production planning

What is production planning?

Production planning is the act of developing a guide for the design and production of a given product or service. Production planning helps organizations make the production process as efficient as possible.

Production planning originated to optimize the manufacturing process, and today, its general logic is applied in various forms to design, production and delivery of software as well.

Why is production planning important?

Production planning creates an efficient process for production according to customer and organizational needs. It optimizes both customer-dependent processes -- such as on-time delivery -- and customer-independent processes, such as production cycle time.

A good production plan minimizes lead time, which is the amount of time that passes between the placing of an order and the completion and delivery of that order. Depending on the company and the type of production planning necessary, the definition of lead time varies slightly.

In supply chain management, for example, lead time includes the amount of time it takes for parts to ship from a supplier. That time is included because the manufacturing business needs to know when the parts will arrive to properly execute material requirements planning (MRP). This consideration is especially important with tight manufacturing constraints or just-in-time (JIT) manufacturing.

Production planning process

The production planning process involves the following steps:

  • Estimate product demand. Doing so produces a rough outline of the number of products that should be produced in a given time period. This estimate is generated by combining analysis of historical production trends with new, potentially relevant trends in the market.
  • Weigh production options. This process involves accounting for the resources on hand and exploring ways to most effectively use them based on projected demand estimates.
  • Choose the most efficient option. Companies should select the use of resources that is the least costly and most time-efficient.
  • Monitoring and evaluation. As the plan is carried out, companies monitor what is happening compared to what should be happening according to the plan and evaluate any differences.
  • Adjust plan. Companies may need to alter the plan so future production plans meet customer goals more efficiently and are more successful in their execution.

Types of production planning

There are many types of production planning that focus on various particulars of the production process. Some of these include the following:

  • Master production schedule (MPS). These are schedules for individual, specific commodities to be produced in a given time period. They are often generated by software, then adjusted by users.
  • Material requirements planning. MRP is a system used for production planning, scheduling and inventory control. MRP ensures the availability of raw materials, maintains the lowest possible material and product levels in-house, and plans manufacturing and purchasing activities. It is often automated to some extent by software but can be performed completely manually as well.
  • Capacity planning. Capacity planning determines what capacity, if any, an organization possesses to meet changing demands.
  • Workflow planning. Workflow planning is the planning of a sequence of operations performed by an employee or group of employees.

Various planning types also apply the logic of production planning to areas other than manufacturing, or complementary areas. For example, human resources planning involves optimizing processes that allow a company to meet their hiring and talent demands. Other examples include the following:

  • Enterprise resource planning (ERP). The integration of main business processes into one unified system, often using software.
  • Sales and operations planning (S&OP). The process for more accurately matching a manufacturer's supply with existing demand.

Production scheduling

Production scheduling is like production control. It involves the allocation of available resources to production processes and events and is essentially the mapping of actual resources to the production plan built for them. Production scheduling is for planning the use of factory equipment and resources as well as human resources and for planning processes and material purchasing.

Scheduling is necessary to create a production plan. Production plans aim to ultimately deliver on customer demand. The goal of a production schedule is to create the most efficient production plan possible.

History of production planning

Modern production planning has its roots in the first half of the 19th century. It developed out of a need for information around internal planning in control. Entities like railroads, textile mills and other factories needed internal administrative frameworks to guide the multiple processes involved in providing their basic product or service at a large scale.

The first production plans were simple. Factories were relatively small and produced a limited number of products in large batch sizes. Factory foremen were technical experts in their field and handled all planning and scheduling, which sometimes would include no more than a list of production orders and the date when they were to be completed.

As production line and manufacturing efforts as a whole became bigger and more complex, more involved production planning became necessary. By the beginning of the 20th century, plans began focusing on not just delivering orders but optimizing processes so production process flow could be as even as possible at the minimum possible production cost.

Today, production planning has changed as the nature of production methods and manufacturing has done so. The technology surrounding production has evolved, enabling more precise communication and monitoring of and around production. The products themselves, and customer expectations, have also evolved.

More information is available than ever before for organizations to weigh when creating their production plans.

This was last updated in December 2022

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