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Production Planning Overview
The process of production planning is central to the success of any manufacturing company. In general terms, the production planning process involves generating a plan to satisfy customers in a manner that results in a reasonable profit. The specifics of the production plan should vary company to company, and industry to industry.
Sales and marketing staff input customer needs to production planning. These needs include requirements volume and timing, target service levels, target lead times, and prices.
Operations, management, and engineering staff identify the necessary resources to meet customer needs at an appropriate cost. These resources include (but are not limited to) machine and equipment time, tooling, labor, materials, and engineering support. The most effective production planning occurs when operations and sales / marketing work together to develop an achievable plan, rather than sales / marketing “throwing the plan over the wall”.
Depending on the type of business and the similarities among items, you may want to aggregate demand into product families and use generic product bills of material and routings when production planning. In deep bill of material environments, you may also want to do Master Production Scheduling. In deep bill environments, you should explode bills as part of the production planning process. Although it can be done manually, historically, this bill of material explosion has been handled by the MRP (material requirements planning) module of the company’s business or ERP system.
Capacity Planning Overview
The process of identifying resources necessary to support the production planning process historically has been called Capacity Planning. Depending upon the time frame involved and whether or not bills have been exploded, more specific terms used to describe the process include resource requirements planning, rough-cut capacity planning, or capacity requirements planning.
By their very nature, production planning and capacity planning can be extremely imprecise. For instance, far enough out on the time horizon, customer orders become sparse and need to be replaced with forecasts. While some companies are good at forecasting, there will always be some level of forecast inaccuracy.
However, production planning can really fall apart when load (or hourly requirements) of the production plan is mapped onto available capacity. While it should be quite easy to predict when capacity is available, estimating the timing of load is much more difficult. Timing difficulties are caused by the assumption of infinite capacity. In the real world capacity is finite. Work doesn’t flow through manufacturing plants, but gets “hung up” at bottlenecks, and can wait in queue for extended periods of time. Furthermore, bottlenecks aren’t static, but vary based on the changing capacity requirements of different product mixes.
How do current production planning and capacity planning methods account for bottlenecks? With static estimates of lead time that seek to approximate how long operations will wait in queue. What is the problem with these lead time estimates? Trying to model bottlenecks and queues that vary over time with static estimates just doesn’t work.
If you input inaccurate lead times into the production planning process, capacity loads are going to be scheduled at the wrong point in time. Then work that is projected to hit a resource at a particular point in time will actually arrive earlier or later. Therefore, load may actually be significantly less than capacity at points in time where it is predicted to be greater, and vice versa. Since capacity can’t always be added or subtracted instantaneously, there will be a mismatch of load and capacity, sometimes needlessly adding cost, and sometimes hurting the ability to satisfy customers.
New Production Planning Techniques
Is there a better way? Yes. Advance Planning and Scheduling Software.(APS) allows you to explicitly consider capacity (or to do Finite Capacity Scheduling) when production planning. If you choose to schedule forward in time, this software will accurately and dynamically calculate queue time based on the natural capacity limits of your operation. It will provide accurate visibility into when requirements will finish. It will also identify when bottlenecks delay production, or when there is excess capacity, and suggest corrective action. If costs and sales prices are added, advanced planning and scheduling software will show the cost and profit impact of a particular plan. The software can be used in a simulation mode to try out and compare different alternatives. The software can be used to pick the best alternative production plan.
