Read the following production planning paper and summarize it:

Introduction

A good production plan is the foundation of success in any production firm. Production planning is a rather complicated process, but it acts as a roadmap that guides an organization to achieve its objectives (Slack and Chambers, 2007). It is, therefore, important that a production company should have a comprehensive and effective production plan because such a plan reduces labor. An effective production plan reduces labor by eliminating wastage, reduces costs, optimizes the use of equipment, utilizes the labor force to capacity, and saves time. Production planning involves forecasting of the market demand, inventory control, risk identification, and mitigation measures, scheduling, quality control and the involvement of information technology. This paper looks at the important aspects of production planning with the aim of creating an understanding of the best principles that guide effective production planning.

Production Planning

Production planning is the administrative process that takes place within a manufacturing industry that ensures that there are sufficient raw materials, staff, and other essential items that are used in the creation of the final products as per the company?s schedule (Bitran and Tirupati, 1993). Production planning is mainly done in companies to increase the profitability and maintain the consumer base. Planning, therefore, addresses the decisions about acquisition, utilization, and allocation of production resources in order to satisfy the customers in an efficient and effective way.

Production planning in a company involves complex processes that follow distinct models that are associated with different costs. Planning begins with the specification that the customers demand because they have to be met. However, because future demand from the customers is always unknown, planning depends on the forecast made by the company. The planning decisions on production and inventory quantities are the principal components of planning. A planning hierarchy is always modeled according to their relative importance (Bitran and Tirupati, 1993).

During the planning, relevant costs are taken into consideration. Such costs include the variable costs, set-up related costs, inventory-holding costs, and other resource acquisition costs. Likewise, the period and the planning horizon should be taken into consideration. Production planning should be done at an aggregate level, implying that similar products should be combined and hence planned together to reduce the planning complexity. Likewise, similar production resources such as labor and machines are also aggregated together. For more complex products, the level and the extent of the product structure should be included in the process of planning. Generally, production planning involves a series of interrelated activities that are governed by different departments in a manufacturing company. Figure 1 below shows the hierarchy of production planning process with the various activities involved at each stage.

The Production Planning Hierarchy

Production planning Models

Several models of production planning depend on factors such as multiple items with independent demand, multiple shared resources, big-bucket periods, and linear costs. The decision variables for these models depend on the number of items to be produced within a given period and the inventory of the items at the end of a given period. Other parameters include the number of items and resources (including labor) that are required per unit production of a certain number of items. The amounts of resources that are available at a given period and the demand for the items in a given period are also factors that are considered.

Another model of planning relies on the market demand such that the value of lost sales is taken into consideration. This model considers the unmet demand of the items in a given period, the unit revenue for those items during the period and, the unit cost of not meeting the demand for that given period. Other models of planning take into consideration the piecewise linear production cost functions. However, when the resource levels are varying, resource planning such as workforce levels must be considered. In such instances, the decision variables are the workforce level in a given time period, the change in the workforce level in a given period. The parameters under which decisions are made during planning in this instance include the amount of labor required per unit of production, the variable unit cost of labor in that period and the hiring and firing costs during the given period. The choice of the planning model to be used in a manufacturing company depends on the objectives and goals of the company, as well as the available resources.

Production Scheduling

Production scheduling is the process of management and allocation of resources, processes and events that lead to the creation of a final product. The process involves developing and maintaining daily and weekly optimal tactical and operational plans with the aim of obtaining maximum value using the available options. This process depends on the availability of resources, the customer orders, and the efficiencies. This process is, therefore, important because it balances the customers? needs and the available resources for production in the most cost-effective manner. It can have a huge impact on the productivity of a company since it minimizes costs and time by pointing out the time an event should occur and whoever should be involved. Scheduling focuses on the resources that are available such as the raw materials, the machines, and the workers. During the scheduling, the resource constraints and outages are considered because they affect the levels of production. Once the constraints and outages have been identified, they are rectified to ensure that the production goals are met. Scheduling also involves the review of the customers? orders and their periods. These, coupled with the production capacity, enable timely and adequate production. Scheduling outlines the volume of goods to be produced, the personnel involved in that production, the order of production process and the timelines for the production.

In scheduling the personnel, concepts such as job rotation, break schedules, cross training and teamwork are incorporated. This process also involves contingency planning, especially on the labor outages to prevent production hitches. Generally, production scheduling improves the customer service due to timely delivery, reduces inventory levels, and improves utilization of the available machinery and labor.

There are different forms of scheduling that can be used by a production firm. Forward scheduling involves planning activities beginning from the time the resources are availed while backward scheduling that involve planning of activities from the time the products are required so as to determine the starting date. The two models can be used for batch production in any manufacturing company.

Production Control

Controlling is the process of maintaining a balance in the activities that are driven at the achievement of a particular goal. Therefore, production control is the process of ensuring that everything occurs as per the adopted plan and the established principles of the process of production. A laid down procedure aims at regulating and ensuring an orderly flow of processes in production. Production control, therefore, points out the shortcomings and the weaknesses in the process so that they can be rectified to ensure optimum production and prevent recurrence.

Production control is important in that it ensures production in a manner that conforms to the requirements of the consumer by ensuring the correct size, quantity, and shape of the product. It also ensures that the production is done within the time limits as per the schedule.

The department of production control in a company is charged with the following functions:

Ensuring adequacy and timely provision of resources (raw materials, equipment, machines, and labor),

1. Organizing of the production schedule to conform to the demand forecast,
2. Ensuring that there is efficient use of resources in a way that reduces costs,
3. Determination of the economics of production to ensure low costs of production,
4. Coordination of the different sectors and departments,
5. Inspection of half-finished and finished products to ensure quality, and
6. Development of the product design.

These functions are managed with the use of different techniques. These techniques include programming, ordering, dispatching, and processing and follow-up.

The process of production planning, scheduling, and control is broad, and therefore, there are several important issues that are put into consideration. During the planning process, other factors such as risk management, forecasting, information technology, quality control, and operation are taken into account.

Forecasting

Research has shown that accurate forecasting enables the companies to provide quality customer services because when demand can be predicted accurately, it can be met in an efficient and timely manner. This would keep the customers satisfied and thus develop trust in the company and the product. Apart from customer satisfaction, accurate forecasting leads to a cost effective production process because the raw materials and other resources can be availed in time, thus preventing extra costs. Logistical services can also be obtained at lower costs due to long-term contracts (Mentzer and Schroeter, 1993). The production and operations department critically depend on forecasting to enable success in those departments.

Most companies have developed a forecasting computer program that is used by a forecasting group to provide demand forecasts. Demand forecasts are derived from histories of shipment or supply in the company. The forecasts are the foundations of the production control because it tells the requirements of the resources that will be used and hence the control department can plan on what and when to do the purchases and recruitments.

Information Technology

Early information technology applications in production were viewed in terms of labor savings, such as the use of computers to automate data storage, conduct routine transactions, and improve communication in the organization (Bresnahan, 1997). Thus, there will be fewer clerks, accountants, and middle managers required. However, massive computerization of manufacturing companies and extensive use of the equipment have improved the value of production by reducing capital. Most manufacturing industries have automated their systems to improve efficiency. Likewise, computers, thus increasing efficiency in production and even reducing expanded fleets in transport, have taken up several programs such as production scheduling and routing.

Technology in production planning is currently aimed at improving customer service, quality of products and most of all, timesaving (Brynjolfsson and Hitt, 1997). According to Bresnahan (1997), computers have proven their function ability as complements to skilled, empowered workers, customer focused strategies and flexible production processes.

These benefits of information technology should always be thought of by incorporation of IT in the processes of production planning. However, information technology may require a reduction in the labor force but it also needs skilled labor to ensure efficiency.

Risk Management

Production activities are planned to run smoothly, effectively and efficiently. In order to achieve these, the managers should be knowledgeable on the factors that can affect the ability to manage these production operations. This is mainly done through identification and management of risks. Therefore, the process of production planning should involve identification of possible risks that are related to the process so that they can be prevented or mitigated (St-Hilaire, 2014). Otherwise, a company may undergo a series of losses. There are definite risks that are always involved in the formulation and the operations of the production. Such risks may be operations risks such as huge costs, inefficiency, interruptions, design failures, unplanned shutdown, poor quality of products, technology failure among many more.

According to St-Hilaire (2014), other risks may be from the systems and technology such as contingency planning, IT failure, security breach, fraud, and lack of information integrity. Other risks may arise from people, such as strikes, skill shortages, poor communication, performance and reward, workload and staff turnover. Lastly, health and safety related risks such as injury, accidents, contaminations, catastrophes, emissions, and equipment failure may occur. The management should identify these risks and formulate effective risk management strategies that may include proactive risk management.

Risk management involves the identification of all the possible risks the production is exposed to as well as determining the levels of each risk. After these, measures are taken to reduce the level of these risks and eventually, constant monitoring of the risks and the levels of such risks using the appropriate tools. External risks that include natural calamities such as fires, flood, and earthquakes should be mitigated by insuring the company against such occurrences. Other risk mitigation procedures include proper physical security to prevent theft and to bring into the company?s premises contraband (Giunipero and Reham, 2001). Adequate training and education should be given to the appropriate personnel to ensure that all procedures are followed by all employees. Despite good forecasting, fall in demand is a common risk that a manufacturing company has to deal with. In the case of a drop in demand, the company should have ensured that it has efficient structures that will enable it match the demand with its supply.

The procedure for Risk Management

NO

The managers should develop an integrative risk management approach that will enable them link risks to the various departments of production to ease the process of mitigation. They should employ the use of risk registers and biannual evaluation of the key risks to ensure that the management is at par with new risks. Generally, there should be a risk management program to oversee all these processes.

Operation

Operations of any production process are always based on the production plan, and the operations managers manage it. An efficient production plan should include the operational requirements that guide the activities and help in the management of the resources that are used in the production process. The function of management of resources important because it also provides guidance on the marketing and market research (Heizer and Render, 2011). It is also concerned with the interaction with the consumer to gather information on the customer requirements, thus enabling proper quality control (Slack and Chambers, 2007). Operations in the production process also involve significant decisions that pertain to finance. Financial decisions affect all the other departments involved in production; therefore, there should be a clear framework of communication procedures between the managers of other departments and the operations manager. The three primary functions of this department (production, marketing, and finance) are the pillars of any manufacturing business. This department is in charge of planning, designing production and management of the workers. Management of employees is a crucial role because it involves hiring, training, supervising, measuring, motivating, setting goals, leading the employees, and building teams.

Quality Control

A quality product is that which meets the needs and the expectations of the customer because the customers always want what is equivalent to the price they pay. A quality product should have a good design, good functionality, should be reliable, consistent, and durable (Hale, 2006). The consumers also relate the quality of the product to the after sales services and always consider value for their money.

It is crucial for a company to produce quality products because it helps the company to build customer loyalty and a strong brand reputation, thus increasing the sales and reducing the costs of replacements and repairs. Likewise, quality products with good brand images help the company to attract and keep good staff.

Any manufacturing plant therefore, should have a quality control department that deals with the inspection of the products to ensure that they meet the set standards of quality before they are released to the customers. It is their responsibility to test or measure all the products or samples of the products to ensure that the variations are within the acceptable limits because it is impossible to maintain perfection in production. Chen (2009) asserts that the production planning process should include the quality control department that will set the standards for the quality requirements and carry out the management of quality throughout the production. The quality control department that should be made up of trained inspectors should carry out regular inspections at the various stages of production that should be random or according to the schedule. However, if the production process is continuous, then the planning should involve statistical process control mechanism should be applied since it includes continuous monitoring of production. It provides data that is analyzed to advice on the quality as the process of production proceeds.

According to ISO 9000:2000 2, quality is an integration of features and characteristics that determine the satisfaction of the customers? needs by a given product. In addition, since the customer, rather than the manufacturer currently define the quality of a product, it is crucial to produce quality products. Therefore, whatever mechanism of quality control is applied, it is necessary because it prevents faulty or inferior quality products from reaching the customers (Chen, 2009). However, models such as Total Quality Management may be proposed in cases where the other quality control mechanisms have failed.

Transcribed Image Text:

PRODUCTION PLANNING HIERARCHY Forecasting Master Production Planning Material Requirement Planning Capacity Balancing Production Scheduling Risk Identification Analysis and Evaluation of each Risk Accept Risk Level? Select Security Measures for Fach Risk YES Organize the Selected Measures PRODUCTION PLANNING HIERARCHY Forecasting Master Production Planning Material Requirement Planning Capacity Balancing Production Scheduling Risk Identification Analysis and Evaluation of each Risk Accept Risk Level? Select Security Measures for Fach Risk YES Organize the Selected Measures

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Production Planning Forecasting enables companies to provide quality customer services because demand can be predicted accurately and can be met in an efficient and timely manner This ensures that cus... View the full answer