Why You Really Need to Set Up Production Planning Processes
Every manufacturing business requires a plan. Your business plan is one thing, but how well do you know your production planning processes?
Mapping out your production processes allows you to keep to your production schedule. In fact, production planning and scheduling are two sides of the same coin.
Production planning processes make sure you have the requisite raw materials, labor, and equipment to complete your orders.
Production scheduling is the management of these processes to make sure they are completed in a timely and economical fashion.
When an unusually large order comes in, you don’t have to estimate or guess, as you have “the knowledge” — the recipe for everything your businesses produces — at your disposal.
This recipe is part of your bill of materials (BOM) and is a cornerstone of your Master Production Schedule (MPS).
But before you can make a schedule, you need to define all your processes, raw materials planning (MRP), and resource planning.
Think that’s a lot of fancy lingo?
You ain’t seen nothing yet...
Why Should You Care About Production Planning Processes?
You don’t set off on a long journey on unfamiliar roads without consulting a map first. The map is not just for finding any valid route but evaluating all the possible routes and determining the best one.
You use a map to consider distance (what’s the shortest route) but also the terrain (which route lets you get there quickest). Winding country roads may take longer to traverse than a straight freeway.
The aim of production planning processes is to find the right route and make sure you have enough fuel and supplies to get there.
So, once you find the shortest and quickest route you’re ready to set off, right?
Well savvy navigators know there’s more to it than that.
The “best route” can fail from time to time. You could run into a problem in one of your production planning steps.
You can get through such problems eventually, but at a huge cost of time and fuel. But why not avoid them in the first place?
Without dynamic production planning processes for your business, your production may have been going astray without you realizing it.
A clear plan in place standardizes your processes.
You want process consistency to produce your artisan goods with the same quality each time, no matter if it’s the first or 1000th unit.
When you gain a new team member, they can learn to do things your way much more quickly.
In fact, you don’t have to spend as much time on quality control, as everyone on your shop floor is playing to the same tune.
Good production planning and process control ensures expert-level quality every week and every month.
For your customers, this is the difference between a one-time purchase and a lifetime of purchases.
What is the First Step to Planning a Production Process?
They say the first step is always the hardest...
You may know your destination (the finished product), but you need to define how to get there.
This is done with a production map. This is a fancy term for a flow chart that shows every step you take to create your finished product.
Your production plan is one of the most important of the production planning processes. It shows every part of your manufacturing fulfillment cycle, including sourcing, machining, wait-times, processing — everything that goes into your final products.
Don’t focus on amounts, but the processes. The quantities come later, in your BOM.
Your process maps are the foundation of your production planning processes, so really focus on this. Once you’ve mapped this out, you can start to evaluate how your workshop is set up to fulfill this? Is everything the best it can be? There may be some illogical steps, such as long transit times between sub-assemblies which increases your lead times.
You may have a simple or complex product, but every manufacturer will benefit from effective process mapping.
You need it to keep you on the straight and narrow when completing the next steps of your production planning processes journey.
The Next Production Planning Process Steps
Now you know the answer to “what is the first step to planning a production process?”
Your production map shows you the best route to tackling the remaining production planning processes.
The following steps help you stay on the right track and identify if you are:
— Straying from your predefined production process; or
— Encountering problems such as bottlenecks, supply chain faults, or insufficient resource management that reduces your order fulfillment cycle time (OFCT).
This is useful as it lets you know when you need to zone back in on your Plan A, or change tack.
1. Define Your Product Recipes
You have defined your processes, now you need to do some Material Requirements Planning (MRP). The industry-standard way to do this is with a product recipe or bill of materials (BOM).
Each product variation (defined by an SKU) requires its own specific BOM.
Determine the resources consider every possible resource:
— Human resources (direct and indirect);
— Machinery and equipment;
— Direct materials; and
— Indirect materials.
With an accurate BOM, when an order comes in, you know the exact materials you need. This information can be used to keep your inventory up-to-date with every order. That’s right, your BOM is the key to unlocking perpetual inventory — i.e. automatically updated inventory counts in real-time.
2. Demand Forecasting
Forecasting demand enables effective capacity and production planning.
So how do you do this without a crystal ball?
First, consider your historical sales demand. Even a very limited sales history is useful as it suggests that demand won’t suddenly spike to thousands of units. Not counting seasonal factors like the winter holidays, expect your demand to increase gradually.
Once you’ve worked out your average demand, you can use this to work out your expected material requirements based on a forecast of similar demands.
But what if your demand suddenly spikes?
This is where you apply a safety stock formula to determine the “emergency stock” that will be sufficient to get you out of a tight spot. Setting up backorder channels is another good emergency method.
These are the basics, but you can go further. You can invest in Smart Workshop software to record your sales history so you can make more accurate forecasts.
3. Prioritize Your Inventory
It’s not just how many total units you need to produce.
How much of each product variation will you sell? You need to make sure you have machine and material availability for these workloads.
This lets you set up MRP for these high-demand SKUs, so you don’t have stock with low turnover adding to mounting carrying costs.
One law of manufacturing is that demand is not evenly distributed. Top selling items can greatly outperform the rest.
The ABC or Pareto Approach states that when reviewing your inventory, you should rate your products from A to C, based on the following:
— A items (green) are goods with the highest average annual value to your business. They are your most popular products, the top 10-20%, that make up between 70-80% of your sales revenue;
— B items (yellow) are the ones in the middle, with a medium value to your business. They contribute 15-25% of sales value and make up around 30% of total inventory items; and
— C items (red) are the items with the lowest value to your business. They may be cool and unique items but bring in the lowest combined sales income. They account for around 5% of total sales but make up 50% of your total product inventory.
The trick is to identify which items you stock are A, B, or C items. Once you have done this you can reduce the associated raw material inventory and floor space requirements for these items.
4. Monitor and Control
Make sure problems on your shop floor are identified and dealt with straight away. You as a production planner or operations manager should keep an eye on everything. But you can’t be everywhere at once: having well-trained staff — and a clear chain of responsibility goes a long way to excellent floor control.
Having these policies in place will allow you to detect problems like bottlenecks before they become a major problem.
Once production is underway, you need to monitor and oversee the whole process. You don’t have to be fixated on every minute detail. This is where having production planning software helps. It can flag up any problems automatically.
PRO TIP: Use an inventory management system with an easy-to-read visual interface to track your processes and operations. It makes it so much easier to spot problems the moment they arise. If something is not available, it comes up as bright red. If it is green it is good to go. You can’t get any clearer than that.
5. Evaluation and Adjustments
Once you’ve made a plan, it shouldn’t be set in stone. It should accommodate adjustments.
You need to keep an eye on how your workshop is performing. One objective way to do this is with Performance Measurement (PM) metrics that track the implementation of your production planning processes.
One important metric is throughput. This tracks how much a particular machine produces. You can use it to track the efficiency of a machine, and when you need to make an adjustment, such as moving its position in the production process. More major action to be to replace the machine altogether if you see a throughput drop-off due to wear and tear.
At times it may come to light that a production map you chose that looked great on paper has some hiccups that you didn’t anticipate.
There’s no shame in that. That’s why we continuously track our production planning processes.
Don’t just consider the schedule for when everything goes to plan. Consider a plan B and C, so you are never caught short.
Don't Neglect Your Production Planning Processes
Advances in IT and software have not necessarily been taken up by small business owners, many of which are not taking advantage of the tools available to them.
They might take hours to pore over several disconnected spreadsheets, updating them to keep up with everything going on in their business.
Sometimes it’s easy to get caught up in spreadsheets and fail to think about your customers.
Customers give life to a business. They are the end-point of your products’ journey. They satisfaction contributes to your reputation.
Customers decide whether a business will be around in 1, 5, or 10 years’ time.
When a customer orders something from your business, you are giving them a promise to deliver what they ask within the agreed boundaries of time and quality.
Production planning processes make sure you can keep your promises to your customers.
So, everything you do in your business to increase efficiency and productivity should be geared towards your customers’ satisfaction.
How can you use production planning processes to get your customers what they want, when they want it?
Perfect Production Planning and Process Control with Katana
Combine your insights and experience with software that keeps you on track.
For example, you don’t have to remember scheduling and planning rules.
You are free to think of the next big thing.
Your production process maps can be disseminated across all team members. Katana is cloud-based and supports multiple users.
It’s a diamond-edged precision tool to get all your materials, labor, equipment, and sub-assemblies where they need to be.
How can you get...
All your production planning processes and production schedule in one useful place?
All your processes clearly mapped out and easy-to-follow?
And all your resources being directed to the right place, without fail?
Try Katana for free to find out.