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Production Plan in Business Plan: A Comprehensive Guide to Success

Last Updated:  

May 7, 2024

In any business venture, a solid production plan is crucial for success. A production plan serves as a roadmap that outlines the steps, resources, and strategies required to manufacture products or deliver services efficiently. By carefully crafting a production plan within a business plan, entrepreneurs can ensure optimal utilisation of resources, timely delivery, cost efficiency, and customer satisfaction. In this article, we will delve into the intricacies of creating an effective production plan in a business plan , exploring its key components, strategies, and the importance of aligning it with overall business objectives .

Key Takeaways on Production Plans in Business Planning

• A production plan : a detailed outline that guides efficient product manufacturing or service delivery.
• Importance of a production plan : provides a roadmap for operations, optimises resource utilisation, and aligns with customer demand.
• Key components : demand forecasting, capacity planning, inventory management, resource allocation, and quality assurance.
• Strategies : lean manufacturing, JIT inventory, automation and technology integration, supplier relationship management, and continuous improvement.
• Benefits of a well-executed production plan : improved efficiency, reduced costs, enhanced product quality, and increased profitability.

What is a Production Plan?

A production Seamless Searches plan is a detailed outline that specifies the processes, resources, timelines, and strategies required to convert raw materials into finished goods or deliver services. It serves as a blueprint for the entire production cycle, guiding decision-making and resource allocation. The production plan considers factors such as demand forecasting, capacity planning, inventory management, and quality assurance to ensure efficient operations and optimal customer satisfaction.

Why is a Production Plan Important in a Business Plan?

The inclusion of a production plan in a business plan is vital for several reasons. First and foremost, it provides a clear roadmap for business operations, helping entrepreneurs and managers make informed decisions related to production processes. A well-developed production plan ensures that resources are utilised efficiently, minimising wastage and optimising productivity.

Additionally, a production plan allows businesses to align their production capabilities with customer demand. By forecasting market trends and analysing customer needs, businesses can develop a production plan that caters to current and future demands, thus avoiding overstocking or understocking situations.

Furthermore, a production plan helps businesses enhance their competitive advantage. By implementing strategies such as lean manufacturing and automation, companies can streamline their production processes, reduce costs, improve product quality, and ultimately outperform competitors.

Key Components of a Production Plan

To create an effective production plan, it is crucial to consider several key components. These components work together to ensure efficient operations and successful fulfilment of customer demands. Let's explore each component in detail.

Demand Forecasting

Demand forecasting is a critical aspect of production planning. By analysing historical data, market trends, and customer behaviour, businesses can predict future demand for their products or services. Accurate demand forecasting allows companies to optimise inventory levels, plan production capacity, and ensure timely delivery to customers.

One approach to demand forecasting is quantitative analysis, which involves analysing historical sales data to identify patterns and make predictions. Another approach is qualitative analysis, which incorporates market research, customer surveys, and expert opinions to gauge demand fluctuations. By combining both methods, businesses can develop a robust demand forecast, minimising the risk of underproduction or overproduction. Utilising a free notion template for demand forecasting can further streamline this process, allowing businesses to organise and analyse both quantitative and qualitative data efficiently in one centralised location.

Capacity Planning

Capacity planning involves determining the optimal production capacity required to meet projected demand. This includes assessing the production capabilities of existing resources, such as machinery, equipment, and labour, and identifying any gaps that need to be addressed. By conducting a thorough capacity analysis, businesses can ensure that their production capacity aligns with customer demand, avoiding bottlenecks or excess capacity.

An effective capacity plan takes into account factors such as production cycle times, labour availability, equipment maintenance, and production lead times. It helps businesses allocate resources efficiently, minimise production delays, and maintain a consistent level of output to meet customer expectations.

Inventory Management

Efficient inventory management is crucial for a successful production plan. It involves balancing the cost of holding inventory with the risk of stockouts. By maintaining optimal inventory levels, businesses can reduce carrying costs while ensuring that sufficient stock is available to fulfil customer orders.

Inventory management techniques, such as the Economic Order Quantity (EOQ) model and Just-in-Time (JIT) inventory system, help businesses strike the right balance between inventory investment and customer demand. These methods consider factors such as order frequency, lead time, and carrying costs to optimise inventory levels and minimise the risk of excess or insufficient stock.

Resource Allocation

Resource allocation plays a pivotal role in a production plan. It involves assigning available resources, such as labour, materials, and equipment, to specific production tasks or projects. Effective resource allocation ensures that resources are utilised optimally, avoiding underutilisation or overutilisation.

To allocate resources efficiently, businesses must consider factors such as skill requirements, resource availability, project timelines, and cost constraints. By conducting a thorough resource analysis and implementing resource allocation strategies, businesses can streamline production processes, minimise bottlenecks, and maximise productivity.

Quality Assurance

Maintaining high-quality standards is essential for any production plan. Quality assurance involves implementing measures to monitor and control the quality of products or services throughout the production process. By adhering to quality standards and conducting regular inspections, businesses can minimise defects, ensure customer satisfaction, and build a positive brand reputation.

Quality assurance techniques, such as Total Quality Management (TQM) and Six Sigma , help businesses identify and rectify any quality-related issues. These methodologies involve continuous monitoring, process improvement, and employee training to enhance product quality and overall operational efficiency.

In addition to the core components of a production plan, it's also important for businesses to consider the broader aspects of their business strategy, including marketing and advertising. Understanding the costs and returns of different marketing approaches is crucial for comprehensive business planning. For instance, direct response advertising costs can vary significantly, but they offer the advantage of measurable responses from potential customers. This type of advertising can be a valuable strategy for businesses looking to directly engage with their target audience and track the effectiveness of their marketing efforts.

Strategies for Developing an Effective Production Plan

Developing an effective production plan requires implementing various strategies and best practices. By incorporating these strategies into the production planning process, businesses can optimise operations and drive success. Let's explore some key strategies in detail.

Lean Manufacturing

Lean manufacturing is a systematic Seamless Searches approach aimed at eliminating waste and improving efficiency in production processes. It emphasises the concept of continuous improvement and focuses on creating value for the customer while minimising non-value-added activities.

By adopting lean manufacturing principles, such as just-in-time production, standardised work processes, and visual management, businesses can streamline operations, reduce lead times, and eliminate unnecessary costs. Lean manufacturing not only improves productivity but also enhances product quality and customer satisfaction.

Just-in-Time (JIT) Inventory

Just-in-Time (JIT) inventory is a strategy that aims to minimise inventory levels by receiving goods or materials just when they are needed for production. This strategy eliminates the need for excess inventory storage, reducing carrying costs and the risk of obsolete inventory.

By implementing a JIT inventory system, businesses can optimise cash flow, reduce storage space requirements, and improve overall supply chain efficiency. However, it requires robust coordination with suppliers, accurate demand forecasting, and efficient logistics management to ensure timely delivery of materials.

Automation and Technology Integration

Automation and technology integration play a crucial role in modern production planning, as well as mobile app development . By leveraging technology, businesses can streamline processes, enhance productivity, and reduce human error. Automation can be implemented in various aspects of production, including material handling, assembly, testing, and quality control.

Continuous Improvement

Continuous improvement is a fundamental principle of effective production planning. It involves regularly evaluating production processes, identifying areas for improvement, and implementing changes to enhance efficiency and quality.

By fostering a culture of continuous improvement, businesses can drive innovation, optimise resource utilisation, and stay ahead of competitors. Techniques such as Kaizen, Six Sigma, and value stream mapping can help businesses identify inefficiencies, eliminate waste, and streamline production workflows.

Frequently Asked Questions (FAQs)

What is the role of a production plan in business planning.

A1: A production plan plays a crucial role in business planning by providing a roadmap for efficient production processes. It helps align production capabilities with customer demand, optimise resource utilisation, and ensure timely delivery of products or services.

How does a production plan affect overall business profitability?

A2: A well-developed production plan can significantly impact business profitability. By optimising production processes, reducing costs, and enhancing product quality, businesses can improve their profit margins and gain a competitive edge in the market.

What are the common challenges faced in production planning?

A3: Production planning can present various challenges, such as inaccurate demand forecasting, capacity constraints, supply chain disruptions, and quality control issues. Overcoming these challenges requires robust planning, effective communication, and the implementation of appropriate strategies and technologies.

What is the difference between short-term and long-term production planning?

A4: Short-term production planning focuses on immediate production requirements, such as daily or weekly schedules. Long-term production planning, on the other hand, involves strategic decisions related to capacity expansion, technology investments, and market expansion, spanning months or even years.

How can a production plan be adjusted to accommodate changes in demand?

A5: To accommodate changes in demand, businesses can adopt flexible production strategies such as agile manufacturing or dynamic scheduling. These approaches allow for quick adjustments to production levels, resource allocation, and inventory management based on fluctuating customer demand.

In conclusion, a well-crafted production plan is essential for business success. By incorporating a production plan into a comprehensive business plan, entrepreneurs can optimise resource utilisation, meet customer demands, enhance product quality, and drive profitability. Through effective demand forecasting, capacity planning, inventory management, resource allocation, and quality assurance, businesses can streamline production processes and gain a competitive edge in the market.

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What Is Production Planning & Why Is It Important?

Business success often hinges on making the products that customers want in a timely and cost-effective way. Production planning helps companies achieve those goals. It maps out all the processes, resources and steps involved in production, from forecasting demand to determining the raw materials, labor and equipment needed. Production planning helps companies build realistic production schedules, ensure production processes run smoothly and efficiently, and adjust operations when problems occur.

What Is a Production Plan?

A production plan describes in detail how a company’s products and services will be manufactured. It spells out the production targets, required resources, processes and overall schedule. The plan also maps all of the operational steps involved and their dependencies. The goal is to design the most efficient way to make and deliver the company’s products at the desired level of quality. A well-designed production plan can help companies increase output and save money by developing a smoother workflow and reducing waste.

What Is Production Planning?

Production planning involves developing a comprehensive strategy for making the company’s products and services. Initially adopted by large manufacturers, production planning has since become more popular among small and midsize businesses in multiple industries — largely because technology has made it easier to plan and track production processes with less effort. Production planning covers many different aspects of production, from forecasting demand to determining the raw materials, workforce, equipment and steps needed to make the company’s products.

Production Planning vs. Production Scheduling

While production planning provides an overview of what the company plans to do, production scheduling creates a more detailed view of exactly how the company will do it. The production schedule describes when each step in the production plan will occur, as well as the workers, machinery and other specific resources assigned to the job. Production scheduling can be extremely complex, especially when there are many interdependent production steps and the company is making multiple products simultaneously. Production scheduling software (opens in new tab) can help businesses create complex schedules, monitor progress in real time and quickly make adjustments when necessary.

Key Takeaways

• Production planning describes in detail how a company’s products and services will be manufactured.
• A production plan defines the production targets, required resources and overall schedule, together with all the steps involved in production and their dependencies.
• A well-designed production plan helps companies deliver products on time, reduce costs and respond to problems.
• Technology has made it easier for small and midsize companies in multiple industries to use production planning to optimize operations.

Product Planning Explained

Production planning is a broad discipline that involves much more than a focus on manufacturing process efficiency. It is intertwined with nearly every other aspect of the business, including finance, sales, inventory and human resources. Production planning activities include demand forecasting to determine the right mix of products to meet customer needs, as well as selecting the optimal approach to building those products. Production planning also assesses the resources needed to meet production goals and lays out in detail all the operations in the production process. Production plans must include the flexibility to make operational adjustments when problems occur — such as machine breakdowns, staffing shortages and supply-chain problems.

Why Is Production Planning Important?

A well-constructed production plan can help to boost revenue, profit and customer satisfaction, while a poorly designed plan can cause production problems and perhaps even sink the company. Specific benefits of production planning include:

• Knowledge. A production plan provides a framework for understanding the resources and production steps required to meet customer needs. It also helps companies understand the potential problems that may occur during production and how to mitigate them.
• Efficiency. Detailed production planning reduces bottlenecks and helps minimize costs. It also helps ensure the high quality of a product, and it keeps expenses on budget.
• Customer satisfaction. Production planning helps ensure that the company can make and deliver products to customers on time, leading to higher customer satisfaction and a greater likelihood of repeat business.

Types of Production Planning

The design of a product plan depends on the production method that the company uses, as well as other factors, such as product type, equipment capabilities and order size. Here are three of the main types of production planning:

Batch production planning.

Refers to manufacturing identical items in groups rather than one at a time or in a continuous process. For some businesses, batch production can greatly increase efficiency. A bakery creating items for sale the next day might first make a batch of chocolate chip cookies, then move on to oatmeal raisin cookies followed by loaves of semolina bread. A clothing manufacturer making goods for the summer might first set up its cutting and sewing machines to make 500 navy-blue T-shirts, then switch to red fabric and thread to make 400 tank tops. A good production plan for batch processing should look out for potential bottlenecks or delays when switching between batches.

Job- or project-based planning.

Used by many small- and medium-sized businesses, job production planning focuses on the creation of a single item by one person or team. Job-based planning is typically used where the specificity of each client’s requirements means it is difficult to make products in bulk. Many construction businesses use this method. Makers of custom jewelry and dresses are other examples of businesses that may use job production planning.

Flow production planning.

In flow production, also known as continuous production, standardized items are continuously mass-produced on an assembly line. Large manufacturers use this method to create a constant stream of finished goods. During production, each item should move seamlessly from one step along the assembly line to the next. Flow production is most effective at reducing costs and delays when there’s steady demand for the company’s products. Manufacturers can then readily determine their needs for equipment, materials and labor at each stage along the assembly line to help streamline production and avoid delays. The automotive industry and makers of canned foods and drinks are among the companies that use this method.

5 Steps to Make a Production Plan

Production planning is a robust undertaking that starts with forecasting and includes process design and monitoring. Here are five typical production planning steps:

Forecast product demand.

Estimate how much of each product you’ll need to produce over a designated period. Historical data can help with forecasting, but you’ll also need to pay attention to other factors that can affect demand, such as market trends and the economic situation for your customer base. Demand planning software can help companies make more informed decisions about the right amount of product needed to meet demand.

Map out production steps and options.

This step determines the processes, steps and resources needed to produce the required output. At this stage, the company may also examine different options for achieving its production goals, such as outsourcing some stages. The production mapping identifies which steps are interdependent and which can be performed simultaneously. Let’s say the job is to produce 1,000 children’s bicycles. Manufacturing the bicycle frames consists of a series of steps that must happen in sequence — cutting metal tubes, welding and painting — while other activities like assembling wheels can occur in parallel. Do you have all the right equipment? What happens if a machine breaks down? Are your suppliers able to meet your demand?

Choose a plan and schedule production.

Select a production plan after comparing the cost, time required and risks for each option. Sharing the selected plan with all necessary stakeholders typically helps assure a smoother production process since all the stakeholders are aware of what’s needed. Create a detailed production schedule that lays out in detail how the company will execute the plan, including the resources and timing for each step.

Monitor and control.

Once production has begun, you’ll need to track performance and continually compare it against the targets described in the production plan. Careful monitoring helps the company to detect any issues as soon as they pop up, so they can be quickly addressed.

Adjust accordingly.

It’s almost inevitable that production will be affected by events that you can’t plan for or predict. Those events can include changes to client specifications, supply chain lags, equipment failures and worker illness. You may also see ways to improve the production plan after seeing it in action for a while. So it’s vital to keep production plans flexible enough to allow for adjustment when needed. Football coaches often make adjustments to their game strategy at halftime — and the same holds true for production planning.

3 Common Product Planning Mistakes

Being aware of potential pitfalls ahead of time can help companies avoid or mitigate problems once production has started. Here are three of the most common production planning mistakes.

Not anticipating hiccups along the way.

In any complex production process, plans can go awry. Production planning should therefore include risk management strategies, including backup plans companies can rely on in the event of problems. Failing to do so can result in serious problems. For example, if a machine breaks on the line and you didn’t budget for repairs and workforce overtime, the issue may strain the company’s financial resources.

Keeping your distance.

Though production management software can provide real-time visibility into a company’s production status, it’s a good idea to supplement that information with in-person visits to the production line. Those visits can provide valuable insights into how production works in practice — insights that you might not gain if you’re stuck behind a desk.

Failing to maintain equipment.

There’s a tradition in football that the quarterback buys presents for his offensive linemen at the end of each season. Why? Because they protect him and enable him to do his job. Your manufacturing equipment is your company’s offensive line, so don’t neglect it. Tracking usage and paying for regular preventive maintenance helps ensure that your machines can keep your business functioning.

Production Planning KPIs

Key performance indicators (KPIs) are important metrics that help companies track the health of their production processes. By monitoring KPIs and comparing them to target values defined in production plans, businesses can determine whether production is on track and pinpoint problems that need to be addressed. Typical production KPIs include:

This key efficiency metric tracks the percentage of time that production is not occurring during scheduled operating hours. Causes include machine breakdowns, tool adjustments and accidents. Some downtime may be necessary for functions such as machine maintenance, but generally, the less downtime the better.

Setup time.

Also referred to as changeover time, this is the amount of time it takes to switch between jobs. Setup time impacts overall productivity because production is halted during these periods. Production schedules should consider how much time and effort it takes to reconfigure production for each job, including changes to the equipment, raw materials and workforce. Designing production schedules to minimize changeover time can increase efficiency.

Production rate.

In a manufacturing environment, this is typically measured as the number of units produced during a specific period. Comparing the actual production rate for each process with the planned rate can help businesses identify strengths and weaknesses and begin to address problems.

Overall equipment effectiveness (OEE).

This is a measure of overall manufacturing productivity that accounts for quality, performance and availability. The formula for OEE is:

OEE = Quality x performance x availability

Quality is typically measured as the percentage of parts that meet quality standards. Performance is how fast a process is running compared to its maximum speed, which is expressed as a percentage. Availability is the percentage of uptime during a company’s scheduled operating hours. Increasing OEE can be achieved by lowering downtime, reducing waste and maintaining a high production rate.

Rejection rate.

This is the number or percentage of products that failed to pass quality checks. Depending on the nature of the product and the problem, it may be possible to salvage some rejected items by reworking them, while others may need to be scrapped.

On-time orders.

Production delays can be costly both in terms of money and reputation. Generating products on schedule means you’re less likely to need costly expedited shipping or other emergency measures to meet deadlines. And delivering orders on time helps keep customers happy, which means they’re more likely to keep doing business with your company.

Production Planning Tools

Businesses rely on a variety of tools to build production plans and track progress, ranging from visualization tools to sophisticated software that automates many of the steps involved. Typical tools include:

Gantt charts.

A Gantt chart is a detailed visual timeline of all the tasks scheduled for a particular job. More than 100 years since its invention by mechanical engineer Henry Laurence Gantt, this chart remains integral to manufacturing and many other industries. Production planning involves coordinating and scheduling many tasks , and the Gantt chart visually represents when each task will take place and how long it will last. Manually creating and updating Gantt charts to reflect complex, ever-changing production schedules can be a time-consuming and error-prone job, however.

Spreadsheets.

Small companies sometimes start out by tracking simple production plans using spreadsheets. However, for most companies, the inherent complexity of production planning quickly outstrips the capabilities of spreadsheet software.

Production planning software.

Production planning involves a wide range of activities, including forecasting, managing the supply chain, tracking inventory and scheduling jobs. Those activities require information from across the company and beyond. Production planning information is integral to business operations and is used by other groups within the company, including finance. That’s a key reason many companies use enterprise resource planning (ERP) application suites that include production planning software and provide a single solution for managing the entire business.

Manage and Optimize Production With NetSuite

NetSuite cloud-based production management software helps companies maximize manufacturing productivity and minimize cost. NetSuite provides real-time visibility into each aspect of the production process, from inventory tracking and monitoring the production floor to fulfilling orders. Production scheduling capabilities let businesses create and update complex real-time production schedules with minimal effort. Because NetSuite production management software is part of an integrated suite of ERP applications , businesses can share production progress with the entire organization and link production processes to financial reports, inventory management and order management.

Production planning is an important function that can boost profitability and customer satisfaction as well as efficiency. It helps companies match output to demand, optimize production processes and determine how to overcome production problems.

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Production Planning FAQs

What are the 5 steps in production planning.

Here are five typical steps in the production planning process:

• Forecast the short- and long-term demand for your product.
• Map out the various options and processes for manufacturing these goods
• Choose the option that checks as many boxes as possible, and develop a production schedule.
• Monitor production against the plan.
• Adjust the plan where needed. In other words, if it’s broken, fix it.

What are the 3 activities of production planning?

Production planning activities can be divided into three main areas: Develop a production process and strategy; gather the resources needed, from raw materials to machinery and personnel; and select and train the necessary people.

What are the types of production planning?

Three of the main types of production planning are batch planning, job planning and flow or continuous planning . The choice depends on your resources as well as the nature of the product. Batch planning makes the same item in bulk before moving on to another item. Job planning, also called project-based planning, focuses more on custom design and single-item production. Flow production involves a steady stream of mass-produced items moving along the line.

What is the role of production planning?

Production planning is critical to ensure the production process runs smoothly and efficiently and delivers products on time. Planning allows a business to make certain that all necessary preparation is completed before starting production.

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Production Planning: How to Create The Ideal Production Plan

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Supply chains have grown more complex over time. There’s no end to all of the different challenges that warehouse managers face from manufacturing in-house and maintaining multiple locations.

Production planning is one beneficial way of getting ahead of the rush and having a good understanding of your supply chain management and strength.

Waiting for a rush of orders to disrupt your warehouse flow should never be an option. Use these production planning tips to improve your warehouse planning.

How Does Production Planning Work?

Production planning is the process of efficiently coordinating resources, activities, and processes in manufacturing to meet customer demand. It begins with demand forecasting and aligns production with sales plans through sales and operations planning (S&OP). The plan considers resource availability, schedules production tasks, manages inventory, and incorporates quality control measures.  Capacity planning ensures production aligns with manufacturing capabilities, while risk management addresses potential disruptions. Continuous monitoring allows for real-time adjustments, and the process fosters continuous improvement. Production planning aims to optimize production efficiency, cost-effectiveness, and customer satisfaction, making it a vital aspect of supply chain management.

Benefits of Good Production Planning

There are a few key benefits that come with good production planning.

• Improved customer service : When you can accurately forecast production needs, you can better meet customer demand and avoid stockouts.
• Increased production efficiency : A well-planned master production schedule prevents bottlenecks and allows for a smooth workflow through the warehouse.
• Reduced production costs : A good production planner will optimize the production process, reducing waste and ensuring that resources are used in the most efficient way possible.

Key Methods of Productions Planning

One of the most important production planning tips is to communicate your production plan to all parties involved.

Your production planning team should work closely with purchasing, operations, quality contro l, and sales teams to create an effective production schedule.

Ongoing communication about changes or disruptions within the supply chain is critical for production planning.

Specific to manufacturing a single product, the job method production planning is a production-oriented plan that uses routings to define the sequence of operations and tasks required to manufacture a product.

The job method production plan starts with the finished goods and works backward, defining each operation and task needed to produce the final product.

This type of production planning is common in batch and repetitive manufacturing environments with single products and smaller warehouses.

Batch Production Method

Batch production refers to individual products produced in batches or groups specific to a single product. In this type of production, products are made to order and typically in varying quantities.

Operations within a batch production environment will generally have some common characteristics:

• The same product is produced over and over again
• Operations are usually done sequentially
• There is often a lot of setup time required between each batch

Flow Method

This method is based on the continuous production of large quantities of one or more products. Flow production refers to the continual production flow and uses assembly lines, conveyors, and other automation tools. Systems are closely monitored using an OEE calculator and similar tools to ensure operations run efficiently.

Flow production typically requires less setup time than batch production methods because there is no need for multiple setups between different production runs.

Process Method

The production planning process is closely aligned with the production scheduling of jobs. Production planners determine which steps come after, how they should be processed, and the production rate.

Production planners work to determine when each step will be processed and how many staff are needed for each step in production scheduling.

This method is common in businesses with a high mix of products and frequent changes to the production schedule.

Mass Production Method

A production planning approach that uses standard routings to produce products in large quantities is known as mass production.

This type of production planning is common in businesses with low product variety and high demand.

In mass production, the goal is to produce as many product units as possible while maintaining quality standards.

How to Choose the Best Production Plan

Most obviously, the type of product you’re producing and the most appropriate production process will impact the production planning method you choose.

Here are some factors to consider as you determine what production plan is best for you.

The Level of Demand

One key question to ask yourself when choosing the right production plan is whether or not your products experience a high volume of orders. Flow production may be the best option to maintain production levels if products are constantly in demand.

The Number of SKUs That Will be Produced

The more unique products you produce, the less likely job or batch production planning will be effective. In these cases, process or mass production methods are better suited for producing large quantities of products.

How Many Steps to Production Are There?

Another important factor to consider when choosing a production plan is whether or not there are multiple production steps required for each product. If so, you’ll want to know if the production processes can be performed simultaneously or sequentially. The decision on how to produce your SKUs will depend heavily on this information.

The Level of Variability in the Production Process

If production processes are highly variable, it can be difficult to use batch production planning. In this case, flow production is often a more effective option because it allows for greater flexibility and faster changes to production schedules.

The Skill Level of Your Workforce

If your workforce has limited production skills or production is performed by untrained workers, your planning will be different than if you’re working with a skilled labor force. Many companies find that process production planning is a good option because it allows for better control of production lines and minimizes the need for highly skilled labor to perform complex steps.

Steps to Creating Your Production Plan

Now that you have a better understanding of the different production planning methods and how you’ll choose the right method for you, it’s time to create your own production plan.

The following steps will help you develop a production plan that meets the specific needs of your business.

1) Gather Estimates and Forecasts of Product Demands

The first step in production planning is to gather data on estimated product demand. This information can come from sales forecasts, customer surveys, or other market research sources.

Once you have an idea of the level of demand for your products, you can begin to plan production around these estimates.

2) Assess Current Inventory Levels

Inventory data is also essential for production planning. You need to know what inventory levels are currently available and how much stock you’ll need to produce your estimated product demand.

This information will help you determine the production schedule and identify any potential bottlenecks in production.

It’s important to note that not all products can be produced in large quantities. If you have products only produced in small batches, production planning will need to take this into account.

3) Plan and Determine Needed Resources

The next production planning step is determining production capacity, overall production costs, and the required resources. This includes equipment, raw materials, and labor. Once you have an idea of what’s needed, you can develop a production plan.

Many factors will impact production capacity, including the number of products being produced and the level of demand.

4) Monitor Production Levels and Plan Release Dates

Monitoring production levels and planning release dates is the next step in your process. This will ensure production is on track and running smoothly. You should also set goals and track key performance metrics (KPIs) for production, such as the number of products to be completed per day or week.

These production planning steps can help your business run more efficiently and ensure products are delivered to customers on time.

5) Make Adjustments to Improve Production for the Future

Finally, production planning should include an evaluation of production processes and assessing how production was managed during the process.

This information can be used to make production methods or equipment changes for future product runs. This helps you avoid issues that occurred in previous production runs, saving time and money down the road.

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From employee tracking to inventory control and stocking, you’ll get all the help you need to ensure that your business runs smoothly and your team keeps fulfilling production orders at a record pace.

Choose Extensiv Warehouse Manager for your inventory management needs , and you’ll get a team of experts to guide you and get your new inventory management system up and running.

Product Planning FAQs

An Enterprise Resource Planning (ERP) system plays a significant role in production planning and scheduling by providing a comprehensive and integrated platform to manage various aspects of manufacturing operations. An ERP system streamlines production planning by integrating various aspects of the manufacturing process, providing visibility, and enabling efficient utilization of available resources. It leads to improved production efficiency, reduced lead times, on-time delivery, and enhanced production control.

A product plan typically includes several key components that help guide the development, launch, and life cycle of a product. These components are interconnected and provide a clear roadmap to reach production goals. A typical production management plan includes components such as material requirements, real-time market analysis, product vision and strategy, product roadmap, features and prioritization, resource allocation, marketing and launch plans, etc.

Demand planning and production planning are closely interconnected in the supply chain and manufacturing process. Demand planning is the process of forecasting customer demand for a product, while production planning is the process of determining how to meet that demand efficiently. Demand forecasting is a critical input to production planning, as it provides valuable insights into customer demand, which allows production planners to optimize resources, streamline production schedules, and meet customer orders efficiently. By aligning production with demand, organizations can reduce costs, improve stakeholder and customer satisfaction, and enhance overall supply chain profitability.

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What is production planning and how to do it? A comprehensive guide.

Production planning is crucial for efficient production. Let’s explore all about it and see how to handle it in ERP software.

Production planning is vital to fulfil orders on time. If you don’t know your stock levels, workstation availability, or job schedules, you won’t be keeping your customers happy.

Whether you’re a new manufacturer oiling your machinery for the first time or a seasoned manufacturer shipping thousands of items, production planning is a must. Similar to how scrums and monthly plans run operations smoothly, production plans ensure optimal usage of resources.

In this blog, let’s understand the basic terms around production planning, see how it’s done, look at common pitfalls to be aware of, see the types of production planning, some topics around production planning, and finally an example of handling production planning in ERPs.

1. Production planning basics

1.1 what is production planning.

Production planning is the planning and allocation of raw materials, workers, and workstations to fulfill manufacturing orders on time. In a make to order environment, manufacturing orders or work orders themselves are created after receiving customer orders. A company that follows make to stock style of manufacturing will create work orders on a timely basis depending on demands. Production plans are usually set by the production managers who supervise the shop floor. A good production plan makes the best use of available resources to deliver orders on time.

1.2 Why should you do production planning

Handling a few production orders in spreadsheets works but for large manufacturing shops, the complexity increases a lot. Production planning helps to plan the procurement of raw materials based on the quantity of finished products to be manufactured. It also affects inventory, cash flow, sales, and distribution.

2. How to do production planning

2.1 five tips to improve production planning.

These tips to keep your production plan on track and improve its efficiency

2.1.1 Forecasting demand

Before production planning, the first action to take is forecasting demands for your products. While this may not be accurate to the last digit, getting rough estimates rolling is important to allocate resources. Forecasting can be done based on factors like historical order data and market trends/demands. Drawing out proper forecasts helps planning the type and quantity of materials to be produced and also the planning of raw material procurement.

2.1.2 Control inventory

Both, inventory shortage and inventory surplus are undesirable states. You can’t proceed with production when there’s a shortage and you waste space and money when there’s a surplus. Efficiently controlling inventory involves reordering when current inventory dips below a certain level, calculating the lead times to order items with long lead times earlier, and factoring in storage conditions. A well-controlled raw material inventory helps run a smooth production line and outputs finished goods inventory on time.

2.1.3 Plan for everything and everyone

Often, when making production plans, some machine or some person is unaccounted for. The problem here is that that machine may go down or the worker may be on leave, or worse, working on something else. Hence, plan for every machine, raw material, workstation, warehouse, and employee.

2.1.4 Monitor

Once the production plan is final and work orders are handed out, the manufacturing process begins. At this point, things may go wrong, machines pause, or items may get misplaced. Constantly monitoring the factory floor with supervisors or with IoT devices ensures that all the pieces are moving as planned.

2.1.5 Adapt

Despite your best planning, things go wrong on the factory floor. Anything can happen from suppliers making late deliveries to workers falling sick to machines failing. It’s important to be flexible and adapt to these changes quickly so that the planned quantities can be delivered on time. Ideally, you should also plan for any such risks beforehand.

2.2 KPIs for production planning

A few key performance indicators to track in production planning are:

• Production cost : This is essentially the monetary cost involved in producing the item. Costs include raw materials, electricity, fuel, worker salaries, rent, etc.
• Capacity utilization rate : It’s the percentage of actual manufacturing output against the total possible manufacturing output. If many machines and workers are sitting idle, your capacity utilization is low. Ideally, you want it high but never full.
• Projected versus actual hours : When planning, you may allocate a certain number of hours for completion of the production plan. But, it may take longer due to delays from workers or unexpected tasks. This KPI gives you a picture of how much time it was supposed to take and how much it did.
• Employee utilization (productivity) : You want workers to be working properly during the punch in and punch out. Nobody wants to be a machine by working to the dot but working 4 hours out of 8 is also not reasonable.
• Takt time : Takt time is a lean manufacturing concept. It is the time taken to produce a single unit of item.

3. Production planning pitfalls and avoiding them

First, let us understand the pitfalls or things that could go wrong during production planning. These occur in areas from idle inventory storage to active workers.

3.1 Stockouts

What is it?

It’s the shortage of raw materials that can happen after fulfilling large orders or due to negligence.

How to avoid it?

By checking inventory reports regularly or better yet, setting up automatic reordering.

How to do it?

By setting automatic reordering like this:

3.2 Assigning work to workstation on downtime

Assigning operations to a workstation that was supposed to be on downtime. This causes confusion and the work doesn’t get done because there’s no machine available.

Get a view of which workstations are on downtime and assign only to available machines. (version 13)

By analyzing the downtime of different machines and assigning work appropriately:

3.3 Bottlenecks

These are roadblocks in the production line that halt the processing of materials midway. For example, if items are waiting at the painting stations to get painted, the painting station is a bottleneck since it’s stopping the items from going ahead.

Bottlenecks can happen anywhere in the production line. Scan all the machines and even check if there are enough workers to carry out tasks. Through planning and ensuring the availability of machines and resources is a good way to avoid bottlenecks.

Setting up regular maintenance activities helps by keeping machines running. Eliminating bottlenecks in the production depends a lot on having sufficient machinery, manpower, and a regular supply of raw materials.

3.4 Insufficient worker training

Some specialized machines need trained workers for operation. Hiring rookies running specialized machines result in work not getting done.

Interview candidates for skills and experience in operating similar machinery. Even after interviews, thorough training should be done to ensure that the worker is ready to use the machines in production.

From the human resources module, first, test the employee’s skill proficiency. Then, set training events to enhance their skills. Updated employee skill maps help supervisors better allocate work to the right people and help the ones that are lagging.

4. Types of production planning

The different types of production planning are based on the manufacturing process followed in the factory. A single organization can deal with different types of manufacturing depending on the goods produced.

When items are manufactured in batches with unique batch numbers allotted to each batch. Production planning in batches helps run machinery in a well-planned manner as the next step is planned and the machines are allocated accordingly.

This type of production planning is common in job shops where custom material processing requirements are carried out. Each production plan will most likely be different from the last with the use of different materials, machinery, and operations on the materials.

In flow method, materials are processed smoothly from one machine to the next with very little human intervention. Any waiting time or bottlenecks are removed so that the materials ‘flow’ continuously till they become finished goods. Standardized work and quality control are essential to ensure consistent quality when producing items with the flow method.

5. Topics around production planning

5.1 production planning and control.

Production planning is about planning resources for delivering products and production control is about controlling the production system to achieve targets optimally. Production control has more to do with monitoring the production line and taking corrective action where things are not moving as planned.

‘Production planning and control’ is simply applying both these concepts to get an efficient production line.

Let’s understand the benefits of using both these methods together:

• Better organization for on-time delivery to customers
• Optimum resource utilization
• Less investment in inventory
• Avoid resource wastage
• Increased efficiency, hence reduced costs
• Improved quality by catching and reducing defects

Now let’s look at these topics individually to further distinguish between them.

5.1.1 Production planning

The steps involved in production planning are:

• Planning : This involves planning shop floor resources to deliver finished goods on time.
• Routing : The exact route/path or set of operations the materials go through is known as a routing. Finding optimum routes that reduce wastage and promote continuous flow is a part of production planning. Finding better routings is about using workstations, machines, and workers in different orders without affecting the product to deliver the items faster.
• Scheduling : The machines, activities, and workers are scheduled to do tasks that are a part of the production plan. Scheduling well helps in delivering the finished products on time.
• Loading : Loading here refers to overloading the production line to see how much it can handle. By loading each point, the last bits of efficiency can be squeezed to get the maximum value.

5.1.2 Production control

The steps involved in production control are:

• Dispatching : After the production plan is ready it’s time to implement it by dispatching items in and out of the production line. Different operations and the corresponding workstations are managed to dispatch items to them. The time to complete each activity or ‘job’ is recorded.
• Followup : After issuing a plan, bottlenecks and other problems may arise. Follow-ups are done by supervisors to eliminate any bottlenecks and ensure that things are going according to plan.
• Inspection : Routine inspections are done during production to verify that the materials are being processed correctly. Note that this is different from quality inspections which are done after the product is finished.
• Correction : The results from other steps in production control are reviewed and corrections are made where necessary. This includes the routings, scheduling work, and even conversations with workers who are taking those long breaks.

5.2 Production planning and inventory control

An indispensable part of manufacturing is managing your inventory. Controlling inventory is an essential part of production planning. Proper inventory control involves ensuring an adequate supply of raw materials which results in the timely delivery of products. It also minimizes the overstocking of finished products. Maintaining both—proper inventory levels and accurate data—helps in good production planning.

5.3 Production planning vs production scheduling

Production planning is about planning the number of resources needed to finish multiple manufacturing orders. Production scheduling is about timing the activities, machines, and workers right to run the production process. The work and workloads are optimized in production scheduling. There are two ways production scheduling is performed:

• Forward scheduling : Say, if resources are available today, plan from today till the order due date.
• Backward scheduling : If the availability date of resources is not certain, plan from the due date backward to a number of days.

Production scheduling levels the inventory, labor, and helps in estimating delivery dates accurately.

6. Production planning in ERP software

A production plan can be created and managed easily by using ERP software. You’d need the items, bill of materials, routings, customer orders, and material requests ready before creating a production plan.

6.1 Creating the production plan

Once you have the prerequisite records ready, it’s time to create the production plan. Let’s follow through step by step.

If the items to produce have been requested via a customer order or material requisitions, they can be fetched into the production plan.

By clicking on ‘Get Sales Orders’, either multiple orders or multiple requests can be fetched here, like this:

If you have a ton of orders or requests, set filters to narrow down your search like this:

Now, by clicking on ‘Get Items for Work Order’, the items to be manufactured using the current production plan will be fetched. The quantities can be increased in case you want to account for SKUs. It’s a good idea to keep extra inventory for items that take a very long time to manufacture but have predictable, fast demands.

Now that you know what items to manufacture since the bill of materials has been fetched, it’s time to plan for the raw materials. Clicking on ‘Get Raw Materials for Production’ will fetch all the raw materials and sub-assemblies required for manufacturing. If the inventory levels are present in the warehouses, they’ll not be fetched here. Click on ‘Download Required Materials’ to download the raw material list as a spreadsheet, send it to others or print it.

Some options to note here are:

• Including non-stock items in case you want to account for some external items that you don’t store in your inventory but will be used in production.
• Some subassemblies may be subcontracted, you can choose to include or exclude them in your plan. The choice here depends on whether the subcontracting is for operations or assembly among other factors.
• Projected quantity will show the inventory levels that should be produced based on demands and requests. If you want to ignore this number and produce quantities that you see fit, go ahead and tick the ‘Ignore Existing Projected Quantity’ checkbox.
• Finally, you submit and start with the production plan. Then, from the production plan work orders can be created. One work order for each BOM will be created if you click on ‘Create > Work Order’.

In the work order, the quantity to be produced can be changed depending on whether you want to produce some quantities later. Work orders are used by shop floor supervisors.

From the work orders, job cards are created to record the operations on raw materials. The jobs/operations are done at different workstations/machines.

Once the ‘jobs’ are done on the materials and items are processed, the work order is complete.

Now, depending on the quantity of items produced, the following details can be seen in the last section of the production plan:

6.2 Scheduling the plan

Creating a production plan is one part of the planning process, the other is scheduling different resources to the production plan. Factors like machine downtime, workstation capacity, and availability of raw materials are taken into consideration when scheduling.

In ERPNext, capacity planning is enabled by default. If you go to the calendar from the work order list, you can see the workstations for which materials are transferred and work has started (orange), neither materials are transferred nor work has started (red), and the ones that have been completed (green).

6.3 Role of project management in production planning

In larger organizations with multiple orders or when you get a large project from a client to produce hundreds of different items, project management comes handy. By using a project in ERPNext, you can create multiple work orders against it to track them all from one place.

That's it. Production planning is done easily with the right tools. By allocating resources carefully, planning for inventory, and avoiding mistakes, you can deliver you orders on time.

First, we introduced what a production plan is and discussed its importance. Then, we talked about the important things to note before creating a production plan and talked about the common mistakes to avoid when planning. Further, we talked about the types of production plans and the role of software in production planning.

For a monthly digest of such blogs and more updates, subscribe to our newsletter .

• Production planning
• Methods of production
• Scheduling (production processes)

ERPNext documentation

• Production Plan
• Capacity Planning
• Operations: Methods of Production (Overview) | Business | tutor2u
• Production plan: Top tips for improving your operations
• Grace college production planning

Prasad Ramesh

Marketing at Frappe.

Thank you very much for your informative info on production planning as I really need to use as guidance for my job as production planner

We are extremely impressed with this article because it contains a lot of great information. We, at MGH Distributors, are a part of the Import and distribution business. Our food products include Candies, cakes, cooking oil, beverages, jelly products, cookies and many more. The FMCG range brings to you world-class razors, blades, bar soaps. Visit our website to know more

Thank you for this very good overview on production in ERPNext.

Production Planning: Process, Factors, Challenges and Best Practices

Content creation team.

Cash Flow Inventory

• Last Updated: 18 th Feb 2024
• Inventory Management

Editorial Note: We are an inventory management software provider. While some of our blog posts may highlight features of our own product, we strive to provide unbiased and informative content that benefits all readers.

Production planning is the process of designing and scheduling the production process to meet the demand for a product or service .

It involves identifying the necessary resources, such as raw materials, labor, and equipment, and allocating them to ensure that the production process runs smoothly.

Effective production planning is essential for businesses to meet customer demand, minimize costs, maximize efficiency, and optimize inventory levels .

Table of Contents

• Importance of Effective Production Planning
• Understanding Production Planning
• Production Planning Steps
• Factors Affecting Production Planning
• Benefits of Effective Production Planning
• Challenges and Best Practices in Production Planning

Importance of Effective Production Planning for Businesses:

Effective production planning is critical for businesses for several reasons:

• Meeting customer demand: By planning production efficiently, businesses can ensure that they meet customer demand for their products or services. This helps to maintain customer satisfaction, which is essential for building a loyal customer base.
• Minimizing costs: Effective production planning can help businesses reduce production costs by optimizing resource allocation, reducing waste, and improving production efficiency. This helps to increase profit margins and improve the financial health of the business.
• Maximizing efficiency: Effective production planning helps businesses to ensure that production runs smoothly and efficiently, with minimal downtime and delays. This can improve the overall productivity of the business and help it to operate more efficiently.
• Optimizing inventory levels: By planning production effectively, businesses can optimize inventory levels to avoid stockouts and minimize excess inventory . This can help businesses to save money by reducing storage costs and avoiding overproduction.

Effective production planning is essential for businesses to remain competitive and meet customer demand. It helps businesses to reduce costs, improve efficiency, and optimize inventory levels, which can have a significant impact on their financial health and overall success.

Understanding Production Planning:

Production planning is the process of designing and scheduling the production process to meet the demand for a product or service. The primary objective of production planning is to ensure that businesses can produce products or services efficiently and effectively to meet customer demand while minimizing costs and maximizing profits.

The key components of production planning include resource identification and allocation, scheduling, and inventory management . Resource identification involves identifying the necessary resources, such as raw materials, labor, and equipment, that are required to produce the product or service. Resource allocation involves assigning these resources in the most efficient manner to ensure that production runs smoothly.

Scheduling involves creating a timeline for production and allocating resources to ensure that products are produced in a timely manner. Inventory management involves managing inventory levels to ensure that the right amount of products are available to meet customer demand without overproducing or overstocking inventory.

Effective production planning requires businesses to consider a wide range of factors, including customer demand, production capacity, resource availability, and production costs. Businesses must also be able to respond quickly to changes in market demand, economic conditions, and other factors that may impact production.

Effective production planning is essential for businesses to meet customer demand, reduce costs, improve efficiency, and optimize inventory levels. It requires a coordinated effort across different departments and teams within a business to ensure that resources are allocated efficiently and that production runs smoothly.

Here are some specific examples of how production planning can be used in different industries:

• Automotive:  Production planning is used in the automotive industry to schedule the production of cars, trucks, and other vehicles. This involves taking into account factors such as demand forecasts, parts availability, and capacity constraints. Production planners also work to identify and mitigate potential bottlenecks in the production process.
• Aerospace:  Production planning is essential in the aerospace industry, where products are complex and often made to order. Production planners work with engineers and other stakeholders to develop production schedules that meet customer requirements while also being efficient and cost-effective.
• Electronics:  In the electronics industry, production planning is used to manage the production of a wide variety of products, from circuit boards to smartphones. Production planners work to ensure that the right materials are available at the right time, and that the production process is efficient and error-free.
• Food and beverage:  Production planning is used in the food and beverage industry to ensure that products are produced safely and efficiently. Production planners work to schedule production runs, manage inventory levels, and comply with food safety regulations.
• Pharmaceuticals:  Production planning is critical in the pharmaceutical industry, where products are often complex and subject to strict regulations. Production planners work to ensure that drugs are produced safely and effectively, and that they meet all regulatory requirements.

These are just a few examples of how production planning is used in different industries. The specific ways in which production planning is used will vary depending on the industry, the products being produced, and the company’s specific needs.

Production Planning Steps:

While the essential steps in production planning remain similar across industries, the specifics can vary. Here’s a deeper dive into each stage:

1. Demand Forecasting:

• Quantitative methods:  Analyze historical sales data, market trends, economic indicators, and competitor activity to predict future demand.
• Qualitative methods:  Consider expert opinions, customer surveys, and marketing campaigns to understand buying intentions.
• Forecasting accuracy is crucial:  Inaccurate forecasts can lead to overproduction, stockouts, and wasted resources.

2. Resource Determination:

• Material requirements:  Calculate the quantity and type of raw materials needed based on the forecasted demand and product specifications.
• Human resources:  Assess the number and skills of personnel required for different production stages.
• Equipment and machinery:  Identify the machines and tools needed, considering capacity, maintenance schedules, and potential bottlenecks.

3. Scheduling and Routing:

• Sequencing:  Determine the order in which products will be produced, considering lead times, dependencies, and machine availability.
• Scheduling:  Assign specific start and finish times to production tasks, aiming for optimal resource utilization and minimizing idle time.
• Routing:  Define the sequence of operations each product will undergo within the production process.

4. Capacity Planning:

• Match resource capacity with demand:  Analyze production capabilities to ensure they can meet the forecasted demand without overloading resources.
• Identify and address bottlenecks:  Proactively identify areas where production could be slowed down and implement solutions like outsourcing or capacity expansion.
• Consider flexibility:  Build in buffers or alternative options to adapt to unexpected changes in demand or material availability.

5. Procurement and Inventory Management:

• Purchase orders:  Issue orders to suppliers for required materials based on the production schedule and lead times.
• Inventory control:  Maintain optimal inventory levels to avoid stockouts while minimizing holding costs.
• Supplier collaboration:  Partner with reliable suppliers to ensure timely deliveries and manage potential supply chain disruptions.

6. Monitoring and Control:

• Track progress:  Monitor production against the plan, identifying deviations and potential delays.
• Make adjustments:  Adjust schedules, resource allocation, or inventory levels as needed to address deviations and optimize production.
• Performance metrics:  Regularly measure and analyze key metrics like production efficiency, on-time delivery, and quality control to identify areas for improvement.

Additional Considerations:

• Integration with other functions:  Production planning should be integrated with other departments like sales, marketing, and finance for holistic planning and resource allocation.
• Software tools:  Utilize production planning software to automate tasks, improve data analysis, and optimize scheduling and resource allocation.
• Continuous improvement:  Regularly review and refine the production planning process based on lessons learned and industry best practices.

Remember , the specific steps and level of detail will vary depending on your industry, product complexity, and company size. By understanding these underlying steps and adapting them to your specific needs, you can create an effective production planning process that ensures efficiency, quality, and timely deliveries.

Factors Affecting Production Planning:

Effective production planning requires careful consideration of numerous factors that can influence your success. Here are some key aspects to consider:

• Demand variability:  Fluctuations in customer demand can significantly impact production schedules. Understanding historical trends, seasonal patterns, and potential promotions is crucial for accurate forecasting.
• Lead times:  The time it takes to acquire raw materials, components, and finished goods needs to be factored into planning to avoid stockouts or overproduction.
• Product mix:  Different products often have varying production complexities and lead times, requiring adjustments in planning and resource allocation.
• Production capacity:  Understanding your machines, manpower, and their limitations is essential to avoid overloading the system and ensure smooth production flow.
• Material availability:  Reliable suppliers and timely deliveries are crucial for avoiding production delays caused by stockouts.
• Human resources:  Skilled personnel, training needs, and potential absenteeism need to be considered to ensure sufficient resources for planned production activities.
• Cost of production:  Analyzing material, labor, and overhead costs helps optimize production processes and minimize expenses.
• Inventory carrying costs:  Holding excess inventory incurs storage, handling, and potential obsolescence costs, necessitating careful inventory management.
• Budget constraints:  Production plans must align with available financial resources to avoid exceeding budgets and jeopardizing financial stability.

External Factors:

• Regulations and compliance:  Adhering to safety, environmental, and other regulatory requirements can impact production processes and timelines.
• Supply chain disruptions:  Unexpected events like natural disasters or geopolitical issues can disrupt material supply chains, necessitating adaptable planning.
• Technological advancements:  New technologies offer opportunities to improve efficiency and capacity, but their integration and potential disruptions need to be considered.

Additional factors:

• Quality control:  Maintaining consistent quality standards requires incorporating quality checks and procedures into the production plan.
• Maintenance and repairs:  Scheduling equipment maintenance and repairs minimizes downtime and ensures production continuity.
• Sustainability:  Integrating sustainable practices into production plans can improve environmental impact and brand image.

Remember , these factors are interconnected and interdependent. Effective production planning involves analyzing these elements collaboratively and adapting your plan as needed to ensure optimal production operations.

Benefits of Effective Production Planning:

Effective production planning offers a wide range of benefits that can significantly improve your business operations. Here are some of the key advantages:

Increased Efficiency and Productivity:

• Reduced bottlenecks:  By analyzing workflows and identifying potential obstacles, effective planning helps streamline processes, minimize downtime, and maximize resource utilization.
• Optimized resource allocation:  Planning ensures the right people, materials, and equipment are available at the right time and place, eliminating unnecessary waiting and rework.
• Improved scheduling:  Well-defined schedules create clarity and direction for workers, leading to increased focus and output.

Reduced Costs:

• Lower inventory levels:  Accurate demand forecasting and just-in-time production methods minimize the need for excess inventory, reducing associated storage, handling, and obsolescence costs.
• Reduced waste:  Optimized production processes generate less scrap and rework, further lowering material costs.
• Lower lead times:  Faster production cycles decrease holding costs and enable quicker response to customer needs.

Enhanced Customer Satisfaction:

• On-time deliveries:  Effective planning leads to reliable production schedules, allowing you to meet or exceed delivery commitments and build customer trust.
• Improved product quality:  Consistent processes and optimized resource allocation contribute to higher quality standards, reducing defects and enhancing customer satisfaction.
• Increased responsiveness:  Flexibility in planning allows you to adapt to changing customer demands and market conditions, ensuring you can effectively meet their needs.

Additional Benefits:

• Improved decision-making:  Data-driven production plans provide valuable insights for informed decision-making, ultimately leading to better business strategy.
• Reduced risk:  Proactive planning helps identify and mitigate potential problems before they impact production, minimizing risk and ensuring smooth operations.
• Stronger competitive advantage:  Efficient and cost-effective production gives you a competitive edge in the market.

Remember, the specific benefits of effective production planning will vary depending on your industry, business size, and unique needs. However, by implementing a well-defined and adaptable planning process, you can unlock significant improvements in efficiency, cost, customer satisfaction, and overall business performance.

Examples (How It works):

Beyond general statements about cost reduction and efficiency, let’s dive into specific, quantifiable benefits that effective production planning can bring to different departments and business areas:

Increased Sales and Revenue:

• Reduced lead times:  Faster production turnaround means quicker deliveries, allowing you to capture early-bird sales and fulfill customer orders promptly. This can lead to a  5-10% increase in sales  by meeting tight deadlines and minimizing order cancellations.
• Improved product availability:  Optimized inventory management based on accurate forecasts minimizes stockouts, ensuring products are ready when customers need them. This can translate to  2-5% additional revenue  by preventing lost sales due to unavailability.
• Enhanced product quality:  Consistent control over resources and processes reduces defects and production errors, leading to  increased customer satisfaction and repeat purchases . This can generate  3-7% growth in revenue  through customer loyalty and positive word-of-mouth.

Reduced Costs and Improved Profitability:

• Minimized waste:  Streamlined production processes with fewer bottlenecks prevent excess material usage and rework, leading to  5-10% cost savings  on raw materials and labor.
• Optimized inventory levels:  Efficient inventory management reduces storage costs and the risk of obsolescence, potentially saving  3-7%  on inventory carrying costs.
• Lower downtime:  Proactive maintenance and contingency plans minimize equipment breakdowns and production stoppages, saving  2-5%  on lost production time and associated costs.

Enhanced Customer Satisfaction and Loyalty:

• On-time deliveries:  Meeting promised delivery dates consistently builds trust and avoids customer dissatisfaction, leading to  improved customer retention and positive reviews . This can translate to  2-4% higher customer lifetime value .
• Reduced order errors:  Accurate planning and communication minimize incorrect orders and product substitutions, improving customer experience and  lowering return rates by 3-7% .
• Improved product quality:  Consistent quality control reduces defects and complaints, leading to  higher customer satisfaction and loyalty , potentially increasing  repeat purchases by 5-8% .

Improved Team Productivity and Morale:

• Clear task assignments and deadlines:  Well-defined production plans minimize confusion and delays, allowing employees to focus on their tasks and improve  individual productivity by 5-10% .
• Reduced stress and frustration:  Streamlined processes and clear communication mitigate unexpected roadblocks and resource conflicts, fostering a  more positive work environment and reducing employee turnover by 2-4% .
• Increased sense of ownership and accountability:  Engaging employees in planning and reviewing processes can lead to a  stronger sense of ownership and responsibility , improving  performance by 3-5% .

These are just a few specific examples of how effective production planning can benefit different areas of your business. By quantifying these impacts and aligning them with your specific goals, you can build a compelling case for investing in improved production planning processes.

Remember, the actual benefits will vary depending on your industry, company size, and specific implementation. However, by focusing on these potential improvements and tailoring them to your context, you can unlock significant value through effective production planning.

Challenges and Best Practices in Production Planning:

Production planning can be a complex process that involves several challenges.

Challenges in Production Planning:

Production planning comes with its fair share of hurdles. Here are some common challenges encountered:

• Demand forecasting:  Accurately predicting future demand can be difficult due to changing market trends, customer preferences, and external factors. Inaccurate forecasts can lead to overproduction (wasting resources) or underproduction (failing to meet customer needs).
• Resource management:  Balancing the availability of resources (e.g., personnel, equipment, materials) with production needs can be tricky. Bottlenecks and delays can occur if resources are stretched too thin.
• Scheduling:  Creating efficient schedules that take into account all tasks, lead times, and dependencies is complex. Scheduling conflicts and inefficiencies can compromise production flow.
• Communication:  Ensuring clear and consistent communication between different departments (e.g., production, sales, procurement) is crucial for aligning efforts. Inadequate communication can lead to errors and disruptions.
• Disruptions:  Unexpected events like equipment breakdowns, supplier issues, or natural disasters can throw off production plans, requiring flexibility and quick adjustments.
• Data management:  Maintaining accurate and up-to-date data on inventory, production capacity, and other critical factors is vital for effective planning. Inaccurate data leads to poor decision-making.

Best Practices for Overcoming Challenges:

Despite the challenges, several best practices can help you navigate production planning successfully:

• Embrace technology:  Utilize advanced planning and scheduling software to optimize resource allocation, identify bottlenecks, and simulate different scenarios.
• Invest in accurate forecasting:  Employ data analysis and statistical methods to improve demand forecasting accuracy, considering historical trends, market research, and external factors.
• Implement collaborative planning:  Foster communication and collaboration across departments to ensure aligned goals and efficient resource utilization.
• Practice real-time monitoring:  Track production progress closely, identify deviations from the plan, and make adjustments as needed to maintain efficiency and meet deadlines.
• Build flexibility into your plan:  Create contingency plans and alternative scenarios to adapt to unexpected disruptions and maintain production flow.
• Focus on continuous improvement:  Regularly review and analyze production data, identify areas for improvement, and implement changes to refine your planning process.
• Invest in employee training:  Provide training to your workforce on efficient production practices, quality control procedures, and the importance of clear communication.

By adopting these best practices and proactively addressing potential challenges, you can create a robust and adaptable production plan that optimizes efficiency, minimizes costs, and ultimately enhances your business success.

Conclusion:

Effective production planning is critical for businesses to improve efficiency, increase productivity, manage inventory levels, reduce lead times, improve customer satisfaction , and lower costs.

However , production planning can be complex and challenging, involving factors such as demand variability , resource availability, production capacity, lead times , cost of production, and technology and automation.

Led by Mohammad Ali (15+ years in inventory management software), the Cash Flow Inventory Content Team empowers SMBs with clear financial strategies. We translate complex financial concepts into clear, actionable strategies through a rigorous editorial process . Our goal is to be your trusted resource for navigating SMB finance.

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The Fundamentals of Production Planning in Manufacturing: A Beginner's Guide

Production planning is a critical process for manufacturers looking to optimize their operations and improve efficiency. It involves setting production goals, determining resource requirements, and developing a plan to meet those goals in the most efficient way possible.

According to a study by the Aberdeen Group, manufacturers who adopt production planning can reduce their inventory carrying costs by up to 22%, increase on-time delivery rates by up to 24%, and reduce lead times by up to 66%.

With such significant benefits, it's no wonder that production planning is becoming increasingly popular in the manufacturing industry.

However, for beginners, understanding the fundamentals of production planning manufacturing can be a daunting task. This guide aims to provide an introduction to the key components and steps involved in the production planning process, as well as the factors that can affect production planning outcomes.

By the end of this guide, beginners should have a good understanding of production planning concepts and be able to develop a basic production plan for their manufacturing operations.

Whether you are a small-scale manufacturer or a large industrial facility, production planning can help you increase efficiency, reduce costs, and improve customer service. By taking the time to understand the fundamentals of production planning manufacturing, you can unlock the full potential of your manufacturing operations and stay ahead of the competition.

• Explanation of Production Planning

Understanding the Basics of Production Planning

Components of production planning, the role of technology in production planning, best practices in production planning, challenges in production planning, how can deskera help you, key takeaways, related articles, what is production planning.

Production planning is a process of determining the resources needed to produce goods and services, setting production goals, and developing a plan to achieve those goals in the most efficient way possible. It involves forecasting demand, creating a production schedule, determining resource requirements such as raw materials, labor, and equipment, and coordinating all the activities involved in the production process.

Production planning helps manufacturers optimize their operations by minimizing production costs, reducing lead times, and improving product quality. It helps ensure that the right resources are available at the right time, and that production is aligned with demand, so that goods are produced in the right quantities, at the right time, and at the right cost.

Production planning is a critical function in manufacturing and is used in a variety of industries, including automotive, aerospace, pharmaceuticals, and consumer goods. It is an ongoing process that involves continuous monitoring and adjustment to ensure that production goals are met and that resources are used efficiently.

Effective production planning requires collaboration between different departments within a manufacturing organization, such as sales, marketing, and production, to ensure that all aspects of production are aligned with business goals and objectives.

Importance of Production Planning in Manufacturing

Production planning is an essential function in manufacturing, and it plays a crucial role in the success of any manufacturing operation. The following are some of the reasons why production planning is important in manufacturing:

• Optimization of Resources : Production planning helps manufacturers to optimize their resources, including raw materials, labor, and equipment. By forecasting demand and creating a production schedule, manufacturers can ensure that they have the right resources available at the right time, reducing waste and improving efficiency.
• Meeting Customer Demands : Production planning helps manufacturers to produce goods in the right quantities, at the right time, and at the right cost, enabling them to meet customer demands effectively. By aligning production with demand, manufacturers can reduce lead times, improve on-time delivery rates, and enhance customer satisfaction.
• Reduced Costs : Production planning helps manufacturers to reduce costs by minimizing inventory carrying costs, reducing waste, and optimizing the use of resources. By avoiding overproduction, manufacturers can reduce storage costs and minimize the risk of obsolete inventory.
• Improved Quality Control : Production planning enables manufacturers to identify potential quality issues before they occur, reducing the risk of defects and improving product quality. By ensuring that the right resources are available at the right time, manufacturers can minimize the risk of errors and defects.
• Increased Efficiency : Production planning helps manufacturers to improve efficiency by reducing lead times, minimizing downtime, and optimizing the use of resources. By coordinating all aspects of the production process, manufacturers can improve productivity and reduce costs.

In summary, production planning is essential in manufacturing as it helps manufacturers to optimize resources, meet customer demands, reduce costs, improve quality control, and increase efficiency. By adopting production planning, manufacturers can stay competitive and achieve their business goals more effectively.

Purpose of the Article

The purpose of the article "The Fundamentals of Production Planning in Manufacturing: A Beginner's Guide" is to provide an introduction to the key components and steps involved in production planning for beginners in the manufacturing industry. The article aims to explain the importance of production planning in manufacturing, its benefits, and the factors that can affect production planning outcomes.

The article is intended to help beginners understand the fundamentals of production planning, including demand forecasting, creating a Master Production Schedule (MPS) , developing a Bill of Materials (BOM) , inventory management, and capacity planning . It also outlines the steps involved in the production planning process and provides practical guidance on how to develop a production plan.

The article is relevant to anyone who is new to production planning, including small-scale manufacturers, entrepreneurs, and students who are interested in the manufacturing industry. By reading this article, beginners can gain a basic understanding of production planning concepts and develop a foundation for more advanced production planning practices.

Ultimately, the article aims to help beginners optimize their manufacturing operations , reduce costs, and improve efficiency by adopting production planning practices.

To effectively implement production planning, it is essential to first understand the basics of this critical process. In this section, we will provide an overview of the fundamental concepts of production planning, including its definition, key objectives, and the various factors that can affect its outcomes.

By gaining an understanding of the basics of production planning, beginners can develop a solid foundation for creating effective production plans that optimize resources, reduce costs, and improve efficiency.

Key concepts of production planning

Production planning is a complex process that involves multiple key concepts that are essential to its success. The following are some of the key concepts of production planning:

• Demand forecasting : Demand forecasting is the process of predicting the quantity of goods and services that customers will require in the future. Accurate demand forecasting is critical to production planning, as it enables manufacturers to produce the right quantities of goods at the right time.
• Master Production Schedule (MPS) : The Master Production Schedule (MPS) is a detailed plan that outlines the quantity and timing of production for each item manufactured. The MPS is the backbone of the production planning process and serves as a guide for all production activities.
• Bill of Materials (BOM) : The Bill of Materials (BOM) is a comprehensive list of all the components and materials required to manufacture a product. The BOM includes the quantity and specification of each component, as well as any special instructions for assembly.
• Inventory management : Inventory management involves managing the quantity and location of inventory to ensure that production can be carried out efficiently. Effective inventory management is critical to production planning, as it ensures that the right materials are available at the right time, minimizing waste and reducing costs.
• Capacity planning : Capacity planning is the process of determining the resources required to produce goods and services, including labor, machinery, and facilities. Effective capacity planning ensures that production can be carried out efficiently and cost-effectively.

In summary, understanding these key concepts is essential for effective production planning. By leveraging these concepts, manufacturers can optimize their operations, reduce costs, and improve efficiency, resulting in increased profitability and competitiveness.

Types of production planning systems

There are several types of production planning systems that are used in the manufacturing industry. These systems vary in complexity, scope, and functionality, and can be classified into the following categories:

• Material Requirements Planning (MRP) : Material Requirements Planning is a software-based production planning and inventory control system that calculates the amount of materials required to manufacture a product. MRP systems use data on production schedules, inventory levels, and demand forecasts to generate a production plan and ensure that the right materials are available at the right time.
• Enterprise Resource Planning (ERP) : Enterprise Resource Planning is an integrated software system that allows manufacturers to manage all aspects of their operations, including production planning, inventory management, accounting, and human resources. ERP systems provide a unified view of the entire manufacturing process, enabling manufacturers to make better decisions and optimize their operations.
• Just-in-Time (JIT) : Just-in-Time is a production planning system that aims to minimize inventory levels by producing goods only when they are needed. JIT systems rely on accurate demand forecasting, streamlined production processes, and close collaboration between suppliers and manufacturers to minimize waste and improve efficiency.
• Kanban : Kanban is a lean production planning system that uses visual signals to manage inventory levels and production schedules. Kanban systems rely on a pull-based production model, where goods are produced only when there is demand, and inventory levels are controlled by limiting the number of items in the production process.
• Advanced Planning and Scheduling (APS) : Advanced Planning and Scheduling is a software-based system that uses complex algorithms to optimize production planning and scheduling. APS systems take into account multiple factors, including demand forecasts, inventory levels, and production capacity, to generate an optimized production plan.

In summary, there are several types of production planning systems that manufacturers can choose from. The type of system chosen will depend on the specific needs of the manufacturer, including the size of the operation, the complexity of the production process, and the level of automation desired.

To effectively plan and manage production processes, it is important to understand the components that make up production planning. In this section, we will delve into the various components of production planning, including capacity planning, scheduling, material requirements planning, and quality control.

By understanding these components and how they interact with each other, manufacturers can create effective production plans that optimize resources, minimize waste, and improve efficiency.

Sales forecasting and demand planning

Sales forecasting and demand planning are critical components of production planning, as they provide insight into the expected demand for products and services. These two concepts are closely related and are used to predict future sales volumes, which in turn drives the production planning process.

Sales forecasting is the process of estimating the future sales volume of a company's products or services. This process takes into account past sales data, market trends, customer behavior, and other relevant factors to generate a forecast for future sales. Sales forecasting is typically carried out on a monthly, quarterly, or annual basis, and is used to inform the overall business strategy, including production planning.

Demand planning, on the other hand, is the process of translating sales forecasts into specific production requirements. This involves identifying the resources required to produce the required volume of goods or services, including materials, labor, and equipment. Demand planning is used to develop a production plan that aligns with sales forecasts and ensures that production can be carried out efficiently.

The key difference between sales forecasting and demand planning is that sales forecasting is focused on predicting future sales volumes, while demand planning is focused on translating these forecasts into specific production requirements. Sales forecasting provides the basis for demand planning, and is typically the starting point for production planning.

Both sales forecasting and demand planning are critical for effective production planning, as they enable manufacturers to align production with customer demand, minimize waste, and optimize resources. Accurate sales forecasting and demand planning can also help manufacturers avoid stockouts, reduce inventory costs, and improve customer satisfaction.

In summary, sales forecasting and demand planning are essential components of production planning. By accurately predicting future sales volumes and translating them into specific production requirements, manufacturers can create effective production plans that optimize resources, reduce costs, and improve efficiency.

Material requirements planning (MRP)

Material Requirements Planning (MRP) is a software-based production planning and inventory control system that calculates the amount of materials required to manufacture a product. MRP systems use data on production schedules, inventory levels, and demand forecasts to generate a production plan and ensure that the right materials are available at the right time.

The MRP process typically begins with a master production schedule (MPS), which outlines the planned production quantities for each product over a specific time period. The MRP system then uses this information to generate a detailed material requirements list, which specifies the quantities of each raw material, component, and subassembly required to meet the production schedule.

MRP systems also take into account lead times, or the time required for materials to be delivered, and safety stock levels, or the amount of inventory kept on hand to protect against unexpected demand or supply disruptions. By factoring in lead times and safety stock levels, MRP systems can ensure that the required materials are available when needed, and avoid stockouts or production delays.

In addition to calculating material requirements, MRP systems also generate purchase orders and production schedules to ensure that the required materials are delivered and production is carried out efficiently. MRP systems can also be integrated with other systems, such as inventory management and accounting, to provide a unified view of the entire production process.

The benefits of MRP systems include increased production efficiency, reduced inventory costs, and improved customer service. By accurately calculating material requirements and streamlining the production planning process, manufacturers can optimize resources, reduce waste, and improve the accuracy and timeliness of order fulfillment.

However, it is important to note that MRP systems have some limitations. For example, they are highly dependent on accurate data inputs, including production schedules, inventory levels, and demand forecasts. Inaccurate or outdated data can lead to incorrect material requirements calculations, which can result in production delays or excess inventory. Additionally, MRP systems may not be suitable for highly customized or rapidly changing product lines.

In summary, Material Requirements Planning (MRP) is a software-based production planning and inventory control system that calculates the amount of materials required to manufacture a product. MRP systems play a critical role in optimizing resources, reducing waste, and improving the accuracy and timeliness of order fulfillment. However, they have some limitations and may not be suitable for all types of production processes.

Capacity planning

Capacity planning is the process of determining the production capacity required to meet the demand for a product or service. The goal of capacity planning is to ensure that a company has the resources and capabilities to meet the expected demand for its products, while avoiding excess capacity that can lead to unnecessary costs.

Capacity planning involves analyzing historical production data, demand forecasts, and other relevant factors to determine the required production capacity for a given time period. This analysis takes into account factors such as production lead times, production rates, and available resources such as labor and equipment.

Once the required production capacity has been determined, capacity planning involves developing a production plan that maximizes the use of available resources and minimizes the risk of overproduction or underproduction. This may involve adjusting production schedules, investing in new equipment or technology, or hiring additional staff.

Capacity planning is critical for effective production planning, as it enables companies to balance production capacity with expected demand, reduce the risk of stockouts or excess inventory, and optimize the use of available resources. Effective capacity planning can also help companies respond quickly to changes in demand, such as seasonal fluctuations or unexpected shifts in customer behavior.

There are several techniques used for capacity planning, including resource forecasting, production rate analysis, and simulation modeling. Resource forecasting involves projecting the availability of resources such as labor and equipment, and determining the production capacity that can be achieved with these resources.

Production rate analysis involves analyzing historical production data to determine the rate at which products can be produced, and using this information to develop a production plan. Simulation modeling involves using computer simulations to model production scenarios and identify optimal production strategies.

In summary, capacity planning is a critical component of production planning that involves determining the production capacity required to meet expected demand, and developing a production plan that maximizes the use of available resources. Effective capacity planning can help companies optimize resources, reduce costs, and improve the accuracy and timeliness of order fulfillment.

Production scheduling

Production scheduling is the process of determining when and how much of a product should be produced to meet customer demand while optimizing the use of resources such as labor, equipment, and materials. The goal of production scheduling is to ensure that production runs smoothly and efficiently, with minimal downtime or waste.

Production scheduling typically involves the use of software tools to generate a detailed production plan, taking into account factors such as production capacity, lead times, inventory levels, and customer demand. The production schedule specifies when each product should be produced, how much should be produced, and which resources should be used.

The production schedule is typically based on a master production schedule (MPS), which outlines the planned production quantities for each product over a specific time period. The MPS provides a high-level view of the production schedule, while the detailed production schedule breaks down the production requirements into specific time periods and production runs.

Production scheduling is a complex process that requires careful coordination between different departments within a company, such as production, procurement, and logistics. Effective production scheduling can help companies optimize production processes, reduce inventory costs, and improve customer service by ensuring that products are delivered on time and in the correct quantities.

There are several techniques used for production scheduling, including material requirements planning (MRP), finite capacity scheduling, and just-in-time (JIT) scheduling. MRP involves calculating the amount of materials required to manufacture a product, based on the production schedule and demand forecasts.

Finite capacity scheduling takes into account the availability of resources such as labor and equipment when generating the production schedule. JIT scheduling involves producing products only when they are needed, in order to minimize inventory costs and reduce waste.

In summary, production scheduling is the process of determining when and how much of a product should be produced to meet customer demand while optimizing the use of resources.

Effective production scheduling can help companies optimize production processes, reduce inventory costs, and improve customer service. There are several techniques used for production scheduling, including MRP, finite capacity scheduling, and JIT scheduling.

Inventory management

Inventory management is the process of overseeing the flow of goods and materials into and out of a company's inventory. The goal of inventory management is to ensure that the company has the right amount of inventory on hand to meet customer demand, while minimizing the costs associated with holding and managing inventory.

Effective inventory management involves several key activities, including forecasting demand, setting inventory levels, tracking inventory movements, and managing stockouts and overstock situations. These activities are typically supported by software systems that provide real-time visibility into inventory levels and enable companies to track inventory movements and forecast demand.

One of the key challenges of inventory management is balancing inventory levels with customer demand. Holding too much inventory can tie up working capital and increase storage and handling costs, while holding too little inventory can result in stockouts and lost sales. To address this challenge, companies typically use inventory planning techniques such as just-in-time (JIT) inventory, economic order quantity (EOQ), and safety stock.

JIT inventory involves producing or acquiring goods only when they are needed, in order to minimize inventory costs and reduce waste. EOQ involves calculating the optimal order quantity based on factors such as demand, lead time, and ordering costs. Safety stock involves maintaining a buffer of inventory to protect against unexpected fluctuations in demand or supply.

Another key aspect of inventory management is tracking inventory movements and managing inventory accuracy. This involves implementing inventory control systems and procedures to ensure that inventory levels are accurately reflected in the company's records, and that inventory is properly accounted for and managed.

In summary, inventory management is the process of overseeing the flow of goods and materials into and out of a company's inventory. Effective inventory management involves balancing inventory levels with customer demand, and using inventory planning techniques such as JIT inventory, EOQ, and safety stock to minimize inventory costs and reduce waste.

Inventory management also involves tracking inventory movements and managing inventory accuracy, to ensure that inventory levels are accurately reflected in the company's records and that inventory is properly accounted for and managed.

Technology has revolutionized the field of production planning, providing companies with powerful tools to optimize their production processes, improve efficiency, and reduce costs. In this section, we will explore the role of technology in production planning, and examine some of the key software tools and technologies used in modern production planning systems.

Overview of production planning software

Production planning software is a category of software tools designed to support the planning and execution of production processes in manufacturing environments. These tools are designed to automate and optimize key aspects of production planning, including demand forecasting, materials planning, capacity planning, scheduling, and inventory management.

Production planning software can be divided into several categories based on their specific focus and functionality. Some software tools are designed to address specific aspects of production planning, such as demand forecasting or inventory management, while others provide end-to-end support for the entire production planning process.

One of the key advantages of production planning software is that it enables companies to optimize their production processes and reduce costs by identifying inefficiencies and bottlenecks. For example, production planning software can help companies identify areas where production capacity is underutilized or where materials are being wasted, and provide recommendations for how to improve efficiency and reduce waste.

Another advantage of production planning software is that it enables companies to better manage their inventory levels, ensuring that they have the right amount of inventory on hand to meet customer demand while minimizing inventory costs. This is particularly important in industries with high demand volatility, where companies must be able to quickly adjust production and inventory levels in response to changing market conditions.

In summary, production planning software is a category of software tools designed to support the planning and execution of production processes in manufacturing environments. These tools are designed to automate and optimize key aspects of production planning, and can help companies reduce costs, improve efficiency, and better manage their inventory levels.

Benefits of using technology in production planning

Technology has had a significant impact on the manufacturing industry, providing numerous benefits for companies that adopt advanced production planning tools and software. In this section, we will explore some of the key benefits of using technology in production planning in greater detail.

• Improved efficiency : Technology can help automate and optimize key aspects of production planning, such as demand forecasting, materials planning, and scheduling, reducing the time and effort required to perform these tasks manually. This can help companies save time and reduce the cost of production planning activities, while also enabling them to respond more quickly to changing market conditions.
• Increased accuracy : One of the main advantages of production planning software is that it can provide more accurate and reliable forecasts, reducing the risk of overproduction or stockouts, and ensuring that the right amount of inventory is on hand to meet customer demand. By providing real-time visibility into inventory levels and demand, production planning software can help companies make more informed decisions about production and inventory levels, reducing the risk of costly errors.
• Cost savings : By optimizing production processes and reducing waste, technology can help companies reduce costs and increase profitability. For example, by providing tools for capacity planning and scheduling, production planning software can help companies reduce the amount of time that production lines are idle or underutilized, reducing the cost of production and improving overall efficiency.
• Better decision-making : Technology provides real-time visibility into production processes and inventory levels, enabling companies to make more informed decisions about production, inventory, and resource allocation. By providing access to real-time data and analytics, production planning software can help companies identify trends and opportunities, optimize production processes, and respond more quickly to changing market conditions.
• Improved customer satisfaction : By ensuring that the right products are available at the right time, technology can help companies improve customer satisfaction and loyalty. By reducing the risk of stockouts and delays, production planning software can help companies ensure that customers receive their orders on time and in full, improving their overall experience and satisfaction with the company.
• Scalability : Technology can help companies scale their production processes and expand their operations more easily by providing tools for planning, scheduling, and resource allocation. By providing a platform for centralizing and streamlining production planning activities, production planning software can help companies manage multiple production sites and production lines more efficiently, improving overall scalability and flexibility.

In summary, the benefits of using technology in production planning are many and varied, including improved efficiency, increased accuracy, cost savings, better decision-making, improved customer satisfaction, and greater scalability. By adopting advanced production planning tools and software, companies can gain a competitive advantage in the marketplace, reduce costs, and improve profitability.

Now that we have covered the basics of production planning and the role of technology in the process, it's important to discuss best practices in production planning. Implementing these best practices can help manufacturing companies optimize their production processes, reduce costs, and increase efficiency.

In this section, we will explore some of the key best practices that manufacturing companies should consider when implementing a production planning strategy. From demand forecasting to inventory management and scheduling, we will provide actionable insights on how to improve production planning processes to achieve better outcomes.

By following these best practices, manufacturing companies can gain a competitive advantage and drive sustainable growth.

Establishing clear goals and objectives

Establishing clear goals and objectives is a critical component of effective production planning. Goals and objectives provide direction and purpose, helping manufacturing companies to align their resources and efforts towards achieving specific outcomes. Without clear goals and objectives, production planning can become disjointed and inefficient, leading to wasted resources, delays, and other negative outcomes.

In this section, we will discuss the importance of establishing clear goals and objectives in production planning and provide guidance on how to set them effectively.

Firstly, clear goals and objectives help manufacturing companies to prioritize their efforts and allocate resources more effectively. By establishing specific, measurable, achievable, relevant, and time-bound (SMART) goals and objectives, companies can focus their attention on the most important areas of their production processes, ensuring that resources are used efficiently and effectively. This can help to reduce waste and improve productivity, leading to lower costs and higher profits.

Secondly, clear goals and objectives help to motivate employees and create a sense of purpose and direction. When employees understand the goals and objectives of the company, they are more likely to be engaged and committed to their work, leading to better performance and higher job satisfaction.

To establish clear goals and objectives in production planning, manufacturing companies should start by conducting a comprehensive analysis of their production processes, identifying key areas for improvement and setting specific goals and objectives for each area.

These goals and objectives should be SMART, ensuring that they are specific, measurable, achievable, relevant, and time-bound. They should also be communicated clearly to all employees, ensuring that everyone is aligned and working towards the same objectives.

Overall, establishing clear goals and objectives is a critical component of effective production planning. By setting specific, measurable, achievable, relevant, and time-bound goals and objectives, manufacturing companies can focus their attention on the most important areas of their production processes, allocate resources more effectively, and improve overall efficiency and productivity.

Collaboration among departments

Collaboration among departments is another key best practice in production planning. Production planning involves many different departments, including production, procurement, inventory management, and sales, among others. For the production planning process to be effective, it's essential that these departments work together and collaborate closely.

In this section, we will discuss the importance of collaboration among departments in production planning and provide guidance on how to achieve it effectively.

Firstly, collaboration among departments helps to ensure that all relevant information is shared and considered. For example, if the sales department is forecasting a surge in demand for a particular product, this information needs to be communicated to the production department so that they can adjust their production schedules accordingly. Collaboration ensures that all departments have access to the information they need to make informed decisions.

Secondly, collaboration among departments helps to improve communication and coordination. By working together, departments can share their expertise and insights, identify potential problems early on, and work together to find solutions. This can help to reduce delays, improve efficiency, and increase overall productivity.

To achieve effective collaboration among departments in production planning, manufacturing companies should establish clear lines of communication and encourage open dialogue. This can be achieved through regular meetings, cross-functional teams, and other collaborative initiatives. It's also important to establish a culture of collaboration and teamwork, where departments are encouraged to work together and share their knowledge and expertise.

Overall, collaboration among departments is a critical component of effective production planning. By working together and sharing information and expertise, departments can ensure that production processes are optimized, resources are used efficiently, and the company is able to achieve its goals and objectives.

Continual monitoring and adjustment of plans

Continual monitoring and adjustment of plans is another essential best practice in production planning. The production planning process is not a one-time event; it's an ongoing process that requires constant monitoring and adjustment to ensure that plans are on track and aligned with changing market conditions and business objectives.

In this section, we will discuss the importance of continual monitoring and adjustment of plans in production planning and provide guidance on how to achieve it effectively.

Firstly, continual monitoring of production plans allows companies to identify potential problems early on and take corrective action before they become major issues. For example, if the production department is falling behind schedule, this can be identified through ongoing monitoring, and adjustments can be made to production schedules to ensure that deadlines are met. This can help to reduce the risk of delays, improve efficiency, and maintain customer satisfaction.

Secondly, continual adjustment of production plans allows companies to respond quickly to changing market conditions and customer demands. For example, if there is a sudden surge in demand for a particular product, the production plan can be adjusted to increase production and ensure that customer needs are met. This can help to increase sales, improve customer satisfaction, and strengthen the company's position in the market.

To achieve effective continual monitoring and adjustment of plans in production planning, manufacturing companies should establish regular review processes and performance metrics. This can include regular meetings to review progress, analyze performance data, and identify areas for improvement. It's also important to establish a culture of continuous improvement, where teams are encouraged to identify problems and suggest solutions proactively.

Overall, continual monitoring and adjustment of plans is a critical component of effective production planning. By monitoring plans regularly and making adjustments as needed, companies can ensure that they remain on track to achieve their goals and objectives, respond quickly to changing market conditions, and optimize their production processes for maximum efficiency and productivity.

Implementation of lean manufacturing principles

Implementation of lean manufacturing principles is a key best practice in production planning that can help companies optimize their production processes, reduce waste, and improve efficiency. Lean manufacturing is a philosophy that emphasizes continuous improvement and the elimination of waste throughout the production process.

In this section, we will discuss the importance of implementing lean manufacturing principles in production planning and provide guidance on how to achieve it effectively.

Firstly, implementing lean manufacturing principles in production planning can help companies to identify and eliminate waste in their production processes. This can include reducing inventory levels, minimizing transportation and movement, and eliminating unnecessary steps in production. By streamlining production processes, companies can reduce costs, improve efficiency, and increase throughput.

Secondly, lean manufacturing principles emphasize the importance of continuous improvement and empowering employees to identify and solve problems proactively. This can help to create a culture of innovation and continuous improvement, where employees are encouraged to identify opportunities for improvement and implement changes to optimize production processes.

To achieve effective implementation of lean manufacturing principles in production planning, manufacturing companies should focus on identifying areas of waste and inefficiency in their production processes, and developing strategies to address them.

This can involve adopting lean manufacturing tools and techniques, such as value stream mapping, 5S, and Kaizen, as well as providing training and support to employees to ensure that they have the skills and knowledge needed to implement these principles effectively.

Overall, implementation of lean manufacturing principles is a critical component of effective production planning. By adopting a lean manufacturing philosophy and focusing on continuous improvement, companies can optimize their production processes, reduce waste, and improve efficiency, leading to increased profitability and a stronger competitive position in the market.

Importance of communication

Effective communication is essential in production planning to ensure that all departments are aligned on production goals and schedules, and to identify and address any issues or bottlenecks in the production process. In this section, we will discuss the importance of communication in production planning and provide guidance on how to establish effective communication channels.

Clear communication between departments is necessary to ensure that everyone is working towards the same production goals and schedules. This involves sharing production plans, schedules, and forecasts with all relevant departments, including sales, purchasing, production, and logistics. This ensures that all departments have a clear understanding of the production plan and can work together to achieve it.

Effective communication also enables departments to identify and address any issues or bottlenecks in the production process proactively. This can include identifying material shortages, machine breakdowns, or scheduling conflicts, and addressing them quickly to avoid delays or disruptions in production.

To establish effective communication channels in production planning, companies should prioritize transparency and collaboration among departments. This can involve holding regular meetings to discuss production plans and schedules, setting up communication platforms such as email, messaging apps, or project management tools, and providing training and support to employees to ensure that they understand the importance of communication in production planning.

Overall, effective communication is critical in production planning to ensure that all departments are aligned on production goals and schedules, and to identify and address any issues or bottlenecks in the production process proactively. By establishing clear communication channels and prioritizing collaboration among departments, companies can improve efficiency, reduce waste, and increase profitability.

Despite the many benefits of production planning, there are also several challenges that manufacturers face when implementing production planning strategies. In this section, we will explore some of the most common challenges in production planning and discuss strategies for overcoming them.

Common production planning challenges

Production planning can be a complex process that involves coordination between different departments, managing resources, and adapting to changes in demand. Here are some of the most common challenges that manufacturers face in production planning:

• Uncertainty in demand : One of the biggest challenges in production planning is uncertainty in demand. Manufacturers must be able to accurately forecast demand to ensure that they have enough inventory and production capacity to meet customer needs. However, changes in customer demand, supply chain disruptions, or unexpected events can make it difficult to predict demand accurately.

To overcome this challenge, manufacturers can use advanced forecasting methods, such as predictive analytics, machine learning, or simulation models, to improve the accuracy of demand forecasts. They can also use flexible production strategies, such as just-in-time (JIT) or lean manufacturing, to adjust production quickly to changes in demand.

2. Resource allocation : Another common challenge in production planning is allocating resources effectively. Manufacturers must ensure that they have enough raw materials, labor, and equipment to meet production targets while minimizing waste and optimizing efficiency. However, resource constraints, such as limited inventory or production capacity, can make it difficult to balance supply and demand.

To overcome this challenge, manufacturers can use production planning software to optimize resource allocation and improve efficiency. They can also use lean manufacturing techniques, such as value stream mapping, to identify and eliminate waste in the production process.

3. Coordination between departments : Production planning requires coordination between different departments, such as sales, production, purchasing, and logistics. However, communication breakdowns or conflicting priorities can make it difficult to align production plans and schedules across departments.

To overcome this challenge, manufacturers can establish clear communication channels and prioritize collaboration among departments. This can involve holding regular meetings to discuss production plans and schedules, setting up communication platforms, such as email or project management tools, and providing training and support to employees to ensure that they understand the importance of communication in production planning.

4. Managing lead times : Another challenge in production planning is managing lead times, which is the time between placing an order and receiving the finished product. Long lead times can make it difficult to respond quickly to changes in demand or supply chain disruptions, while short lead times can increase the risk of stockouts or production delays.

To overcome this challenge, manufacturers can use production planning software to optimize lead times and improve delivery times. They can also work with suppliers to improve lead times for raw materials or components, and use agile manufacturing techniques, such as modular production or cross-training, to improve flexibility and responsiveness in the production process.

Overall, production planning requires careful coordination and management of resources, demand, and production schedules. By addressing these common challenges, manufacturers can improve efficiency, reduce waste, and increase profitability.

Strategies for overcoming challenges

Production planning is a complex process and can face various challenges that can impact the productivity and efficiency of manufacturing operations. Here are some strategies to overcome these challenges:

• Flexibility : One way to overcome production planning challenges is by being flexible. Manufacturing companies need to be able to quickly adapt to changes in demand, supply chain disruptions, or unexpected events. This can be achieved by having contingency plans, having multiple suppliers, and being open to changing production schedules.
• Collaboration : Collaboration and communication among different departments is essential for successful production planning. Different departments such as sales, production, and inventory management need to work together to develop an effective production plan. This will help in identifying potential issues and finding solutions quickly.
• Advanced technology : The use of advanced technology such as production planning software, automation, and data analytics can help to overcome production planning challenges. These tools can provide real-time data on inventory, production schedules, and demand, enabling manufacturers to make informed decisions and adjust production plans accordingly.
• Continuous improvement : Continuously monitoring and analyzing production planning processes can help to identify areas for improvement. Manufacturers can use techniques such as lean manufacturing and Six Sigma to identify and eliminate inefficiencies and improve overall productivity.
• Skilled workforce : Having a skilled and well-trained workforce is crucial for successful production planning. This can be achieved by providing training and development programs for employees to enhance their skills and knowledge in production planning processes.

By implementing these strategies, manufacturers can overcome production planning challenges and achieve greater productivity, efficiency, and profitability in their operations.

In conclusion, production planning is a critical process in manufacturing that ensures products are produced efficiently, cost-effectively, and delivered on time to customers. This beginner's guide has provided an in-depth understanding of the key concepts, components, and best practices in production planning.

We have explored the different types of production planning systems, the importance of technology, and the challenges faced in the process.

By understanding the fundamentals of production planning manufacturing and implementing best practices, manufacturers can improve their operations, optimize resources, reduce waste, and improve customer satisfaction. The use of advanced technology, collaboration among departments, continual monitoring and adjustment of plans, and a skilled workforce can help manufacturers overcome production planning challenges and achieve their goals.

In conclusion, production planning is an ongoing process that requires continuous improvement, flexibility, and adaptation to meet the changing demands of customers and the marketplace. By following the best practices outlined in this guide, manufacturers can develop effective production plans, optimize their operations, and achieve long-term success in the manufacturing industry.

How can Manufacturers further their Learning and Implementation?

If you are a manufacturer or aspiring to be one, it is crucial to understand the fundamentals of production planning to achieve success. This guide has provided an overview of the key concepts, components, and best practices in production planning, and the challenges that may be encountered.

To further your learning and implementation, we encourage you to take the time to research and explore different production planning software and technologies that can enhance your manufacturing operations. You can also seek out industry experts or consultants to provide guidance and expertise in production planning.

Remember that production planning is an ongoing process, and continual improvement is essential for success. Keep yourself updated with the latest trends and best practices in production planning and strive to implement them in your manufacturing operations.

By investing time and effort in learning and implementing best practices in production planning, you can optimize your operations, improve customer satisfaction, and achieve long-term success in the manufacturing industry.

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• Production planning is a critical process that helps manufacturers optimize their operations and achieve long-term success in the industry.
• Sales forecasting and demand planning are essential components of production planning as they enable manufacturers to anticipate demand and plan accordingly.
• Material requirements planning (MRP) helps manufacturers ensure they have the right materials and components to meet production requirements.
• Capacity planning enables manufacturers to determine the amount of production that can be completed in a given time frame.
• Production scheduling is a vital component of production planning as it ensures that production occurs in the most efficient and effective manner.
• Inventory management is essential in production planning to ensure that the right amount of inventory is available to meet production needs without overstocking.
• The use of technology, such as production planning software, can significantly enhance the efficiency and effectiveness of production planning.
• Collaboration among departments is crucial to ensure all teams are working towards a common goal and that the production plan is optimized.
• Continual monitoring and adjustment of plans are necessary to ensure that production is meeting expectations and that any issues are addressed promptly.
• Implementing best practices such as establishing clear goals and objectives, lean manufacturing principles, and effective communication can help manufacturers overcome challenges and optimize their operations.

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10.2 The Production Process: How Do We Make It?

• What types of production processes do manufacturers and service firms use?

In production planning, the first decision involves which type of production process —the way a good or service is created—best fits with company goals and customer demand. An important consideration is the type of good or service being produced, because different goods may require different production processes. In general, there are three types of production: mass production, mass customization, and customization. In addition to production type, operations managers also classify production processes in two ways: (1) how inputs are converted into outputs and (2) the timing of the process.

One for All: Mass Production

Mass production , manufacturing many identical goods at once, was a product of the Industrial Revolution. Henry Ford ’s Model-T automobile is a good example of early mass production. Each car turned out by Ford ’s factory was identical, right down to its color. If you wanted a car in any color except black, you were out of luck. Canned goods, over-the-counter drugs, and household appliances are other examples of goods that are mass-produced. The emphasis in mass production is on keeping manufacturing costs low by producing uniform products using repetitive and standardized processes. As products became more complicated to produce, mass production also became more complex. Automobile manufacturers, for example, must now incorporate more sophisticated electronics into their car designs. As a result, the number of assembly stations in most automobile manufacturing plants has increased.

Just for You: Customizing Goods

In mass customization , goods are produced using mass-production techniques, but only up to a point. At that point, the product or service is custom-tailored to the needs or desires of individual customers. For example, American Leather , a Dallas-based furniture manufacturer, uses mass customization to produce couches and chairs to customer specifications within 30 days. The basic frames in the furniture are the same, but automated cutting machinery precuts the color and type of leather ordered by each customer. Using mass-production techniques, they are then added to each frame.

Customization is the opposite of mass production. In customization, the firm produces goods or services one at a time according to the specific needs or wants of individual customers. Unlike mass customization, each product or service produced is unique. For example, a print shop may handle a variety of projects, including newsletters, brochures, stationery, and reports. Each print job varies in quantity, type of printing process, binding, color of ink, and type of paper. A manufacturing firm that produces goods in response to customer orders is called a job shop .

Some types of service businesses also deliver customized services. Doctors, for instance, must consider the illnesses and circumstances of each individual patient before developing a customized treatment plan. Real estate agents may develop a customized service plan for each customer based on the type of house the person is selling or wants to buy. The differences between mass production, mass customization, and customization are summarized in Exhibit 10.5 .

Converting Inputs to Outputs

As previously stated, production involves converting inputs (natural resources, raw materials, human resources, capital) into outputs (products or services). In a manufacturing company, the inputs, the production process, and the final outputs are usually obvious. Harley-Davidson , for instance, converts steel, rubber, paint, and other inputs into motorcycles. But the production process in a service company involves a less obvious conversion. For example, a hospital converts the knowledge and skills of its medical personnel, along with equipment and supplies from a variety of sources, into health care services for patients. Table 10.1 provides examples of the inputs and outputs used by various other businesses.

There are two basic processes for converting inputs into outputs. In process manufacturing , the basic inputs (natural resources, raw materials) are broken down into one or more outputs (products). For instance, bauxite (the input) is processed to extract aluminum (the output). The assembly process is just the opposite. The basic inputs, like natural resources, raw materials, or human resources, are either combined to create the output or transformed into the output. An airplane, for example, is created by assembling thousands of parts, which are its raw material inputs. Steel manufacturers use heat to transform iron and other materials into steel. In services, customers may play a role in the transformation process. For example, a tax preparation service combines the knowledge of the tax preparer with the client’s information about personal finances in order to complete the tax return.

Production Timing

A second consideration in choosing a production process is timing. A continuous process uses long production runs that may last days, weeks, or months without equipment shutdowns. This is best for high-volume, low-variety products with standardized parts, such as nails, glass, and paper. Some services also use a continuous process. Your local electric company is an example. Per-unit costs are low, and production is easy to schedule.

In an intermittent process , short production runs are used to make batches of different products. Machines are shut down to change them to make different products at different times. This process is best for low-volume, high-variety products such as those produced by mass customization or customization. Job shops are examples of firms using an intermittent process.

Although some service companies use continuous processes, most service firms rely on intermittent processes. For instance, a restaurant preparing gourmet meals, a physician performing surgical procedures, and an advertising agency developing ad campaigns for business clients all customize their services to suit each customer. They use the intermittent process. Note that their “production runs” may be very short—one grilled salmon or one physical exam at a time.

Concept Check

• Describe the different types of production processes.
• How are inputs transformed into outputs in a variety of industries?

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• Authors: Lawrence J. Gitman, Carl McDaniel, Amit Shah, Monique Reece, Linda Koffel, Bethann Talsma, James C. Hyatt
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• Publication date: Sep 19, 2018
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What is Production Planning? – Process Flow, Types & Tools

Stepping into the world of production planning is like conducting a well-orchestrated symphony in the world of business. It’s the meticulous planning and coordination that transform ideas into tangible products, ensuring efficiency and success.

It helps to control and manage the production of goods. It includes the steps needed to make the products. There are different types of production plans called production schedules or manufacturing schedules.

This blog post will explore production planning and related terms. We will discuss creating the production plan and the tools and software used.

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What is the production planning, and what are its objectives?

Production planning is a process that creates a plan for producing products. The production plan is a document that explains what will be produced and when it will be produced.

The objectives of production planning are to make sure the right products are made at the right time and in the correct quantities.

The production process

There are a few critical steps to producing a product. The first step is acquiring raw materials. Next, you need to turn them into a finished product. Finally, once finished, it needs to be packaged and shipped.

Production processing

Production processing is when you turn raw materials into another product. For example, if you have a production line that takes in unprocessed ingredients and makes finished goods, or if it brings in finished goods and creates a different type of product.

Manufacturing process

A manufacturing process is a series of steps followed to make a product. The first step is getting unprocessed materials, and the last is finishing the product.

There are three main parts of the process:

• Collection of raw materials
• Manufacturing of the product
• Packaging and shipping of the product

Ingredients are collected and brought to the manufacturing plant. The manufacturing process begins with the production of the product. The product is then packaged and shipped to the customer.

You can divide the process into two sections:

• Inward processing
• Outward processing

Inward processing  refers to the manufacturing of products from basic materials.  Outward processing  refers to the manufacturing of products from semi-finished products.

Manufacturing can be divided into the following steps:

• Receiving and inspection of ingredients
• Cutting and shaping of ingredients
• Assembling of components
• Finishing and testing of products
• Packaging and shipping of products

It is a long, complex series of steps followed to create products. Therefore, manufacturing companies have departments dedicated solely to production planning. A good production planning process ensures a smooth manufacturing process in an organization.

Production scheduling

Production scheduling is the process of organizing production in a factory. This includes creating a plan and determining the resources needed for each step.

Scheduling is essential to make the factory run smoothly and efficiently. It is crucial to think about the availability of human and machine resources and the order of products.

Companies can use production scheduling software to help create and manage a production schedule. This software can automate creating a plan and track the status of each step in the process. In addition, scheduling software is often used with other manufacturing software, such as quality control or inventory management software.

Production line

A production line is a set of machines, tools, or workers who produce something. A production manager oversees it to ensure everything runs smoothly and that the workers do what is wanted. In addition, the production manager makes sure the workers are doing their job right. 

The most common type is the Assembly line . Each worker does one step of the process, making it more efficient. Another is called a Job shop . Each worker does the whole process in a Job shop, which is not as efficient as an Assembly line but allows for more flexibility and creativity.

The production line can be under conventional or lean production models. Conventional production is when the workers do their jobs the same way they have always done them. Lean production is when the workers are more flexible and can adapt to changes in the production process. 

The production line is responsible for taking unprocessed materials and turning them into finished products. So it needs to be organized in a way that allows it to be efficient and effective in creating products from raw materials.

Raw materials

Raw materials are the components that are used to create a product. They can be divided into  primary raw materials  and  secondary raw materials .

Primary are the basic components of a product. These materials, such as minerals, plants, or animals, are usually extracted from nature. Primary raw materials are used to make the basic parts of a product. For example, they can use aluminum for the body of a phone.

The secondary is made from primary basic materials. These materials are usually created in a factory or other manufacturing environment. Secondary raw materials are used to create finished products, such as a car’s body or a phone’s screen.

The basic materials must be available in sufficient quantities to ensure the finished products’ efficient and effective creation. Therefore, raw materials must be managed carefully so that the production line can always obtain enough resources to allow for production.

Capacity planning

Capacity planning is assessing and anticipating the number of resources needed to produce the desired output level.

What is Capacity Planning? (Strategies, Tools, and Process)

The production process provides  three possible outcomes  of this determination:

• It can identify enough resources
• Not enough resources
• Or more resources than desired

Production control

First, production planning and control regulate the production of goods and services to meet the market’s demand.

Production control also includes ensuring that the resources are available when needed, monitoring production to ensure that it meets the schedule, and making changes as required to ensure that production meets the forecasted demand.

Planning Process

Production Planning is organizing and managing the production of goods and services to meet customers’ needs.

The main goal of production planning is to ensure that the right products are made in the right quantities, at the right time, and at the right price.

Production planning involves three key steps:

• Planning : In this step, managers determine what products must be made and identify the necessary resources. They also develop a schedule for producing these products.
• Manufacturing : In this step, workers make the products.
• Distribution : In this step, managers ensure that the products are delivered on time and at the right price. This step is closely related to supply chain management.

The production planning process is crucial because it helps businesses to:

• Meet customer demand
• Control costs
• Maximize profits
• Improve quality and efficiency

Outcomes and outputs of production planning

The  outcomes  of a better production planning process are:

• A well-organized and efficient production process
• Improved quality of the final product
• Increased productivity and efficiency
• Reduced manufacturing time
• Reduced waste and scrap
• Reduced production costs
• Increased customer satisfaction and reduced lead time.

These outputs are achieved by an effective Production Planning Process, which is responsible for taking inputs from the various functions involved to accomplish these outputs.

The  inputs  required include,

• Market requirements
• Competitor analysis
• Product design specifications/drawings & product specifications
• Available resources & production facilities
• Schedule for product development

Outputs  of a good production planning process are:

• A well-organized and efficient process flow diagram
• Detailed work instructions/operations manuals to support the process flow diagram
• Product cost estimation by activity or operation as per BOM (Bill Of Materials)
• Output schedule comprising the production start date, due dates for all activities, and finished product delivery dates
• Capacity requirement calculation based on the Output schedule
• Raw material availability check & purchase plan preparation

Types of production planning and the time horizons

There are three types of production planning: short-term, medium-term, and long-term.

It is used to plan and schedule the production of goods for the near future. For example, this type of planning is used when there is a known demand for a product, and the manufacturer must ensure that they have enough stock to meet that demand.

Medium-term

It is used to plan and schedule the production of goods for the medium term. For example, this type of planning is used when an estimated demand for a product is estimated, but it is not yet known how much stock will be needed.

It is used to plan and schedule the production of goods for the long term . This type of planning is used when there is an expected demand for a product, but exactly when the need will occur is unknown.

The production plan

The production plan is a document that details the specific steps to produce a product. For example, the production plan includes production, manufacturing , scheduling, line, and production costs.

The production plan ensures that the product is produced according to specifications. The production plan is also used to ensure that the product is made on time and low cost.

Types of production plans

A business can use several production plans to optimize its schedule since multiple processes are involved in its operation. The most common types of production plans are as follows:

• Master Production Schedule
• Material Requirements Plan
• Capacity Requirements Plan
• Production Schedule

The production  planning department  typically creates these plans. However, depending on the company’s structure and needs, they can also be delegated to a  project manager  or  line supervisor .

In some cases, planners could even combine these plans into one document to make it easier for all parties involved to understand what is needed from each section. First, however, it is essential to note that each of these plans serves its unique purpose in production.

How to create a production plan

There are a few critical steps in creating a production plan:

1.  Establish the goals of the production plan  – What is the purpose of the production plan? For example, is it to meet customer demand, reduce manufacturing time, or control costs?

2.  Determine the necessary resources for production  – What resources are needed to produce the product? This includes human resources, machines, and raw materials.

3.  Create a manufacturing process  – What steps are needed to produce the product? This process should be detailed and easy to follow.

4.  Schedule production  – When will the product be produced? What are the due dates for all activities, and when will the finished product be delivered?

5.  Control production  – How will the process be monitored to ensure it proceeds as planned? What steps need to be taken if there are deviations from the plan?

Types of production planning tools

• Production planning software  is designed to help businesses plan, schedule, and manage their production. It can provide various reports on how the process is proceeding and alerts if there are any deviations from the plan.
• Production planning templates  – A template is a pre-determined format for creating a document. Production planning templates can help ensure that all the necessary information is included in the production plan and that the document is easy to follow.
• Gantt chart  – A Gantt chart is a graphical tool to schedule and track tasks. For example, it can display the relationship between tasks and their start and finish dates.
• Production planning tools online  provide standard features and let you  collaborate with others.
• Production planning PDF  allows you to print and use them as hard copies.
• Production planning excels
• Production scheduling software  enables you to track the progress of each step in the process and alerts you if there are any delays.
• Production line design software  allows you to design and simulate the process before producing the product.
• Raw material inventory management  software helps you track how much of each raw material is needed for the process and order more if necessary.

List of production planning software

• Microsoft Excel   – Microsoft Excel is one of the most common and popular software for production planning. Small and medium businesses widely use it because it is easy to use and versatile.
• Oracle Primavera  – Primavera is a production planning software used by larger businesses. It offers more features than Microsoft Excel, such as creating Gantt charts.
• SureTrak Project Manager  – SureTrak is another production planning software used by larger businesses. It has more features than Primavera, such as tracking inventory and costs.
• Microsoft Project  – Microsoft Project is a project management software used for production planning. It has more features than Microsoft Excel, such as creating timelines and tracking costs.
• Workfront production planning software  – Workfront is a cloud-based software that helps businesses manage their production planning. It has features such as the ability to track tasks and costs and to create reports.

Most modern ERP solutions include a production planning module in them.

Why is production planning important in supply chain management?

Production planning is essential in supply chain management because it allows for the smooth and efficient flow of goods from the supplier to the customer. Production planning also helps ensure that the correct quantities of goods are produced and produced on time. Production planning also helps to keep costs down and minimizes waste.

How do you plan human resources in production?

When planning human resources as part of manufacturing production planning, it is vital to consider its needs and the available workforce . Some factors to consider when planning human resources include: – The number of employees needed – The types of positions needed – The skills and experience required for the positions – The geographical location of the employees – The availability of qualified employees

What is Production Planning and Inventory Control?

Production planning and inventory control (PPIC) is a process that determines the number of products to produce, when to make, and what resources are needed. PPIC also determines the types and quantities of materials from suppliers and the need for finished goods inventory. As a result, PPIC helps companies ensure they have the right products on hand to meet production orders while minimizing costs.

Production planning is critical for all businesses, whether you produce physical or digital products. By correctly understanding the process and scheduling your production, you can minimize waste, optimize resources, and ensure that your customers are happy with their products.

In this comprehensive guide to production planning, we’ve outlined the steps involved in creating an effective plan and some best practices for streamlining the manufacturing process.

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Production planning and scheduling for manufacturing

James humphreys.

Senior Content Manager

Production scheduling is essential for growing manufacturing operations to take their production to the next level. If you’re looking to maximize efficiency on your shop floor, you need a way to optimize your production planning and scheduling.

Nowadays, your scaling manufacturing business has many options for finding production planning software explicitly crafted for manufacturers.

This guide will provide you with a comprehensive understanding of manufacturing scheduling and how it can help you allocate your resources efficiently and cost-effectively to meet customer orders. So, read on to learn how to improve production scheduling in your scaling manufacturing business.

Table of contents:

• What’s the difference between production planning and scheduling?

The importance of production planning and scheduling

5 stages of production planning and scheduling.

• Download production schedule template

A simple production plan example

The key factors to consider when scheduling production.

• Production Planning KPIs

How to optimize production scheduling

Production planning and scheduling mistakes, can you use excel for production planning, production planning and scheduling with katana, what’s the difference between planning and scheduling.

Production planning and scheduling are two key activities in manufacturing and operations management. Although closely related, they involve different aspects of the production process. Let’s take a closer look at the difference between these two concepts.

What is production planning?

Production planning is an important process that involves strategic decision-making to determine the optimal production strategy, resource allocation, and scheduling to meet customer demand and organizational objectives. It encompasses a comprehensive analysis of what products should be produced, in what quantities, and when.

By considering market demand, sales forecasts, and internal capabilities, production planning ensures efficient utilization of resources while maintaining a competitive edge in the market. This process plays a vital role in aligning the overall business strategy with the operational aspects of production, enabling companies to meet customer expectations, maximize productivity, and achieve their desired outcomes.

The main objectives of production planning include:

• Forecasting customer demand and market trends
• Setting production goals and objectives
• Determining the types and quantities of products to be produced
• Identifying the necessary resources (materials, equipment, labor, etc.)
• Allocating resources efficiently
• Developing manufacturing schedules and timelines

What is production scheduling?

Production scheduling is a vital process that entails the creation of a comprehensive and detailed timetable outlining the specific order and timing of production activities. It involves making critical decisions on when each task or operation should commence and conclude, taking into account resource availability, constraints, and dependencies.

By considering factors such as machine availability, labor capacity, and material availability, production scheduling aims to optimize efficiency and streamline workflow.

This process ensures that production tasks are executed in a coordinated manner, minimizing idle time, maximizing resource utilization, and ultimately facilitating the timely delivery of products.

Effective manufacturing scheduling plays a pivotal role in enhancing productivity, reducing costs, and maintaining a smooth and well-organized production process.

The primary objectives of production scheduling include:

• Sequencing the order of production tasks
• Assigning resources (equipment, labor, etc.) to specific tasks
• Minimizing idle time and maximizing resource utilization
• Adapting to changes in customer demand or unforeseen disruptions
• Ensuring timely delivery of products

In summary, production planning focuses on the big picture and long-term decisions to ensure that production activities align with the overall business strategy and customer demand. On the other hand, production scheduling focuses on short-term decisions that aim to optimize efficiency, minimize costs, and maintain a smooth workflow within the production process.

Both planning and scheduling are essential for effective production management and meeting customer demands efficiently.

Production planning and scheduling are crucial aspects of a business’ operations and have significant importance for several reasons:

• Meeting customer demands — Effective manufacturing planning and scheduling ensure timely delivery of products in the required quantities, avoiding stockouts , minimizing lead times, and enhancing customer satisfaction.
• Optimal resource utilization — Proper planning and scheduling enable businesses to allocate resources efficiently, minimizing idle time, reducing costs, and maximizing productivity, leading to improved operational efficiency and resource utilization.
• Cost control — Accurate demand forecasting and efficient scheduling help avoid overproduction, minimize inventory holding costs, reduce setup times, eliminate bottlenecks, and optimize resource use, contributing to cost savings.
• Improved production efficiency — Effective planning streamlines production processes, eliminates inefficiencies, and reduces waste, optimizing production flow, reducing cycle times, and increasing overall efficiency.
• Timely decision-making — Well-defined plans facilitate informed decisions on resource allocation, production priorities, and capacity management, enabling adaptation to changes and ensuring timely production.
• Coordination and collaboration — Manufacturing planning and scheduling involve cooperation between departments, enhancing communication, improving coordination, and achieving a synchronized production process, reducing delays and enhancing operational efficiency.
• Scalability and growth — Well-designed production plans and schedules lay the foundation for handling increased demand, expanding operations, and adapting to market conditions. This helps to facilitate scalability and capitalizing on growth opportunities.
• Continuous improvement — Monitoring production performance, analyzing data, and evaluating schedules help identify areas for improvement, driving continuous optimization and maintaining a competitive edge.

So, if you want to ensure timely delivery, optimal resource utilization, cost control, improved efficiency, and scalability, you need to have a solid production plan.

Production planning and scheduling involve a systematic approach to ensure efficient and timely production of goods. The best way to achieve this is by dividing the process into four distinct stages, each serving a specific purpose.

These stages provide a structured framework for organizations to plan, schedule, and control their production processes effectively. Let’s explore each stage in detail.

1. Demand forecasting and capacity planning

The first production planning and scheduling stage involves demand forecasting and capacity planning.

Demand forecasting entails estimating future customer demand based on historical data, market trends, and other relevant factors. It helps organizations determine the expected demand volume and patterns for their products.

To forecast demand, you need to incorporate a variety of data, including:

• Historical sales performance
• Local and national taxes and regulations
• Current manufacturing trends and predictions
• Technological advancements

Learning and understanding your product demand will help you make the best choices when arranging and improving your operations.

Once the demand is forecasted, capacity planning comes into play.

It involves evaluating the production capacity and capabilities of the organization to determine if it can meet the projected demand. Factors such as workforce availability, equipment capacity, and facility constraints are taken into account during this stage.

The goal is to align the production capacity with the anticipated demand to avoid underutilization or overburdening of resources.

2. Material planning and procurement

The second stage focuses on inventory control , including material planning and procurement. In this stage, organizations identify the raw materials, components, and resources required for production. The quantities needed are determined based on the manufacturing schedule and demand forecast.

Efficient material planning ensures the timely availability of materials while minimizing inventory costs and the risk of shortages or excess stock.

Establishing strong supplier relationships is essential during this stage to ensure a reliable supply chain. Organizations collaborate with suppliers to coordinate delivery schedules, negotiate pricing, and maintain consistent quality standards.

Effective material planning and procurement help optimize production flow and prevent disruptions in the supply chain.

3. Scheduling and resource allocation

The third stage involves detailed scheduling and resource allocation. It focuses on creating a comprehensive production timeline and sequence of activities to ensure smooth operations.

Scheduling involves assigning tasks to different workstations or production lines, considering factors such as equipment availability, setup times, and dependencies between jobs.

Resource allocation is another crucial aspect of this stage. It entails determining the optimal allocation of labor, equipment, and other resources to specific production tasks. Balancing workloads, considering skill levels, and maximizing resource utilization are key considerations during resource allocation.

The goal is to create an efficient schedule that minimizes idle time, bottlenecks, and unnecessary delays.

4. Production control and monitoring

The fourth stage revolves around production control and monitoring. Once production is underway, it is essential to track work progress, ensure adherence to the planned schedule, and maintain quality standards. Production control is all about monitoring the production process, identifying deviations or bottlenecks, and taking corrective actions as necessary.

Efficient production control relies on real-time data collection, performance measurement, and analysis. It enables organizations to identify issues, make adjustments, and optimize the production flow. This stage also includes quality control measures to ensure the final output meets the required standards and customer expectations.

5. Master production schedules

Once your manufacturing plan looks achievable, you can progress to the next step, producing a master production schedule , the ultimate document for production.

Your master production schedule (MPS) will detail how many items need to be produced within a certain period. Most manufacturers use manufacturing technology to create an MPS that will provide real-time data and allow manufacturers to make production changes on the fly.

By effectively controlling and monitoring the production process, organizations can improve productivity, minimize waste, and ensure timely delivery of products to customers.

Imagine a small but modest workshop with five artisans making psychedelic T-shirts.

Each artisan works eight hours a day, from Monday to Friday. They follow a make-to-stock workflow in a job shop setting. It takes 2 hours to produce a single T-shirt.

The max capacity of this Funkadelic business is 200 hours .

In this scenario, the annual hippie fest is fast approaching — and looking at your historical data collection — the T-shirt makers expect to see a surge in sales. Last year they were overwhelmed, so this year, they have decided to put together a quick manufacturing plan a week before they expect an increase in demand. They also want to have a safety stock level of ten for each of their items.

As per their initial plan, they won’t be able to meet production requirements, but they can now use this knowledge to readjust their current production plan. They decide to limit the production of Far Out T-shirts to 40 and Peace T-shirts to 8 .

They can still meet the forecasted demand with the modified plan by sacrificing some of the safety stock.

However, this plan put their operations and resources at 100% capacity . If one of the artisans calls in sick on Wednesday evening, the max capacity for the week falls to 176 hours . When planning production, a rule of thumb is to have 20% free to give yourself wiggle room if a problem occurs.

Production planning is vital for any manufacturing business. Even basic products need a clear and defined flow to turn them from raw materials into quality goods. If you don’t follow this flow or your production quality control checklist , your products will surely drop in quality. Without a proper process, your standardized practices will be forgotten.

So, when scheduling the production, what are the key factors to consider?

Crew management

Use your team well.

Your people are a valuable asset to your business. They play a key part in manufacturing process optimization. Make it your business to know your people, including their strengths and weaknesses. This way, you can assign each team member to the most suitable tasks and machines.

If someone is sick or goes on holiday, you have the additional capacity to make up for the temporary loss.

Effective production planning allows you to get the most out of your people and machines. Every team member knows the tasks assigned to them and what their expected output is. Keeping tabs on this process lets you compensate for shortfalls and keep up with high demand.

Running at capacity

Is your workshop constantly running at 100% of its output?

It only takes a minor bump to bring things to a grinding halt. Capacity planning helps to make sure you’re not running at max capacity. If you do receive an unusually large order or two, you will be glad you prepared.

The same goes for your team, as they have enough resources to do their job on time.

Raw materials

Frequent stalls in production planning mean paying team members and machines to stand by.

Integrating a robust MRP or manufacturing ERP software into your business can help ensure you always have the required raw materials available. This means:

• You never have to push back production because of supply order delays or stockouts.
• Priority deadlines do not have to be set back due to undersupply.
• There’s no need to constantly step over excess raw materials on your shop floor.

If done right, warehousing and transport costs won’t skyrocket due to oversupply. As a bonus, every team member always has something to do as they work with your available materials.

Workshop logistics

The logistical flow of each part of your manufacturing process also requires consideration. This may not seem so important, but you would be surprised. Many production lines have come grinding to a halt as one weak link has been placed on the wrong stage.

Pushing machines and people to unsuitable locations can harm efficiency.

Sometimes, what seems like common sense could be harmful to your flow. It takes careful analysis to determine how materials, resources, people, and supplies travel around your shop floor.

It may be that a more efficient layout or order exists for your business. Sometimes a small change can make a world of difference to your production schedule.

Problem-solving

Trial-and-error problem-solving costs your business money through each failed attempt.

Overordering or overproducing is a band-aid solution, as this leads to extra costs or staff burnout. You need effective production planning software to track your flow and find manufacturing scheduling issues to get to the root of a problem.

Know your manufacturing processes

Understanding manufacturing planning and scheduling allow you to oversee your manufacturing methodically to overcome production issues easily.

Track and manage everything effectively, and everything should run like clockwork. Effective manufacturing scheduling makes it easier to do everything by the book — it is set out clearly for your whole team and is available 24/7.

Production planning KPIs

Now you know everything there is to know about putting together your production plan — the next step is understanding how to measure its effectiveness. Here are some KPIs to track to get you started:

• Manufacturing costs — Track how much it costs to produce an item by looking into raw materials, utilities, salaries, rent, etc.
• Capacity utilization rate — You don’t want resources running at max capacity, but you don’t want machinery or workstations sitting idle.
• Planned production vs. actual hours — This will help you better understand how long it takes to produce an item or uncover any issues which lead to delays on your shop floor.
• Employee utilization (productivity) — The same as your capacity rate. The only difference is that you don’t want to overwork them. Make sure you schedule your human resources reasonably to void burnout.
• Takt time — A lean manufacturing concept that looks into the actual time it takes to produce a single unit of item.

This checklist will guide you in creating your business analytics to observe your production and develop plans to make them even more efficient.

But, as you can tell, doing this is a long and arduous process, and many scaling manufacturers turn to automation to help them with this task.

Optimizing production scheduling involves maximizing efficiency, minimizing costs, and ensuring timely delivery of products. Below you’ll find some strategies for optimizing manufacturing scheduling.

Demand-driven scheduling

Incorporate demand-driven scheduling by aligning manufacturing schedules with customer demand. Use accurate demand forecasting to determine the required production volume and adjust schedules accordingly. This approach helps avoid overproduction or underproduction and reduces excess inventory or stockouts.

Utilize advanced scheduling techniques

Employ advanced scheduling techniques such as finite capacity scheduling, just-in-time (JIT) scheduling, or theory of constraints (TOC) to optimize production schedules. These techniques consider capacity constraints, setup times, and dependencies between tasks to create efficient and realistic schedules.

Optimize resource allocation

Ensure optimal utilization of resources by assigning tasks based on skill levels, availability, and efficiency. Consider the capabilities and capacities of equipment, machinery, and workforce while allocating resources. Efficient resource allocation minimizes idle time, reduces bottlenecks, and improves overall productivity.

Minimize changeovers and setup times

Reduce changeover and setup times by implementing strategies like single-minute exchange of die (SMED). Streamlining changeover processes allows faster transitions between different product configurations, enabling shorter production runs and increased flexibility.

Implement real-time monitoring

Utilize real-time monitoring systems and production control tools to track progress, identify bottlenecks, and make data-driven decisions. Real-time data provides insights into the actual status of production, enabling prompt adjustments and proactive problem-solving.

Prioritize critical tasks

Identify critical tasks or processes that significantly impact the overall production timeline. Prioritize these and allocate resources accordingly to ensure timely completion. Focusing on critical tasks minimizes the risk of delays in the entire production process.

Consider production constraints

Take into account any constraints that may affect production scheduling, such as limited capacity, equipment maintenance schedules, or supplier lead times. By incorporating these constraints into the scheduling process, you can avoid scheduling conflicts and optimize production flow.

Implement lean manufacturing principles

Apply lean manufacturing principles such as just-in-time production , continuous flow, and waste reduction techniques to optimize production scheduling. Eliminate non-value-added activities, reduce inventory, and optimize process flows to improve overall efficiency.

Embrace technology

Utilize production scheduling software or manufacturing execution systems (MES) with advanced planning and scheduling capabilities. These tools automate the scheduling process, optimize resource allocation, and provide real-time visibility into production activities, enabling better decision-making and scheduling optimization.

Continuous improvement

Foster a culture of continuous improvement by regularly reviewing and analyzing production schedules, performance metrics, and feedback. Identify areas for improvement, implement changes, and monitor the impact of these adjustments. Continuously striving for optimization ensures ongoing efficiency gains in production scheduling.

By implementing these strategies, organizations can optimize their production scheduling processes, enhance operational efficiency, minimize costs, and deliver products on time, ultimately improving customer satisfaction and competitiveness.

Production planning and scheduling mistakes can lead to inefficiencies, delays, increased costs, and customer dissatisfaction. Let’s review some common mistakes to avoid in manufacturing planning and scheduling.

Inaccurate demand forecasting

Failing to accurately forecast customer demand can result in overproduction or underproduction. Overproduction leads to excess inventory and increased carrying costs , while underproduction can result in stockouts and missed sales opportunities. It is important to gather and analyze relevant data, consider market trends, and collaborate with sales and marketing teams to improve demand forecasting accuracy.

Insufficient capacity planning

Inadequate evaluation of production capacity can lead to resource constraints and bottlenecks. If the production capacity does not align with the forecasted demand, it can result in missed deadlines, backlogs, and delays in fulfilling customer orders. Conducting regular capacity assessments and considering factors such as equipment maintenance, workforce availability, and facility constraints are essential for effective manufacturing capacity planning .

Poor material planning

Inaccurate material planning can cause disruptions in the production process. Insufficient stock of raw materials or components can halt production, while excessive inventory ties up capital and increases storage costs. Utilizing efficient inventory management systems, establishing reliable supplier relationships, and continuously monitoring material requirements are crucial to avoid material planning errors.

Inefficient scheduling

Inefficient scheduling can lead to production issues, increased setup times, and idle resources. Poor task sequencing, inadequate consideration of setup times, and neglecting resource availability can result in unnecessary delays and production bottlenecks. Utilizing advanced scheduling techniques, considering the dependencies between tasks, and optimizing resource allocation is vital for efficient scheduling.

Lack of flexibility

Failure to incorporate flexibility in manufacturing planning and scheduling can make it challenging to adapt to unforeseen events or changes in demand. Market fluctuations, machine breakdowns, and supplier delays can disrupt the planned schedule. It is important to build contingency plans, have backup suppliers, and maintain buffer capacity to accommodate unexpected disruptions and maintain operational continuity.

Ignoring feedback and continuous improvement

Neglecting to gather feedback from the production floor, customer feedback, and performance metrics can hinder process improvement.

Regularly reviewing production performance, analyzing data, and actively seeking feedback from relevant stakeholders can help identify areas for improvement and drive continuous optimization in production planning and scheduling.

Lack of communication and collaboration

Poor communication and collaboration among departments can lead to misalignment and delays. Production planning and scheduling require coordination among different teams, including sales, operations, procurement, and logistics.

Clear communication channels, regular cross-functional meetings, and shared visibility of information are essential for effective collaboration and synchronization of activities.

By avoiding these common production planning and scheduling mistakes and adopting best practices, organizations can enhance their operational efficiency, minimize costs, and improve customer satisfaction by consistently delivering products on time and as per requirements.

The absence of affordable production planning software has led to many manufacturers using inefficient spreadsheets .

There are three main problems with this approach:

• Spreadsheets are slow — It may be better than doing it with a pen and paper, but Excel is still too labor-intensive.
• Spreadsheets are error-prone — They are vulnerable to mistakes that cause confusion, production delays, and business-disrupting problems.
• Spreadsheets are static — They do not update automatically. This can lead to delays as changes are not communicated.

Many modern manufacturers are stuck with Excel because they can’t see better options.

This is understandable. Most manufacturers do not need the gargantuan flow diagrams and Gantt charts seen in large enterprise software. Shop-bought software like Excel seems like a quick and easy option.

But it is not powerful enough for using production management effectively.

The best way to avoid production planning mistakes and implement different optimization techniques is through software. Katana is a cloud manufacturing platform that allows you to do all that and more. It offers advanced features with an intuitive interface, so you don’t need a 3-month boot camp to start using it.

Let’s have a look at what production planning with Katana looks like.

The Production operations tab lets you do production planning as it automatically assigns team members and workstations to each process your manufacturing orders require. It also calculates all the resources needed and associated costs.

The Make screen lets you review all outstanding manufacturing tasks. If something comes up, or you want to change tack, simply reorganize your manufacturing queue, and Katana’s real-time master planner reallocates all resources to ensure the prioritized orders get out of the door first.

Production planning with Katana allows you to:

• Generate forecasts and plan inventory
• Prevent idle time in your workshop
• Significantly reduce scheduling errors
• Generate accurate, realistic deadlines
• Minimize inventory transport and storage costs
• Identify inefficiencies that could lead to production bottlenecks
• Gets products out the door and to customers on time

Take control of your production processes with Katana. Request a demo today to see it in action.

James Humphreys has produced content on manufacturing and inventory management practices for 5+ years. He began his journey into writing via the creative industry, writing and producing plays, some of which toured the UK and Europe.

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Production Scheduling Basics: Creating a Production Schedule

Production scheduling is part of the pipeline that starts with sourcing and planning. Is it the most important part? Every part is important! If you don’t have the materials, you can’t manufacture a product. If you don’t have a plan, you’ll never get your goods to market on time.

But for now, let’s focus on production scheduling. We’ll define both production scheduling and a production schedule and define what production scheduling is not. Then we’ll explain what to consider in production scheduling and how the process can benefit your projects.

What Is Production Scheduling?

A production schedule is a plan that helps facilitate the process of delivering products to customers and the marketplace. It’s part of the larger supply chain in manufacturing and includes everything from procurement of raw materials and labor and logistics to the costs involved and a production timeframe.

Manufacturers need to address production scheduling before they begin the manufacturing process. This might sound obvious, but production scheduling informs the costs involved in producing a product, such as the production itself and labor. Therefore, financial resources must be allocated for every step in your production cycle.

It’s essential to consider when to introduce your product to the marketplace. You want to do so quickly without negatively impacting quality, so many work backward from a deadline. That means understanding how long production will take and the timeline to transport finished goods to distributors. This requires balancing resources to have what you need when you need it.

That’s a lot of different pieces to coordinate. ProjectManager is award-winning project management software with robust Gantt charts to map your production schedule. Our Gantt charts allow you to manage your resources and costs in real time. All four task dependencies can be linked in the production schedule to avoid costly bottlenecks. Once you have your production scheduling planned, set a baseline to capture that plan. Now you can compare the planned schedule to the actual schedule when in production to help you stay on track. Get started with ProjectManager today for free.

Production Scheduling Process

To balance production orders with the availability of resources in a cost-effective manner, manufacturers apply the production scheduling process to their production facilities. It provides a better way to allocate resources, operations and processes when creating goods and services.

By following the steps below, manufacturers can adjust their production scheduling to reflect resource availability and client orders. But your production schedule must be accurate in terms of the resources available to reap the benefits of production scheduling.

1. Production Planning

Everything rests on this step. Here, you’ll figure out the course of the entire production. Managers will look over production budgets, a demand plan , and the number of raw materials that will be required. There are two types of plans, static and dynamic, the former thinking that everything will follow the plan’s timeline and the latter believes everything can change. The dynamic plan is recommended as change is part of any execution of a plan.

2. Production Routing

Now with the plan done, you’ll want to determine the path the production will follow. This is routing. That is, how the raw materials are procured and then made into a finished product. The idea behind production routing is to determine the more economical sequence of operations in the production process.

3. Production Scheduling

This is when you determine the date and time that the production operation must be completed. There are three types of production scheduling, master scheduling (which defines the entire process from start to finish), manufacturing or operation scheduling (for routing raw materials) and retail operation scheduling (to get the finished product from the manufacturing facility to stores). You’ll want to include a contingency plan to respond to issues that negatively impact your schedule.

4. Dispatching & Execution

Once you’ve scheduled production, it’s time to share the plan with everyone involved. Assign the order of jobs, instructions and other production information that’s important for execution. Execution is when staff works together to ensure that the sequence of the production schedule is followed and deliverables meet deadlines. This means monitoring and removing bottlenecks that might delay production orders .

What Is the Role of a Production Scheduler?

A production scheduler oversees the production scheduling process, managing production schedules and allocating resources strategically to ensure that his organization can respond to customer orders at any point. To do so, production schedulers must constantly collaborate with production managers, production planners and cross-functional teams to ensure the production process is as efficient as possible.

A production scheduler must demonstrate working knowledge in key areas of production management such as production planning, optimization and control but also managerial skills such as resource planning, workflow management, team management and project scheduling .

What Is a Production Schedule?

A production schedule is an integral part of production scheduling. The production schedule is a list of all the products that are to be manufactured. That list also notes where and when each product will be made.

The production schedule is very detailed and includes everything from raw materials to logistics and what processes will be used to run a smooth production line. Managers will also explore potential bottlenecks so they can avoid issues. The production schedule is reviewed throughout the manufacturing process and revised as needed to keep production running on time.

Related: Best Production Scheduling Software

Not only managers but sales teams benefit from a production schedule. Sales can use the production schedule to keep the manufacturing team updated on the demand for the product. And, of course, managers can keep sales aware of what product is available.

Get your free

• Production Schedule Template

Use this free Production Schedule Template for Excel to manage your projects better.

Production Schedule vs. Production Plan

Production scheduling and production planning work together but they are separate processes. In fact, sometimes a manufacturer will use one instead of both depending on the type of production they’re doing.

There are differences between the two and it’s important to understand what those differences are. One way to look at it is that production planning is a general overview of when a product is made, but a production schedule is a far more detailed look into that process.

Production Schedule vs. Master Production Schedule (MPS)

A master production schedule (MPS) details what, when and how many products a manufacturer will produce. It links the demand determined by sales to the capacity a company has to make the product. It helps create a realistic plan that avoids overstocking warehouses but maintains on-time delivery.

A production schedule shares many qualities with the MPS, but goes further. It includes planning, routing, scheduling, dispatching and execution. It’s a larger process encompassing everything related to scheduling when manufacturing products.

How to Make a Production Schedule

Production schedules vary from one organization to another depending on the production scheduling tools you use, the level of detail you’d like to include and the specific characteristics of your manufacturing process. Having said that, here are five general steps any organization should follow when making a production schedule.

1. Estimate Customer Demand

Before you make a realistic production schedule, you’ll need to forecast the future customer demand for your product so you have a better idea of the ideal production volume your organization should manufacture to ensure there’s enough product supply for fulfilling customer orders .

Various demand planning techniques and business analytics tools can make an accurate sales forecast for your business. Sales forecasts can be made for various time frames such as quarterly, monthly or yearly.

2. Measure Your Production Capacity

Once you’ve created a sales forecast, you’ll then need to measure your production capacity , which refers to the organizational resources such as raw materials, labor and capital assets that your organization uses to manufacture goods and evaluate whether there are enough resources to meet customer demand and manufacture products on time.

If this isn’t the case, you should invest in your manufacturing facilities to expand your production capacity. If that’s not possible, try production optimization techniques such as re-thinking your shop floor or balancing the workload of assembly line stations.

3. Make a Production Budget

Based on your sales forecast and production capacity, you can now make a production budget , which is a document that allows you to estimate the ideal number of units that should be produced to meet customer demand and also maintain optimal product stock inventory levels.

4. Optimize Production Routing

Production routing consists of defining the route that materials, parts and components will take across the production floor as they’re transformed into final products by production workers. The main objective of the production routing process is to identify the most efficient route in terms of time, effort and cost. By defining the production route, you can also accurately measure how long it’ll take to make your products.

5. Schedule Production Activities

At this point, you should clearly understand the quantity of product that needs to be manufactured, how much it’ll cost and how long it’ll take. Now, you’re finally ready to schedule production orders to meet the production budget you’ve defined.

Production Schedule Example

Various tools can make a production schedule, from a simple spreadsheet or task list with production order details and due dates to more advanced production scheduling tools such as Gantt charts .

Here’s an example of what a Gantt chart production schedule looks like. On the left side, you can list the major stages of your production process , which in this case are “design,” “prototyping” and “pre-production” among others. To complete these production processes, the team must execute many smaller tasks, such as 3D rendering, CNC machining and durability testing.

As you can see in our production schedule example image, a Gantt chart allows you to enter details about these tasks such as their due dates, duration, costs and more. On the right-hand side, there’s a visual timeline that shows bars to represent the duration of tasks over a calendar and allows you to track their percentage of completion and identify any dependencies between them.

If you prefer, use the visual timeline bars to represent each of your production orders to create a high-level view Gantt chart production schedule that allows you to check their progress and due dates at a glance. Or if you’re not ready for Gantt charts yet, you can use a manufacturing template for Excel to keep track of production orders.

This free production schedule template for Excel helps you schedule production orders and keep track of their status and due dates for manufacturing and shipping. It also allows you to keep track of the starting and ending inventory of finished goods after each production order to help you maintain optimum inventory levels.

Production Scheduling Techniques

Various production scheduling techniques can help you streamline your manufacturing process and efficiently use organizational resources . Here’s a quick overview of some of the most commonly used methods to make a production schedule.

Forward Scheduling

This production scheduling technique consists of manufacturing orders as soon as they’re received, or whenever resources become available. This ensures your production workers and capital assets have a high resource utilization rate but might make it difficult for your organization to accommodate new orders as production capacity is always limited.

Backward Scheduling

As its name suggests, this production scheduling method works in the exact opposite manner as forward scheduling. In a backward scheduling approach, manufacturers wait until the last day of the lead time to manufacture production orders. While it might seem counterintuitive, this allows them to use their production capacity strategically to take as many orders as possible.

Make-to-Order Production Scheduling

In a make-to-order production scheduling approach, manufacturers don’t keep an inventory of product stock so they only make the exact number of product units to meet customer orders.

Make-to-Stock

This production scheduling method is used by manufacturers who sell their products through physical distribution channels such as brick-and-mortar retail shops that hold inventories of product stock for sale. In a make-to-stock manufacturing approach, manufacturers constantly check stock inventory levels and schedule production orders to replenish them.

Finite Capacity Scheduling (FCS)

In a finite capacity production scheduling model, manufacturers schedule production orders based on their available production capacity. This conservative production scheduling approach helps ensure that organizations don’t take customer orders they can’t complete on time which is ideal for small to medium-sized manufacturing companies with limited resources.

Infinite Capacity Planning

The opposite of finite capacity scheduling, this method ignores production capacity constraints and consists of scheduling production orders based on their lead time but ignores resource constraints , which is a preferred method for larger organizations. In this production method, resources utilized for a production order might be reallocated from one to another based on their lead time and due dates.

Key Factors to Consider In Production Scheduling

Because production scheduling is such a large job, it can seem overwhelming. It’s best to look at it as a collection of many smaller jobs or factors that contribute to production . Let’s look at some things you’ll need to consider when production scheduling.

• Production capacity: The most output measured in units of output per period.
• Production forecasting: Projection of the number of finished products or subassemblies that’ll be produced in a specific period to meet forecasted sales.
• Production inventory: Everything that’s used in the manufacturing process.
• Required raw materials & components: Specific items in production inventory.
• Supply chain: A series of processes in the production and distribution of a product.
• Available equipment: Metric to measure the percentage of time a piece of equipment can operate.
• Operations management: The production schedule must stay up-to-date on what’s going on with the organization.
• Plant layout: This is important as the time it takes to transport materials and process them is part of the larger production schedule.

Production Scheduling Software

Production scheduling software helps manufacturers better schedule their production lines, including equipment and resources. It can automate certain activities to streamline work and define employees’ availability to make it easier to assign them to jobs.

It monitors and tracks the schedule to help managers catch issues and respond to them quickly to avoid any slowdown or delay or delivery. It can address customer demand and reduce lead time getting products into retail shops or eCommerce. Production scheduling software can help with workflows, timesheets and much more.

Choosing software to manage your production scheduling process can be difficult, which is why we’ve reviewed the best free and paid production scheduling software in our blog to help you make an informed decision.

ProjectManager Has Powerful Production Scheduling Tools

ProjectManager is award-winning scheduling software that helps managers plan, manage and track their jobs in real time. Live dashboards and customizable reporting tools allow managers to have transparency into the production line, whether getting a high-level view of costs, time and more or digging deeper into status reports, variance and other reports that can be shared with stakeholders to keep them updated.

Make Detailed Production Schedules with Gantt Charts

You can use ProjectManager’s Gantt chart to map all your production orders in one place and visualize their duration and due dates at a glance. In addition, you can zoom into the activities that need to be completed to transform your raw materials, parts and components into final products. You can track their percentage of completion, costs, task dependencies, priority and much more.

Create Production Workflows With Kanban Boards

Creating custom workflows allows production to move from one activity to the next. You can even automate workflows by adding triggers that will change the status, assignee and more. To ensure that only quality moves forward on the production line, set task approvals and designate someone with authority to review and approve. Our software has multiple project views so the production scheduling of the Gantt chart is the same when you toggle over the kanban board, which makes it easy to visualize the workflow.

Track Resource Utilization With Timesheets and Workload Charts

Keeping track of your resources is essential to staying on a production schedule. Our software has resource management tools that can keep your production line working more efficiently. There are tools, such as secure timesheets, which do more than streamline payroll. They also show you a real-time picture of how complete each team member’s job is. You can set the availability of team members’ PTO, vacations and global holidays, which makes it easier to assign them work. Then our color-coded workload chart makes it easy to see who is overallocated. You can balance their workload from that chart to keep production on track.

As mentioned above, production scheduling must be flexible and adjust to changes. Our risk management features make it easier to identify risk and track issues in real time to ensure that there’s as little disruption as possible. Our collaborative platform makes it easy for everyone to share files, comment and more whether they’re on the production line or in the office. Manufacturers can benefit from all the features of our software.

Related Content

• Best Production Scheduling Software Rankings
• Production Management: A Quick Guide
• Production Planning in Manufacturing: Best Practices
• How to Create a Master Production Schedule (MPS)

ProjectManager is online scheduling software that builds schedules and helps you execute them more efficiently. Use tools to plan, assign, track and report on all aspects of your production. Get started with ProjectManager today for free.

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Creating an Effective Business Plan (part II) Summary: CLASS OBJECTIVES: To enhance knowledge and skills of students about the: • Major terms of Business Plan • Market Analysis • Production Plan • Marketing Plan • Operations Plan • Logistics Plan • Financial Plan • Execution of Plan • Exit Strategy • The International Organization for Standardization (ISO) • Appendix (Essential documents) CLASS STRUCTURE • Review of the last Class, Creating an Effective Business Plan - Part • PowerPoint Presentation as per Class Objective • Students’ test / Question • Please write your answers in the box of 'COMMENT IN CHAT.' • Open question / answer session at the end of clas • Closing remarks Date: Tuesday, May 14th, at 10:00 a.m., US Eastern Time. Topic: Business Administration

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About Muhammad Saghir: University of Balochistan Quetta Pakistan Master of Commerce (MCom), Commerce and Management 1977-1979 University of Balochistan Master of Arts (MA), Political science 1974-1976

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China is kicking America's ass in the EV battery race and it's going to define the 21st century

In recent years, the relationship between the US and China — the world's economic superpowers — has devolved into an unwieldy tug-of-war between economic interdependence and deep-seated distrust. On one hand, diplomats are trying furiously to maintain a stable world and keep money flowing between the two countries. But at the same time, one of the relationship's most salient features is that it is a contest for control over the technology that will define the 21st century. 

In the latter battle there is one area where the US has fallen woefully behind: batteries. China's state-supported enterprises — let's call them China Inc. — dominate in every aspect of the development of batteries for electric vehicles, from the mining and refining of raw materials to the manufacture of the batteries themselves.

"The danger is that we won't have a domestic battery sector and we will totally in perpetuity rely on China to build cells for us," Tu Le, the founder of the consultancy Sino Auto Insights, told me. And without cheap batteries to power fleets of cheap electric vehicles, he argued, companies like GM and Ford "run the risk of becoming regional players and losing their international status."

Until US automakers can source batteries domestically, or from friendly nations, they will depend on maintaining good relations with Beijing. It is an increasingly fraught partnership, even setting geopolitics aside. For the past 40 years China needed foreign automakers to help develop its own car industry through joint ventures. But as China's domestic electric-vehicle market takes off, the tables have turned. Beijing is boosting its homegrown products, and foreign automakers — which already need China Inc.'s batteries to build more EVs — are losing market share.

The winner of the battery war will not only control the electric-vehicle market but also produce thousands of jobs, control the future of mobility, and dictate the West's ability to transition to greener forms of energy.

Beijing's battery plan

China has been working to dominate the battery space since at least 2015, when the leadership of the Chinese Communist Party crafted the National Key Research and Development Program New Energy Vehicle Key Special Implementation Plan. Despite its long, formal-sounding name, the document sets out a clear goal: to corner the market for key materials like lithium, cobalt, and nickel; invest in their extraction; and build factories for battery manufacturing. 

The plan starts at the most basic level of battery production: raw materials like cobalt, lithium, manganese, and nickel. Most of these minerals lie outside China — in countries such as Chile, Australia, Bolivia, and the Democratic Republic of Congo. But China Inc. has negotiated ownership stakes and partnerships with mines all over the world. From 2018 to the first half of 2021, China Inc. invested about $4.3 billion in lithium mines internationally, according to the research firm S&P Capital IQ. And once these minerals are pulled out of the ground, they are shipped to Chinese-owned refineries that transform the metals for use in the final product. By 2019, Chinese companies made up 80% of the world's output for battery materials. This would not have been possible without Beijing's willingness to pay whatever price and withstand whatever losses it took to build the industry.

"At the end of the day even if DC or Brussels or Tokyo manages to support competing suppliers of minerals and companies that can turn minerals and metals into components, the mineral commodity markets are hard to predict," Jane Nakano, a senior fellow in the Energy Security and Climate Change Program at the Center for Strategic and International Studies, told me. "It's very difficult for private-sector non-state-supported entities to plan ahead."

In the past, this is where the Chinese value chain would end. The refined materials would get shipped out to the US or Europe where they would then be transformed into batteries. Not anymore: Beijing is trying to do that work in-house.

"In the 1970s and '80s China was exporting minerals to us to make higher-value goods," Nakano explained. "That's precisely the situation the Chinese wanted to get out of. That's why they came up with their tech strategy."

Nowadays when Beijing wants to develop technology, it sprays money at any companies that want to give it a shot and watches them duke it out until a few come out on top. Once the dominant parties have revealed themselves, everyone else is cut off and left to wither. 

The undisputed champion of the Chinese battery-manufacturing battle is Contemporary Amperex Technology Co. Limited. The company, first called Amperex Technology Limited, was founded in Hong Kong in 1999. Using patented technology licensed from the US's Bell Labs it became a battery supplier for companies including Apple and Samsung. But by 2008 it wanted to manufacture in China for easier access to its market and to take advantage of government incentives. To do that, though, it had to move its headquarters from Hong Kong, which was (and technically still is) politically separate from Beijing. Eventually the company set up shop in a county in northeastern China that was once governed by a young Communist Party secretary named Xi Jinping. And so ATL became CATL. By 2022 it controlled about 32% of the world's market share for electric-vehicle batteries, and about half of China's domestic market. As of now, CATL has 13 factories worldwide that supply batteries for Tesla, Toyota, and Daimler. Earlier this month, Ford announced plans to build a $3.5 billion battery plant in Michigan with technology licensed from CATL.

Coming in a not-so-close second is China's BYD. Within China, it's a top-selling car company that makes its own batteries. Thanks to that inherent demand, it has taken just over 13% of global market share for EV batteries. And thanks to its ownership of its battery supply chain, it's able to make cars cheaply. Its BYD Song Plus — the best-selling car in China in the first quarter of this year — comes in both electric and combustion-engine versions and sells for under $30,000.

Role reversal

As Chinese companies have started to dominate the battery space, the US is trying to avoid a role reversal of past decades in which it would depend on China for higher-value batteries. 

To prevent this outcome, the US needs to start investing in every part of the value chain for batteries. And it starts with the country's vast resources of " white gold ," the name for lithium used among those who believe its large deposits can be exploited to create the country's next great source of energy. As of now, the US has only one open lithium mine in Nevada. Lithium extraction and refining are messy, and environmental concerns have kept US output limited to about 1% of the world's supply.

"We really haven't gotten our heads in the game in terms of resource extraction," Nakano said.

To boost this output, companies are rushing to extract lithium deposits from California's Salton Sea, a dry region east of San Diego. Geologists estimate that the region could supply enough lithium to support the manufacturing of 7.5 million car batteries a year. US companies like BHE Renewables, backed by Warren Buffett's conglomerate Berkshire Hathaway, and EnergySource Minerals are looking to advance technology that will extract lithium using clean energy and while doing as little environmental damage as possible. President Joe Biden's 2022 Inflation Reduction Act legislation set aside $200 million, through the Department of Defense, to establish an end-to-end American supply chain of rare-earth metals, lithium, and nickel that can be used in domestic battery efforts.

America is also lacking capacity further down the manufacturing chain. The US is home to only two processing plants that produce lithium hydroxide , a more lightweight, concentrated version of the metal used for batteries. This month, Tesla broke ground on a third facility in Texas. The Inflation Reduction Act set a goal of refining enough lithium domestically to supply 2 million electric vehicles annually. The Biden administration hopes to accomplish this in two ways — one carrot and one stick. To try to lure companies, the law provides subsidies for companies that invest in that refining process, but it also sets stringent requirements for how much of an EV battery's components must be sourced in the US — or from countries with which we have free-trade agreements — to be considered domestically produced and avoid tariffs. But all of this planning and incentivizing this will take time to kick into gear. For example, EnergySource Minerals has said its mine could be operational by 2025.

A time to squeeze

While the US has a long way to go to catch up to China, there are some analysts who see Beijing's hand in the market as more clumsy than capitalist, and who say the CCP's ambitions will actually make it easier for American firms to catch up. Anne Stevenson-Yang, the research director of J Capital Research, predicted in a recent note to clients that Beijing's push to increase the supply of materials required for battery manufacturing will ultimately make it dramatically cheaper to enter the battery market over the next few years. Yang's research indicates the price of lithium carbonate — another critical chemical for batteries — has been sliced in half since November and will drop by another two-thirds this year.

"That is because of massive new Chinese capacity," she wrote. "If all goes as planned, lithium will be in global surplus as 2024 rolls around."

We've seen this dynamic when China enters a market before. Beijing throws a staggering amount of cash at an industrial product or late-stage technology until there's so much domestic supply that a capacity glut ensues. China then dumps that excess capacity into foreign markets, depressing prices globally. Stevenson-Yang sees parts of China's battery supply chain as the next glut it will need to dump. 

"There are certain issues around security and having a manufacturing base in the US that makes sense, but we don't have to worry about the tech war," she said by phone. "China is like the Russian army in the 18th century. Everyone feared the 'Great Bear to the North,' but they eventually found out that size doesn't mean quality — size means size."

But the potential of a battery supply glut tomorrow doesn't help carmakers meet their needs today. Until the US and its friends can offer them another supply of electric batteries, auto manufacturers all need China Inc., especially as they ramp up their EV ambitions. 

"We don't have a major player in the battery cell space, full stop. US battery makers will not likely be able to make a profitable battery until at least 2030," Sino Auto Insights' Le said. "The reality is GM and Ford can't build a $40,000 EV that will help their bottom line for the foreseeable future without BYD and CATL batteries."

And then there's Tesla. Elon Musk has said the company's goal is to manufacture 20 million cars annually by 2030 . To put that in perspective, Toyota — the world's biggest carmaker — sold just over 10 million cars last year, while Tesla sold just over 1 million. If Musk wants to reach his goal, Tesla not only needs Chinese consumers to keep buying his cars, but he also needs China's cheap batteries and manufacturing infrastructure to make a car cheap enough to sell to markets like Latin America, Southeast Asia and India.

"Musk can continue to be very effusive of the Chinese government and their support of the EV sector in China," Le said. "But if the US-China relationship continues to deteriorate, it's inevitable that it's going to be much tougher for any US company to do business in China."

And of course, Le pointed out, wherever Tesla goes in the world BYD will be there to compete on price. 

"The IRA will create opportunities in the mobility space," Le said of the Inflation Reduction Act. "But if we're looking at evolutionary improvements, China Battery Inc. will still dominate. If we're looking at revolutionary developments over the next five to seven years, though, they'll be over here in the US. Of course, this is in the backdrop of BYD and CATL continuing to lower prices on current tech making transitioning to new technology a tougher decision for OEMs."

It's a complicated race, one of sometimes conflicting incentives and allegiances. The Inflation Reduction Act has upset the US's European allies while at the same time establishing protocols for cooperation to wrest the battery supply chain from China. US car manufacturers can't make cheap electric vehicles for the US market without China Inc., while at the same time the US government is creating policy to push back against China's ambition to dominate the EV market entirely, not just domestically. We cannot make clean energy without making a mess environmentally and geopolitically. For now China is winning the battery contest, but that doesn't mean the US or its allies should give in. There's always time to catch up in a race with no end.

Linette Lopez  is a senior correspondent at Insider.

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Generic drugmakers Teva and Sandoz planning to ramp up biosimilars production

The use of brand-name biologics typically account for an outsize proportion of drug spending in wealthier countries.

Generic drug makers Teva Pharmaceutical Industries and Sandoz are planning to increase the production of biosimilars aiming to increase their share of an expanding market.

More than 55 brand-name blockbuster biologic drugs, each with peak annual sales above $1 billion, are due to come off patent by the end of the decade, according to industry estimates, as quoted by news agency Reuters.

Executives from Teva, and Sandoz said, as quoted by Reuters, they are targeting top-selling biologics such as Humira, AbbVie Inc’s top-selling arthritis drug, which came off-patent in Europe and is due to come off-patent in the U.S. next year. But both companies face commercial and regulatory challenges, especially in the U.S., where biosimilars have not resulted in dramatically lower prices for consumers.

Biologics are complex molecules cultivated inside living cells, making it impossible to manufacture exact copies, as is the case with conventional pharmaceuticals made from chemical compounds.

One of the biggest makers of generic drugs, Israeli-based Teva said it aims eventually to secure a 10% global market share of biosimilars. According to a report by Reuters, the company has been grappling with a heavy debt load since a 2016 acquisition and lawsuits arising from the U.S. opioid epidemic.

Reportedly, Teva currently has three approved biosimilars and 13 in development.

“We are going full blast now,” Teva Chief Executive Kåre Schultz said in an interview with Reuters. He said the company was targeting “80% of what’s going off-patent in the next 10 years” including big sellers like the cancer drug Keytruda.

A division of Novartis, Sandoz is currently the second biggest player after Pfizer Inc in the biosimilar market by gross sales globally, per IQVIA data, cited by Sandoz. (Amgen is in third place).

Sandoz launched eight biosimilar drugs between 2017 and 2021, including a version of Bristol-Myers’ multiple myeloma drug Revlimid.

“We now have over 15 products in development, and in the next five years we would like to double that,” chief scientific officer Claire D’Abreu-Hayling told Reuters, adding that the biologics they intend to target are “really obvious opportunities”.

Novartis plans to spin off its Sandoz generics business in 2023. The Swiss drugmaker said the unit failed to attract a serious buyer earlier this year as it considered options for the unit’s future.

The more than 55 blockbuster biologics coming off patent protection in the United States and Europe over the next decade account for more than $270 billion in expected peak annual sales, according to a McKinsey analysis.

The analysis projected the value of the global biosimilar market could more than triple to an estimated $74 billion by 2030.

Reportedly, Sandoz and Teva are both working on biosimilars for Humira. However, the crowded field raises a tough question: Should the companies target the biggest selling biologics such as Humira, or aim for smaller brands that will likely attract fewer players, said Barclays pharmaceuticals analyst Emily Field.

A typical biosimilar costs $100 million to $300 million to develop and between six to nine years to win approval, according to McKinsey. About half of efforts launched across the U.S., European, and Japanese markets fail at the earliest stages, the report found.

Generics, which can be priced as much as 80% to 90% less than branded pills, barely cost a few million to develop. Biosimilars are viewed as “better than traditional generics, but nowhere near as good as branded pharma,” Field said.

Commercial prospects will also depend on the regulatory environment. While more than 50 biosimilars have been introduced into the European market, the United States has taken longer to set up a regulatory pathway for biosimilars.

European regulators consider all approved biosimilars on par with the original biologic, which has helped boost uptake. Biosimilars have taken the majority of market share from brand-name biologics in Europe and resulted in savings between 75% to 90% off the reference product prices, according to a 2021 report by Duke University’s Margolis Center for Health Policy.

In the United States, the Food and Drug Administration (FDA) has approved 39 biosimilars and 22 products have been launched as of October, according to an Amgen analysis. The FDA typically expects additional trial data before designating a biosimilar as “interchangeable” with the original biologic, which would allow it to be automatically replaced with a biosimilar at the pharmacy counter.

Biosimilars launched in the U.S. have only taken about 20% of the volume share of the biologics they are based on, according to the Duke Report, with knockoffs delivering discounts of about 30% to 40%.

Patent-focused court battles have stymied some launches of biosimilars. Aggressive pricing strategies from branded drug companies also helped neutralize the limited discounts initially offered by biosimilar makers, as per Reuters.

(With inputs from Reuters)

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Sunak’s food security plan fails to fix immediate problems, says farming chief

National Farmers’ Union president warns food production is likely to drop next year and says farmers need help right now

Rishi Sunak’s plan to improve the UK’s food security will not help build farmer’s confidence in the short-term, the head of the country’s biggest farming body has said.

Food production was likely to drop next year, said Tom Bradshaw, the president of the National Farmers’ Union, who warned that the prime minister’s plan, published during the UK’s second annual Farm to Fork summit, failed to give farmers the solutions they needed.

On Tuesday, 70 food and farming businesses met at No 10 to discuss how to improve food security, as the government unveiled a plan to boost food production and security. The plan focused particularly on fruit and vegetables, the two food types most reliant on imports from abroad.

The new policies include changing planning laws to make it easier to build greenhouses and a replacement for the EU horticulture resilience scheme that would double the funding available to £80m a year.

In a briefing after the summit, Bradshaw said overall the changes would do little to fix the short-term challenges farmers currently faced.

He said: “I think that what’s missing from today, really. Today was more about the strategic long-term plan, it’s not about putting the building blocks in place that rebuild that confidence immediately.”

Last month, an annual survey by the NFU found farmers’ confidence was at its lowest since the first survey of its kind in 2010, which followed a winter of extreme weather when many farms flooded and farmers were unable to plant crops. There are also widespread concerns about the impact phasing out the EU’s basic payment scheme subsidies will have on farmers.

Bradshaw was keen to stress the importance of the Farm to Fork summit and said it marked a change from previous governments when it came to the importance of farming. However, he said: “I believe as we go into next year, we will have less food, [a] lower food security index than now.”

“I think that the government needs to take critical steps to get the industry on to a firmer footing, and willing to start that investment cycle. If they’re not doing that, then an industry that is not investing is not preparing for the future.”

The government has published its first ever food security index, which uses official data to paint a picture of Britain’s overall ability to produce enough food for its population.

The table revealed that the UK only produced 17% of its own fruit, and 55% of its own vegetables. Lamb and milk were the most secure foods, with producers respectively generating 7% and 5% more than the country needs.

Bradshaw welcomed the index but called on the government to begin setting food security targets for different food types. Other sector figures, however, cautioned that the index was based on old data.

Tom Lancaster, a land analyst at the Energy and Climate Intelligence Unit, said: “In only running to 2022, the new food security index is lagging behind the impacts of extreme weather and climate change that we’ve seen in the last 18 months.

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“To address this, they could have done some interim analysis or even provided some interim commentary, but clearly chose not to.”

The index also outlined the main risks to future food security but the government was widely criticised for listing climate change as a “longer-term risk”.

Dustin Benton, the policy director at the Green Alliance, said: “The past 12 months have been 0.7C higher than the 1990-2020 average. Higher temperatures are associated with the sorts of extreme weather that cuts food production. Climate risks are no longer just a long-term problem.”

Rob Percival, the head of food policy at the Soil Association, said: “Absurdly, climate change is described as a ‘longer-term’ risk, despite the steady ratcheting of climate extremes and the profound effects already being felt on the ground.”

Steve Barclay, the environment secretary, said: “Today’s announcements will turbocharge the growth of our horticultural sector, supporting the building of cutting-edge glasshouses and innovative farming techniques to put British fruit and vegetables on our plates all-year round.

“We will continue to invest in and support farmers to produce the best of British food to strengthen our food security, championing innovation in the sector.”

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