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What makes a good production plan?

Discover the five key factors of an effective production plan

Read time: 7 minutes

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To maximize productivity, every company needs a sound production plan. However, effective planning is a complex process that covers a wide variety of activities to ensure that materials, equipment and human resources are available when and where they are needed. Production planning is like a roadmap: It helps you know where you are going and how long it will take you to get there.

Here are some advantages of an effective production plan and scheduling.

  • Reduced labour costs by eliminating wasted time and improving process flow.
  • Reduced inventory costs by decreasing the need for safety stocks and excessive work-in-process inventories.
  • Optimized equipment usage and increased capacity.
  • Improved on-time deliveries of products and services.

“Production planning is a critical process that must be mastered to ensure your sustainability, because the techniques used (bottleneck management, global management, pull system, etc.) make it possible to avoid exceeding delivery times, minimize the risk of stock shortages and maximize the use of human and material resources,” explains Éric Frenière, Senior Business Advisor, BDC Advisory Services.

5 key factors of a production plan

Effective planning hinges on a sound understanding of key activities that entrepreneurs and business managers should apply to the planning process. Here are five examples:

1. Forecast market expectations

To plan effectively, you will need to estimate potential sales with some reliability. Most businesses don't have firm numbers on future sales. However, you can forecast sales based on historical information, market trends and/or established orders.

“Field analysis, information gathering and understanding of the results achieved make it possible to establish a more accurate diagnosis and develop a better action strategy,” adds Mr. Frenière.

2. Inventory control

Reliable inventory levels feeding the pipeline have to be established, and a sound inventory system should be in place.

3. Availability of equipment and human resources

Also known as “available time", this is the period of time allowed between processes so that all orders flow within your production line or service.

Production planning helps you manage open time, ensuring it is well-utilized, while being careful not to create delays. Planning should maximize your operational capacity but not exceed it. It's also wise not to plan for full capacity and leave room for the unexpected priorities and changes that may arise.

4. Standardized steps and time

Typically, the most efficient means to determine your production steps is to map processes in the order that they happen and then incorporate the average time it took to complete the work. Remember that all steps don't necessarily happen in sequence, and that many may occur at the same time.

After completing a process map, you will understand how long it will take to complete the entire process. Where work is repeated or similar, it is best to standardize the work and time involved. Document similar activities for future use and use them as a baseline to establish future routings and times. This will speed up your planning process significantly.

5. Risk factors

Evaluate these by collecting historical information on similar work experiences, detailing the actual time, materials and failures encountered.

Where risks are significant, you should conduct a failure modes and effects analysis (FMEA) and ensure that controls are put in place to eliminate or minimize them. This method allows you to study and determine ways to diminish potential problems within your business operations. This type of analysis is more common in manufacturing and assembly businesses.

How to plan work

All other activities are initiated from the production plan, and each area is dependent on the interaction of the activities. Typically, a plan addresses materials, equipment, human resources, training, capacity and the routing or methods to complete the work in a standard time.

The production plan initially needs to address specific key elements well in advance of production in order to ensure an uninterrupted flow of work as it unfolds.

  • Material ordering

    Materials and services that require a long lead time or are at an extended shipping distance, also known as blanket orders, should be ordered in advance of production requirements. Suppliers should send you materials periodically to ensure an uninterrupted pipeline.

  • Equipment procurement

    Procuring specialized tools and equipment to initiate the production process may require a longer lead time. Keep in mind that the equipment may have to be custom made or may simply be difficult to set up. This type of equipment may also require special training.

  • Bottlenecks

    These are constraints or restrictions in the process flow and should be assessed in advance so you can plan around them or eliminate them before you begin production. When you assess possible bottlenecks, be aware that they may shift to another area of the process. Dealing with bottlenecks is a continual challenge for any business.

  • Human resources acquisitions and training

    Key or specialized positions may demand extensive training on specialized equipment, technical processes or regulatory requirements.

    These candidates should be interviewed thoroughly about their skills. When hiring them, allow sufficient time for training and be sure that they are competent in their work before the job begins. This will ensure that your process or service flows smoothly.

    “People are an important element of production planning,” says Mr. Frenière. “Planning means managing human capital as well as equipment. They are often the key to optimizing production capacity.”

The production plan provides a foundation to schedule day-to-day activities. As sales orders come in, you will need to address them individually based on their priority.

The importance of the order will determine the work flow and when it should be scheduled. After this, you should evaluate whether or not you are ready for production or to offer the service. You will need to determine:

  • Is inventory available at the point where work is to start?
  • Are your resources available? Do you have the necessary staff to complete the task? Are the machines being used?
  • Does the standard time fit within the available time allowed?
  • You should be careful to minimize risk factors; allowing too many what-ifs can delay delivery and be counterproductive.

Communicate the plan

After determining that you have met all the criteria to start production, you will need to communicate the plan to the employees who will implement it.

You can plan the production on spreadsheets, databases or software, which usually speeds the process up.

However, a visual representation is preferred as a means to communicate operation schedules to floor employees. Some businesses post work orders on boards or use computer monitors to display the floor schedule. Others post work orders in real time on the floor schedule.

Consider change

One of the many challenges of production planning and scheduling is following up with changes to orders.

Changes happen every day. You will need to adjust your plan in line with these changes and advise the plant.

Dealing with change is not always easy and may take as much effort as creating the original production plan. You will need to follow up with the various departments involved in order to rectify any problems.

As well, computer software can be helpful in tracking changes, inventory, employees and equipment.

Continuous improvement of processes

Developing your production plan could highlight sources of waste. You can apply the principles of operational efficiency and value-added production to eliminate waste, shorten processes and improve deliveries and costs.

In order to increase your efficiency, it is essential to examine all of your processes. There are symptoms that are easy to decode to review and refine the management of your operations. One example is increasing delivery times and the company losing control of its production.

The concrete benefits of having a global view of the efficiency of your processes are:

  • Improved quality—Fewer errors. More relevance. Products that are better suited to your customers’ needs.
  • Increased speed—Better offering. Better inventory management. Reduced risk. The ability to meet your customers’ needs more quickly.
  • Enhanced reliability—The right product or service, at the right time and in the right place. Builds customer trust and loyalty.
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