Production Planning for Small Manufacturers

What is Production Planning?

Production planning is the process of strategically considering the key variables that affect the manufacturing process in order to maximize production efficiency. It is an integral part of production management and includes many facets of a manufacturing company, including CRM, inventory, procurements, production scheduling, employee utilization etc.

The concept of how to conduct business has changed dramatically in the past few decades. This is especially evident in manufacturing industries. In the previous century, thorough production planning was only common for large scale manufacturers. These days, however, manufacturing processes are becoming more and more sophisticated and complex in SMB’s as well.

Many business owners still plan their production using outdated methods or altogether avoid investing time and resources into systemic planning, unaware that this can bring about opportunity loss and negatively affect competitiveness, often decisively. In this article we will give an overview of key questions relating to production planning and scheduling.

Why is production planning important?

No matter what kind of business you have, there are the same main principles of success.

You need to accomplish only two things:

• Good product
• Good service

That’s all you really need to reach the hearts of your customers.

The product you are selling must be well-made, easy-to-use, of good quality, appealing, etc. Your attitude towards clients must be caring. Delivery must be delivered in a promised time period, invoices must be correct, etc. With these two points, every client will be yours and for a long time.

But maintaining this is not as easy as it looks. For example, suddenly you may have more items ordered than you usually have. That’s good news! A big order! You happily go check your stock and suddenly find that you don’t have enough items to fulfill this order. You start contacting your supplier and other suppliers, but the earliest date your items will arrive is way past your deadline. Long story short, you failed, and this customer will never contact you again.

How can you prevent a situation like this from happening?

You guessed it! The right production planning.

It plays an important role in any successful business, and it’s hard to find a case where planning plays as great a role as in manufacturing companies, where poor production planning could trigger a catastrophe, or conversely, proper planning may become a strong competitive advantage.

As Benjamin Franklin once said: “If you fail to plan, you are planning to fail!”

The importance of production planning is that it gives you knowledge (i.e.what you have, what you need to purchase, when you need it, how long it will take to get it, and much more) and essential information about your business. It gives you full control over your manufacturing process, and this, in turn, provides you the power to stop wasting time, to avoid bottlenecks, to manage your crew effectively, and to make the process flow without stops and troubles. Does it sound like “efficiency” to you? Because it is.

The definition of production planning goes something like this:

“Production planning can be defined as the technique of foreseeing every step in a long series of separate operations, each step to be taken at the right time and in the right place and each operation to be performed with maximum efficiency (Kumar, 2008).” “Garment Manufacturing Technology,” Woodhead Publishing, 2015.

It sounds good, but let’s sort out all that “production something.”

What is production control and production scheduling?

Production planning is your strategy for the whole manufacturing process. You’re making a map consisting of all the processes that are needed to manufacture your product. This map leads from nothing to the final product. Your manufacturing process will follow this map step-by-step.

Production scheduling is the same as planning, but its process specific. It organizes separate parts of the whole production process and is adjusted depending on the real-time workflow.

From clever production planning and scheduling comes good production control.

Production control means that you always have an actual overview of your manufacturing, all information about your inventory is quickly accessible, you know everything about real-time workflow, and you are ready to immediately react in an unforeseeable situation.

Never underestimate production control!

Without it, efficiency is unreachable. Great production control is a competitive advantage because it gives you great confidence in your manufacturing. Good production control is when you are sure that you have all the necessary raw materials, you know your capacity, and you know how much you can produce at any given time.

You need it even if you are a small make-to-order enterprise. You will feel confident in front of a client and will be able to quickly make accurate estimates. It will give the client a sense of safety and confidence in you. Right after getting the order you will quickly schedule everything needed, and it will become a part of your production plan.

Now that all the terms that start with “production” are clear, let’s get further into it.

Read more about production scheduling.

Production planning know-how

All manufacturing businesses from a small bakery to factory production have the same goal: to make quality goods with minimal time and resources. Let’s take a step-by-step look at what you need to achieve that.

Firstly, what information is required for proper manufacturing planning?

Of course, you must have a full overview of the necessary materials and components for your product. That’s the first thing needed in production planning.

1. Components of your product:

• Bill of Materials (BOM)
• Routing (how the item is going to be produced)
• Raw materials availability in stock
• Cost of raw materials
• Supplier’s lead times and prices

Then you need to connect all the components into one product. That’s the job for the workers or machines, and that’s why it is the second category of needed information for production planning.

2. Workstations and workers

• Availability
• Information about other works on the machines
• Capacity and productivity
• Costs related to machines or workers on the workstations

With this information, it is possible to answer two key questions: when will the product be ready and what will it cost? And yes, answers to these questions are worth the time is taken to research them. As was stated earlier, the goal is to “make quality goods with minimal time and resources.”

If we know when the product will be ready, we can plan to start the manufacturing of the next product right after finishing the previous one. It will make the process as fast as possible. Correctly calculating the cost of production will help to estimate the optimal price for the manufacturer and the client.

That sounds great, but if we look at the sheer amount of this information with a pinch of realism, it will become clear that making all necessary calculations will take a huge amount of time and effort. The scheduling will take more time than simply performing it.

This is somewhat problematic, but worry not! You just have to use the right tool to do that for you. The human brain is 10 million times slower with calculations in comparison with a computer. So why not leave all the hard work for the computers?

The right tool

For some manufacturers, choosing the right production planning software is the hardest part of all the processes of optimization for their production.

The classic of classics, a veteran of spreadsheets – Excel

Everyone who was forced to do something in Excel loves it and hates it. Unfortunately, Excel is not suitable for manufacturing planning and scheduling.

1. It doesn’t update automatically, which means that a worker has to do it manually by hand.
2. It’s very easy to make a mistake when you are filling many columns and rows with different types of data.
3. It requires a lot of time and effort. It is nearly the same as doing everything on paper.

Why use the multidisciplinary Excel program when there are systems made especially for manufacturers? Some manufacturers still use Excel because they believe that all production planning systems are the same giant monsters as SAP, and to implement it, you need a budget greater than the yearly budget of the USA.

Also, many people are confused by the large variety of software solutions and technical terms such as MRP, MRP II, APS, ERP, etc. Don’t be afraid. You don’t need to be a manufacturing software specialist to find the right solution for your production. You need only two things:

• Knowledge about your company (e.g. size, number of workers)
• Free trial

Usually, production software providers provide information on their homepage regarding who they deem as being suitable. It doesn’t mean that you can’t try it if you differ from their requirements. It only means that their software was made with the thought of their target group manufacturers and their respective needs, which may differ from your needs.

The best way to understand whether this solution is suitable for you is to try it! Nowadays, the vast majority of SaaS (Software as a Service) companies have free trials. Right now you have an overview of why production planning is crucial, and you are willing to optimize your production process with some good manufacturing software.

That’s great, but now you have to find the best production planning system, and you only have a vague idea of what functionality you need in it.

Let’s make it clear right now…

What functionality is needed for good production planning?

As a rule, very often manufacturing starts from customer orders. So, the information about the customers and their orders should be stored somehow.  This is the task of the CRM part of the software system.

CRM (abbreviation from Customer Relationship Management) not only stores the above-mentioned information. Its main functions are:

• Being the right hand of the Sales or Customer Service Department by storing and reflecting the sales pipeline.
• Being a source of information for the Production Planning Department by storing customer orders alongside their delivery times.
• Being the source of important accounting information by providing invoices and shipping documents.

It is not possible to produce goods from thin air. So, raw materials and needed components should be ordered prior to production. There are three departments responsible for that.

The Product Department is responsible for developing product documents, which are, in general, the BOM (Bill of Materials) and Routing. Often, they are supplemented with drawings.

The BOM is the list of materials and components needed for producing the final product, with their quantities generally being per single unit, or per some minimum producing quantity.

Routing is the list of manufacturing operations with the required equipment, working time, and labor resources are also often needed too.

However, for the final answer, it is necessary to have the information at the Stock Department in the Stock module of the manufacturing ERP system. Which materials and components are available in stock? How many of them are free? How many of them are booked already for previous orders?

The important functionality of a Stock module is the ability to clearly distinguish between inventory currently on hand, and the inventory expected to arrive. Also, it helps you to reduce manufacturing costs by optimizing inventory and avoiding overstocking.

If there are not enough parts and materials for manufacturing the product, they should be procured. The Purchasing Department has all the needed information about possible suppliers, their delivery terms, and prices in the Procurement module. It allows a purchasing order to be created quickly, and for planned delivery dates to be entered before the goods will physically arrive in stock.

So, all these aforementioned components of a manufacturing ERP system participate in effective production planning. An important functionality of such a system is the easy rescheduling of work orders, so a system with dynamic possibilities (drag and drop at the monitor screen) has an advantage.