Production planning policy and procedure


The end product of the production planning efforts is the formulation of production plans. The plans are formulated in the light of the specified future period. The plans are to be implemented in the light of the estimated costs and agreed policies. The costs in the case include capital costs of assets and plant facilities, inventory cost, labor cost and cost of setting up the operations. The policies are framed in the light of the planning techniques and strategies which have been developed for the particular plan. The important steps in production planning are as under:

1. Demand Forecasts: The production planning function is geared to the estimated demand for the product. The demand forecasting represents an anticipated level of demand and it also reflects on the pattern of the demand. If seasonal or other kind of symmetry can be predicted, production can be planned to take advantage of the predicted pattern of the demand.

2. Specification of Production requirement:
Though demand forecasts provide the basis for production planning, it is not everything in production planning. The demand forecast must be converted into a specification of production requirements. The forecast demands are adjusted as under while planning the actual production:

(a) On the basis of available production capacity, the forecast demand is put on the calendar schedule.

(b) Reasonable allowances are made for possible errors in the forecast

(c) The deficiency of surplus of the existing production capacity ascertained in term of machine capacity and labor force. On the basis of the temporary or permanent fluctuations in the demand, the adjustment in the machine capacity and labor force are planned well in advance.

(d) A schedule, of material requirement is prepared. While deciding the quantity of material due considerations is given to the seasonal advantage, cost of excess inventories carrying, cost of stock outs etc. The above type of production planning is made in the light of the specification of the product or the customer orders within the prescribe tolerance limits.

Setting of Production Rate:

The production requirements are broken into periods and the schedule of production is prepared. The production at any point of time is the result of the prescribed rated capacity. In the light of the desired production, the production rate should be planned on the basis of the existing production capacity, overtime working, extra shift working or new additions to the existing production capacity. The inventory levels should be geared to the production rates. On the basis of the set production rates, the schedule of the period production and inventory holding should be prepared. The production rate is set with the help of graphic technique.

The setting of the production rate is relatively difficult in case of the seasonal demand. However, the adjustment can be made by continuing the average production throughout the year and by manipulating the inventories if it releases some costs advantages. Various mathematical programming methods are used in practice for planning the seasonal production requirements.

Controlling Production:

Once the production plan is made and set to operations , is likely that the actual stocks of the finished goods inventory will fall below or exceed the planned balances due to the discrepancies in the estimated an actual sales. The marginal imbalance in the estimated and actual sales is solved by providing for certain safety level of inventory. The size of the safety stock depends on the promptness of production adjustment. In any way, such discrepancies would necessitate the periodic adjustment in the production with the view to bring the inventories into the line. The adjustments in the plan are made as under

I. Where only a short span of the planned cycle is over, the revisions I the original forecast should be made by adjusting the excepted sales changes to the cumulative forecast for the remainder of the planned cycle.

II. Where the planned cycle is on the verge of completion, the forecast may be extended to cover the next planning cycle.

Production Control:

Production planning strives to set the production targets and plans the availability of the resources to translate these targets into reality. While the production control constantly keeps a watchful eye on the production flow and views of resources along with the location, of any deviation from the pre-set action and to arrange for the prompt adjustment so that the productivity may run according to the original and revised schedules.

Production control (PC) is facilitating service to manufacturing. PC coordinates all the production operations by collecting the relevant information about various types of inputs and outputs and by making necessary adjustment in them. It directs and checks the course and progress of the work and closes the records on the completion of the work or order.