LEVELS OF PRODUCTION, PLANNING & CONTROL
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 organizationâ€™s 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:
1. 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.â€™
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.