What is production planning?
Production planning is the process of organizing and coordinating activities related to the production of products.
Production planning encompasses long-term decisions, such as investing in new technologies and expanding production capacity, while also focusing on immediate tasks, such as organizing labor, machinery, and raw materials to fulfill orders on time. Planning allows a company to better manage its resources and avoid downtime or excess production.
Production plans are created at different levels:
- strategic (long-term) plans focus on overall strategic goals, such as investments.
- tactical plans (medium-term, annual) are more detailed and focus on resource allocation.
- operational plans (short-term), are focused on the current operational implementation of production tasks
All these activities together constitute Integrated Production Planning.
What does strategic production planning include?
A strategic, long-term production plan is developed at the ownership and management levels. It stems from the company’s development vision and long-term sales plans. It covers a five-year period or longer. As a result, the level of investment in new machinery, the expansion of production facilities, the introduction of new lines, and the definition of future production capacities and technologies are determined. This approach encompasses balancing production capacity to achieve the projected production volume, broken down by product category and group. Suppliers of materials and semi-finished products are also sought, with whom framework agreements are signed.
Tactical Production Plans – Resource Integration and Balancing
Tactical production plans address medium-term activities aimed at achieving strategic goals. They include balancing and planning resources such as workers, materials, and machinery, as well as establishing production targets and budgets.
Annual production plan
It originates with the board and management of sales, development, and production. It is a process that helps integrate sales, marketing, and product development plans into a unified action plan. It covers a one-year period, broken down into quarters or months. As a result, it helps balance supply and demand, manage inventory levels, production capacity, and financial plans. Approval of the plan occurs at the board level. It includes:
Master Production Plan – What is it and what does it include?
The Master Production Schedule (MPS) is developed by production management and the planner. It is typically classified as a tactical plan and is often called a master plan. It is a short-term/medium-term production plan and typically covers a period of 2-4 months. Based on calculations, it specifies what is to be produced, in what quantities, and in what periods. The master plan’s time intervals typically cover a one-week period. It is created by balancing customer orders, sales plans, open orders, and inventory levels. Taking into account actual orders received from customers is crucial. Projected orders are based on sales plans and existing open orders that have not yet been confirmed or triggered. Current inventory levels of finished goods and raw materials also influence the production schedule.
Then, a materials purchasing plan is calculated based on this information. Furthermore, production capacity is balanced.
Material Requirements Plan
The Materials Purchasing Plan (MPS) is based on several elements. First, the master plan (MPS) is used as the planning basis. Second, the Bill of Materials (BOM) provides a list of all raw materials, components, and subassemblies required for the production of the planned products. Current stock levels of materials, deliveries in transit, semi-finished products, and semi-finished products in process are also taken into account.
Based on this, a materials procurement plan is created. This is a worksheet that specifies which materials are needed, when they must be ordered, and when they must be delivered to ensure production runs smoothly and without interruption. The goal of MRP is to ensure that all necessary materials are available in the right quantities and at the right time, allowing for the smooth and efficient execution of production plans.
Capacity Requirements Planning (CRP)
Capacity Requirements Planning (CRP) is used to determine and balance a company’s production capacity with demand resulting from production plans. CRP helps determine whether available production resources (machines, employees) are sufficient to fulfill planned orders. CRP calculations are based on an analysis of available machine and employee operating hours and comparing them with the demand for these resources resulting from the master plan. This allows the company to avoid overloads and capacity shortages, allowing for more efficient production and resource management.
What is operational production planning and what does it include?
Short-term, operational production planning is the lowest-level plan, created by a planner at the production or department level. It encompasses the ongoing management of resources and operations, allowing for rapid response to changing conditions and production needs. This allows companies to maintain production continuity, minimize downtime, and maximize efficiency. 
As part of operational planning, a detailed production schedule is created, specifying specific activities to be performed in the short term. As a result, production operations are distributed, indicating:
- Planned quantity to be manufactured: The planned quantity of products results from the issued production orders.
- Production stations and employees: Assigning specific tasks to specific production stations and employees, ensuring efficient use of human and equipment resources.
- Start and end dates: Setting precise dates and times for the start and end of individual production operations, allowing for precise monitoring of work progress.
- Materials and Tools: Determining what materials and tools will be needed to complete tasks to ensure their availability at every stage of production.
IT tools in production planning
Production planning requires the use of various IT tools that help manage resources, schedule activities and forecast needs over various time horizons.
Long-term production planning
Data Analytics Systems analyze historical sales data, market trends, and external factors, enabling more accurate demand forecasts. Artificial Intelligence (AI) algorithms use advanced algorithms to predict future product demand based on the analysis of large data sets. Management’s growth vision is supported by Strategic Planning Tools (SPTs), which help management develop long-term growth strategies. These tools incorporate business objectives, SWOT analyses, and market forecasts, allowing the company to better prepare for future challenges and opportunities.
Medium-term production planning
ERP / MRP II (Manufacturing Resource Planning): MRP is a part of ERP systems that encompasses the planning of all production resources, including people, machines, and materials. It enables the management of all production activities, including production planning, inventory control, order management, and finances. It supports the monitoring of production execution through real-time analytics and reporting. It allows for the tracking of key performance indicators (KPIs), such as production completion rate, inventory levels, and machine utilization efficiency. This allows managers to make more informed decisions and respond more quickly to deviations.
Short-term production planning
Advanced Planning and Scheduling (APS) Tools: APS is an integrated approach to planning and scheduling, utilizing advanced algorithms to optimize production and logistics. As a result, it takes into account complex interdependencies such as resource availability and occupancy over time, priorities, and deadlines. APS focuses on highly detailed resource planning and management to maximize operational efficiency and minimize downtime. APS responds to deviations from plan by automatically adjusting schedules in real time in response to unforeseen events, such as delivery delays, machine breakdowns, or changes in demand. This dynamic approach minimizes disruptions and maintains production continuity.
Why does production planning at various levels increase efficiency for manufacturing companies?
“Failing to plan is planning to fail” – Benjamin Franklin
A comprehensive, holistic approach to production planning at various levels of the organization and over different time horizons is important for manufacturing companies because:
First, strategic planning supports the owners’ and management’s vision for company development and helps the company adapt to long-term trends. It enables decisions about investments in technology, production capacity, and new products.
Secondly, tactical planning ensures effective management of resources such as people, machines and materials, which allows for optimal efficiency and balance of demand and supply.
Third, operational planning enables ongoing production management, minimizing downtime and responding to daily challenges such as breakdowns or raw material shortages.
