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 the period of planning is long-range, intermediate range and short-range planning.
Strategic planning:
Strategic planning is a process of thinking through the organization's current mission and environment and then set 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, spanning 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 the 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).
Operating capacities.
Inventory policies.
Levels of manufacturing costs.
Tactical Planning
Tactical Planning is done over an intermediate-term or medium-range time horizon by middle-level management (Operations at the departmental level). These plans focus on aggregate products rather than individual-specific products. These aggregate plans have a period 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
Operational planning is done over a short-range period developed by 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 number of specific products to be produced in each week of the planning horizon which varies from a week to a few months.
An example of a short-range plan is a 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 period keeping in mind the stipulated costs and agreed policies. The costs include the capital cost of the facility, assets and labour.
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 equipment 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. The 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 about the efficiency of labour and equipment. According to the fluctuation in the demand for the product, necessary adjustments are made in the capacity of machines and the number of labourers.
Plans are drawn in case of a sudden surge in demand as in seasonal advantages of certain products. The cost of surplus inventory and stocks are taken into account.
Rate of production: The rate and scale of production is set up. It is broken into realistic periods and schedules. The stipulated or specified job needs to be finished by a particular date to start the next step.
Comments