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Production Plan

By Anonymous - Posted on 25 December 2011

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.
The purpose of the production plan is to balance the aggregate market Demand (product family) with the Factory Aggregated Capacities over the aggregate planning horizon (EFFECTIVENESS)  with a minimum Production Cost . (EFFICIENCY)

Other objectives should be considered such as:
maximize customer service
minimize inventory investment
maximize utilization of plant and equipment
minimize changes in workforce levels
minimize changes in production rates

Production planning is a complex process. The production planning document typically starts with a sales forecast, or sales plan usually supplied by the marketing group. From the production planning document all other process's start. The production planning document can include material, labor, capacity, training and should include a backup plan should things go wrong. Each area of planning is dependent on the other and must be done in unison. It makes no sense to bring in material if production can't produce, or plan production if materials are not available. It requires a collaborative effort between different departments to effectively bring all aspects of the process together.

Important points about production plan
1. It integrates the capabilities and capacity of the factory with the market and financial plans to achieve business
2. Its prime purpose is to establish production rates that will accomplish the objectives of the SBP.
3. The plan must extend far enough in the future to plan for the labor, equipment, facilities and material needed. This is a period of 6 to 18 months and is done in monthly or sometimes weekly periods. With the time spans involved and the
uncertainly of demand over long periods, the detail would not be accurate or useful and the plan would be expensive to create.
4. For planning purposes, a common unit or small number of product groups is required

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