Production planning occurs at several levels in the organization and covers different time horizons.
Planning can be classified as strategic planning, tactical planning and operational planning according to the hierarchical levels in which it is done in the organization. Another classification based on time span of planning is long range, intermediate range and short range planning.
Strategic planning is a process of thinking through the organizations current mission and environment and then setting forth a guide for future decisions and results.
Example: Technology forecasting and choice of appropriate technology for the long range time horizon.
Strategic plans are usually long range plans done at the top management level. For example, the vice-president-operations, together with the top executives of the firm develop long range capacity and facility plans.
The long range plans focus on product lines, divisions, factories, markets and other business units, span several years and reflect the operations strategy of the business. Long range plans focus on the utilization of production facilities in the long run to achieve business objectives. They involve commitment in terms of capital investment, manufacturing process technology, product life and the like. The factors to be taken into consideration in long range planning are investment capacity of the firm, product life cycle, technology level, market requirement and the like. These plans set in motion activities required to develop facilities and equipment, production processes and major sub-contractors. Long range plans become constraints on how many products can be produced in the intermediate and short range plans.
Objectives laid down by long range planning are:
- Production levels (Number of units produced).
2. Operating capacities.
3. Inventory policies.
4. Levels of manufacturing costs.
Tactical Planning is done over an intermediate term or medium range time horizon by the middle level management (Operations at departmental level). These plans focus on aggregate products rather than individual specific products. These aggregate plans have a time span of 6 to 18 months. They specify the employment plan; machinery and utility plans, the sub-contractor and materials supply plans and facility modification/ expansion plans.
Operational planning is done over a short range time span developed by the junior level management. It is concerned with the utilization of existing facilities rather than the creation of new facilities. It involves proper utilization of key resources such as raw materials, machine capacity, energy etc.
Short term planning takes into account, current customer orders, priorities, material availability, absenteeism rate, cash flows, etc., and it is designed to respond quickly to changes in production levels and market conditions.
Short range planning establishes short range schedules which specify the quantity of specific products to be produced in each week of the planning horizon which varies from a week to a few months.
Example of a short-range plan is master-production schedule, together with materials requirement planning and capacity requirement planning.
Short range production scheduling and shop floor planning involve the day to day issues and decisions related to operations planning.
Procedures of Production Planning and Control
The process of PPC follows a pre designed formulation. The purpose is to ensure that the plans are implemented properly .These plans are for a specified time period keeping in mind the stipulated costs and agreed policies. The costs include the capital cost of the facility, assets and labor. The steps or the procedure followed in PPC are as under:
Demand predictions: The production planning process begins with estimating or forecasting the demand among the consumers for the product or the service which is being offered
- Preparation of production budget: to compute the total cost of production.
- Design the facility layout
- Prescribe the types of machines and equipments to be used
- Appropriation of production requirements: At the planning stage itself the appropriation of raw materials, men and machinery required is done. Specifics regarding their quality and quantity are decided.
Schedule: The schedule of production is drawn. Date by which a particular operation or production step should be completed is stipulated and reasonable allowances are made for any possible delays or errors.
- The shortage or excess of the end product is ascertained I relation to efficiency of labor and equipment. According to the fluctuation in the demand for the product, necessary adjustments are made in capacity of machines and the number of labor.
- Plans are drawn in case of a sudden surge in demand as in seasonal advantages of certain products. Cost of surplus inventory and stocks are taken account of.
Rate of production: The rate and scale of production is set up. It is broken into realistic time periods and schedules. The stipulated or specified job needs to be finished by a particular date to start the next step.