Effective production planning and control are essential ingredients for any form of manufacturing. Whether making one-off items in a jobbing shop or mass-producing consumer goods, poor planning and control leads to unplanned stoppages that disrupt delivery dates.

A production planning and control definition has two elements:

• Production planning
• Production control

Production planning includes:

• Determining demand
• Establishing production capacity and how to meet demand
• Identifying raw material requirements
• Preparing a workable production plan

Production control includes:

• Monitoring production
• Measuring performance
• Initiating corrective action as required

This definition deliberately includes activities that belong to other disciplines such as sales and marketing, as well as raw material procurement. The reason is that effective production planning and control doesn't happen in a vacuum, but is part of an integrated approach that considers all production planning and control responsibilities; it's not just a part of the business.

Key Production Planning and Control Activities

Determining demand

One of the first steps in production planning and control is determining demand. Usually performed by sales and marketing, demand planning is crucial in that it determines the required production capacity and raw material requirements. While erroneous demand forecasts undermine profitability, it's surprising how many executives still rely on gut feel when deciding future demand. Perhaps it’s because they don't have the right tools to analyze sales information and arrive at data-driven decisions.

Establish available production capacity and determine how to meet demand

The next step is to consider the available production capacity, especially in terms of:

• Absolute production capacity
• Demand volume
• Timing of the demand

This information helps determine whether there's sufficient capacity to meet demand. The ideal is to match capacity to demand, which is relatively simple if demand is steady. Unfortunately, this is rarely the case, with peak demand occurring during well-defined periods such as over Christmas or such as planting and reaping times in the case of agricultural equipment manufacturers. In most instances, management needs to consider demand shaping to optimize supply and demand.

Determine raw material stock requirements

Once the overall production plan is settled, it's time to consider raw materials procurement. The starting point is the bill of materials (BOM). It's the procurement department's responsibility to procure items required for each build so items arrive in time to meet production requirements. This is sometimes a balancing act, as some items are unique or may have long lead times, whereas others are off-the-shelf items.

Run MRP and prepare a workable plan

Most large organizations use Materials Resource Planning (MRP) to determine production sequences and detailed material requirements to satisfy the build. MRP solutions also have the ability to determine the complex sequence of operations to produce each item; this is also known as routing.

Besides MRP, other production planning tools for improving production efficiency exist such as Kanban, Just in Time (JIT), Optimized Production Technology (OPT) and Flexible Manufacturing Systems (FMS). Each has its strengths and specific objectives. Some, such as Kanban, are largely manual systems, while others use sophisticated algorithms to manage production scheduling.

Balancing Supply and Demand

While the overall concept of production planning and control is simple, in reality it's a fiendishly complex and difficult-to-control process. Late delivery of critical components can stop production lines, as can quality control issues, unplanned downtime and labor shortages.

Production management needs support, as they often have to make decisions on the run with little time to consider alternatives. Unfortunately, conventional planning tools are relatively inflexible and, as they generally update overnight, can't provide immediate answers. This means many managers turn to spreadsheets to determine the best solution, a process that can be cumbersome and prone to errors. Often, the only practical answer appears to be costly measures such as unplanned overtime to meet production schedules.