Production Planning Methods
Production planning is defined as the process whereby a company makes sure that supplies and raw materials are in place at the appropriate time and in the correct quantity. Here is an overview of different production planning methods.
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Why is Production Planning important?
Manufacturing is a complex and difficult endeavor. Materials, labor, regulation, supply chain, and many other factors go into the creation of the products used by consumers. This is true regardless of whether manufacturing companies are discreet manufacturing companies or process manufacturing companies. To manage all the elements that must come together in the right order and quantity, companies use production planning to manage the workflow within the factory.
Production planning is defined as the process whereby a company makes sure that supplies and raw materials are in place at the appropriate time and in the correct quantity. Too much and cash is tied up in inventory carrying costs. Too little and production slows to a crawl or stops. The same is true of the labor required to produce the goods. Inaccurate labor planning means that not enough workers are present to efficiently complete the volume of the complexity of the product or that too many workers are present for optimum production thus wasting money.
Production planning can also impact areas outside of production. Sales and distribution are also affected as they must rely on the plan to balance incoming sales and outgoing orders. Human resources too must understand the production plan for each cycle to provide the right volume and skill level of hiring as well as training for current staff.
Considerations for proper Production Planning
While production planning as a tool and a discipline has come a long way, there are still many things to consider before settling on a method and purchasing planning software. Each company will be different based on its size, its product type, and its business needs. Here are the business areas that must be evaluated before determining a production planning method:
- Material – Depending on the type of company and the complexity of its supply chain, material will usually be one of the two largest expenses for any company. In addition to the possibility of globally sourcing these materials and accounting for lead time in their delivery, companies must take raw material and component quality into account as well. In addition to lead time and quality of materials, balancing the materials to account for sudden shifts upward or downward in demand must be factored in as well.
- Labor – Labor is also one of the two largest costs to companies and a sound and accurate production plan can help companies manage this cost to an optimum level of balance. The labor plan is further complicated since companies must not only ensure that they have enough labor to complete production orders. They must also account for the right skill level as well. Unskilled or over skilled labor will impact cost and quality as well as the amount of labor present.
- Production Methods – All companies strive to produce goods in the most efficient way possible. And over the last few decades, new disciplines have become popular that help lock in that efficiency. Each of these methods will impact the way a production plan must be produced to succeed. These methods may include lean production, Six Sigma, Just-in-Time (JIT) production, and others. These methods may depend on the production mode required for specific products such as Make to Stock (MTS), Make to Order (MTO) or Engineer to Order (ETO.
- Costing Methods – Product costing is critical to manufacturers and inaccurate costing can have a huge impact on a company’s bottom line. Again, depending on individual markets, business needs, company size, and production mode, each company must decide as to what costing method they will use and apply to their Bill of Materials and to their accounting process. Costing methods include activity-based costing, process costing and job-order costing as well as others.
Methods of Production Planning
Once a manufacturer has assessed its business needs to include the considerations above, they can determine which method of production planning works best for them. There are five main methods of production planning to choose from:
- Job Planning – This method means that single workers or groups of workers complete all tasks for manufacturing a process. Job planning is important when customer specifications are critical to production. Job planning may be a small scale, requiring very few tools and limited skills. Or, it can also be utilized in complex environments where high-skilled positions are needed in large teams using high tech equipment and advanced project management. In both cases, the worker, or workers, completes all aspects of production.
- Batch Planning – The batch method requires the division of work on manufacturing segments or components into parts. Each sub-assembly or batch must be completed before the rest of the final product can be completed. This method is often used in electronics manufacturing. It may also be used in appliance manufacturing or any manufacturing operation where electronic sub-assemblies are required. Labor specialization is required for each cell producing specific batches.
- Flow Planning – Similar to the batch method, the flow method seeks to improve material flow and workflow. However, the distinction is that in the flow method, while each cell of single or multiple workers may be working on sub-assembly batches or components, production can continue as an assembly line with finished components made available to production lines as needed. This keeps production and workflow running smoothly without creating lags or interruptions.
- Process Planning – Job, Flow, and Batch can be seen more often in discreet manufacturing or Make to Order environments. However, process manufacturing is more commonly found in process manufacturing on more commodified goods where raw materials are processed continuously as well as the final product. This includes goods such as spun yarns within one department of a textile factory that are then combined and woven high speed within another in a commodified or continuous flow. In the process method, production is continuous and may include highly automated equipment and automatic labeling, packaging, and movement within the factory.
- Mass Production Planning – Also for highly automated or process manufacturing, Mass Production Planning utilizes techniques such as balanced production or product-wise layouts. In balanced production, highly commodified and automated processes produce exactly what is required. Food production, textiles, and other consumer goods may be produced this way. This is typical in process manufacturing where takt time and material requirements are precisely measured and known. In product-wise layouts, tools, labor, resources, and materials are in various parts of the assembly line depending on where the product is in terms of stage of manufacture.
As small and medium-sized businesses grow and scale, their planning needs become more complex. And depending on the method used above, a company may find itself in the need for a new type of software to help keep up with the speed and complexity of producing the production plan. As companies scale, they will find themselves moving from one type of solution to another as needs require.
- Spreadsheet-Based Software – The simplest form of planning uses Excel, Word, Google docs and others and is still used by an astounding 30% of small businesses. And while these tools used in combination may work for a while, volume increases and increased sales will slow down planning and require automation that may not be available with the combination of tools used.
- Custom Made Planning Software – Some companies have the benefit of in-house staffing or local network connections that let them proceed down the path of creating their own software to manage planning. And while this may help lower initial costs, it is always dependent on the skill of a contractor or in-house expert who may leave the company at any time. Further, costs for updating and improving the software increase relative to other software.
- Specialized Planning Software – Specialized planning software such as an MRP system is specifically designed to address the needs of small and medium-sized manufacturers. It addresses the dilemma of rapid scaling of business while reducing the need for in-house expertise. It usually includes powerful production management functions like job shop and bill of materials tools and is often easily integrated with accounting and other software.
Regardless of the size of a manufacturer, everyone should understand the considerations required to choose the optimum method of production planning. It will reduce costs, improve quality, simplify workflows and will allow for growth down the road. And when combined with the right software, proper production planning will keep small and medium manufacturers in the game compared to their larger competitors.
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