufficient to meet demand.
• Production planning strategies: Based on demand analysis and capacity assessment, strategies are developed to plan production activities. This may include determining production numbers, product mix, inventory levels and other operational decisions.
• Production schedule preparation or production scheduling: The production schedule is a detailed plan indicating when and how much of each product is to be produced. This includes setting start and end dates for production batches, taking into account factors such as raw material delivery times, production capacity and lead times.
• Material planning: This involves managing inventory levels of raw materials, parts and other materials needed for production. The goal is to ensure that sufficient materials are available to meet production needs while minimizing excess inventory.
• Workforce planning: This involves determining what staff resources are needed to perform production activities, including planning work schedules, assigning tasks and managing vacations and absences.
• Quality Control: This includes scheduling checks and inspections during the production process to ensure that quality standards are maintained and that any defects are detected and corrected in a timely manner.
• Monitoring and Adjustment: The process also includes continuous monitoring of production activities, evaluating performance against the plan and taking corrective action if necessary to address any deviations.

By following these steps systematically, companies can create an effective production schedule that allows them to produce efficiently, minimize costs and meet customer demand.