Preparing Your Production Plan
What is a production plan?
A production plan is that portion of your intermediate range business plan that your manufacturing / operations department is responsible for developing. The plan states in general terms the total amount of output that the manufacturing department is responsible to produce for each period in the planning horizon.
The output is usually expressed in terms of pesos or other units of measurement (e.g. tons, liters, kgs.) or units of the aggregate product (this refers to the weighted average of all the products in your company). The production plan is the authorization of your manufacturing department to produce the items at a rate consistent with your company’s overall corporate plan.
This production plan needs to be translated into a master production schedule so as to schedule the items for completion promptly, according to promised delivery dates; to avoid the overloading or under loading of the production facility; and so that production capacity is efficiently utilized and low production costs result.
Why is it important to have a carefully developed production plan?
Production planning is one of the planning functions that a firm needs to perform to meet the needs of its customers. It is a medium range planning activity that follows long-range planning in P/OM such as process planning and strategic capacity planning. Firms need to have an aggregate planning or production planning strategy to ensure that there is sufficient capacity to meet the demand forecast and to determine the best plan to meet this demand.
A carefully developed production plan will allow your company to meet the following objectives:
- Minimize costs / maximize profits
- Maximize customer service
- Minimize inventory investment
- Minimize changes in production rates
- Minimize changes in work-force levels
- Maximize the utilization of plant and equipment
“The purpose of the production plan is minimize time and costs, efficiently organize the use of resources and maximize efficiency in the workplace” commented Salomón Juan Marcos Villarreal, president of Grupo Denim.