INTRODUCTION

This chapter introduces the reader to the production planning and control system. First we'll talk about the system as a whole, then we'll talk more about some aspects of production planning. The following chapters cover master production scheduling, resource planning, performance management, production control, purchasing, and forecasting.

Production - complex task. Some companies produce a limited number of types of products, others offer a wide range. But each enterprise uses different processes, mechanisms, equipment, labor skills and materials. To make a profit, a company must organize all these factors in such a way as to produce the desired goods highest quality V right time with minimal costs. This is a complex problem and will require an effective planning and control system to address it.

A good planning system must answer four questions:

1. What are we going to produce?

2. What do we need for this?

3. What do we have?

4. What else do we need?

These are priority and performance issues.

A priority- this is what products are needed, how many of them are required, and when they are needed. Priorities are set by the market. In charge production department includes developing plans to meet market demand as far as possible.

Performance is the ability of production to produce goods and services. Ultimately, it depends on the company's resources - equipment, labor and financial resources, as well as the ability to obtain materials from suppliers in a timely manner. Over a short period of time, productivity (production capacity) is the amount of work that can be completed with the help of labor and equipment in a certain time frame.

There should be a relationship between priority and performance, shown graphically in Figure 2. 1.

Figure 2.1 Relationship between priority and performance.

Over the short and long term, the production department must develop plans to balance market demand with available production resources, inventory, and productivity. When making long-term decisions, such as building new plants or purchasing new equipment, plans need to be developed several years in advance. When planning production for the next few weeks, the time period in question is measured in days or weeks. We will look at this hierarchy of planning, from long-term to short-term, in the next section.

PRODUCTION PLANNING AND CONTROL SYSTEM

The production planning and control (MPC) system consists of five main levels:

• Strategic business plan;
• Production plan (sales and operations plan);
• Master production schedule;
• Resource requirement plan;
• Procurement and control over production activities.

Each level has its own objective, duration and level of detail. As we move from strategic planning to control of production activities, the task changes from setting general direction to specific detailed planning, the duration decreases from years to days, and the level of detail increases from general categories to individual conveyors and pieces of equipment.

Since each level has its own duration and tasks, the following aspects also differ:

• Purpose of the plan;
• Planning horizon - the period of time from the current moment to one or another day in the future for which the plan is designed;
• Level of detail – detail of the products necessary to implement the plan;
• Planning cycle – frequency of plan revision.

At each level you need to answer three questions:

1. What are the priorities - what needs to be produced, in what quantity and when?

2. What production capacity do we have at our disposal - what resources do we have?

3. How can discrepancies between priorities and performance be resolved?

Figure 2.2 illustrates the planning hierarchy. The first four levels are planning levels. . The plans result in the initiation of the purchase or production of what is needed.

The last level is the implementation of plans through control production activities and procurement.

Figure 2.2 Production planning and control system.

In the following sections, we will look at the goal, horizon, level of detail, and cycle at each level of planning.

Strategic business plan

A strategic business plan is a statement of the main goals and objectives that the company expects to achieve within a period of two to ten years or longer. This is a statement of the general direction of the company, describing the type of business that the company wants to do in the future - subject-production specialization, markets, etc. The plan gives a general idea of ​​​​how the company intends to achieve these goals. It is based on long-term forecasts and involves marketing, finance, production and technical departments in its development. In turn, this plan provides direction and ensures coordination of marketing, production, financial and technical plans.

Marketing specialists analyze the market and make decisions regarding the company's actions in the current situation: they determine the markets in which work will be carried out, the products that will be supplied, the required level of customer service, pricing policy, promotion strategy, etc.

The financial department decides from which sources to receive and how to use the company's funds, cash flow, profit, profit on invested capital, as well as budgetary funds.

Production must satisfy market demand. To do this, it uses units, mechanisms, equipment, labor and materials as efficiently as possible.

The technical department is responsible for research, development and design of new products and improvement of existing ones.

Technical specialists work closely with marketing and production departments to develop product designs that will sell well in the market, and which will require minimal production costs.

The development of a strategic business plan is the responsibility of the company's management. Based on information received from the marketing, finance and production departments, the strategic business plan defines a general framework in accordance with which goals and objectives for further planning are set in the marketing, financial, technical and production departments. Each department develops its own plan for achieving the objectives set by the strategic business plan. These plans are consistent with each other, as well as with the strategic business plan. This relationship is illustrated in Fig. 2. 3.

The level of detail in the strategic business plan is low. This plan covers General requirements market and production - for example, the market as a whole for major product groups - rather than sales of individual products. It often contains figures in dollars rather than units.

Strategic business plans are usually reviewed semi-annually or annually.

Production plan

Based on the objectives set in the strategic business plan, the management of the production department makes decisions on the following issues:

• The number of products in each group that is required to be produced in each time period;
• Desired level of inventories;
• Equipment, labor and materials needed at each time period;
• Availability of the necessary resources.

The level of detail is low. For example, if a company produces different models of children's two-wheelers, three-wheelers, and scooters, and each model has many options, then the production plan will reflect the main product groups, or families: two-wheelers, tricycles, and scooters.

Specialists must develop a production plan that satisfies market demand without exceeding the company's available resources.

Figure 2.3 Business plan.

This will require determining what resources are needed to meet market demand, comparing them with available resources, and developing a plan that coordinates one with the other.

This process of determining the required resources and comparing them with those available is carried out at each level of planning and represents the task of performance management. Effective planning requires a balance between priorities and productivity.

Along with the marketing and financial plan, the production plan affects the implementation of the strategic business plan.

The planning horizon is usually from six to 18 months, and the plan is reviewed monthly or quarterly.

Master production schedule

A master production schedule (MPS) is a plan for the production of individual finished products. It provides a breakdown of the production plan, reflecting the number of final products of each type that is required to be produced in each period of time. For example, this plan might state that 200 model A23 scooters need to be produced every week. The production plan, forecasts for individual end products, purchase orders, inventory information, and existing productivity information are used as input to MPS development.

The level of detail of the MPS is higher than that of the production plan. While the production plan is based on product families (tricycles), the master production schedule is developed for individual end products (for example, each model of tricycles). The planning horizon can be from three to 18 months, but above all it depends on the duration of the procurement processes or the production itself. We'll talk about this in Chapter 3, in the section on master production scheduling. The term general scheduling refers to the process of developing a master production schedule.

The term master production schedule refers to the end result of this process. Plans are typically reviewed and modified weekly or monthly.

Resource requirement plan

Resource requirement plan (MRP)* is a plan for the production and procurement of components that are used in the manufacture of the main calendar plan production of products.

It indicates the required quantities and the timing of their intended production or use in production. Purchasing and production control departments use MRP to make decisions about whether to initiate purchases or manufacture a specific product line.

The level of detail is high. The resource requirement plan indicates when raw materials, supplies, and components will be needed to produce each final product.

The planning horizon must be no less than the total duration of the procurement and production processes. As with the master production schedule, it ranges from three to 18 months.

Procurement and control over production activities

Figure 2.4 Relationship between level of detail and planning horizon.

Purchasing and production control (PAC) represents the implementation and control phase of a production planning and control system. The procurement process is responsible for organizing and controlling the receipt of raw materials, supplies and components to the enterprise. Control over production activities is planning the sequence of technological operations in an enterprise and control over it.

The planning horizon is very short, approximately from a day to a month. The level of detail is high as it deals with specific assembly lines, equipment and orders. Plans are reviewed and changed daily.

In Fig. 2. 4 shows the relationship between by various means planning horizons and levels of detail.

In subsequent chapters we will look in more detail at the levels discussed in previous sections. This chapter is about production planning. Next we will talk about master scheduling, planning resource requirements and controlling production activities.

Performance Management

At each level of the production planning and control system, it is necessary to check the compliance of the priority plan with the available resources and productivity production capacity. Chapter 5 describes performance management in more detail. For now, it is enough to understand that the basic process of managing production and enterprise resources involves calculating the productivity required to produce according to a priority plan and finding methods to achieve such productivity. Without this, there can be no effective, workable production plan. If the required performance cannot be achieved at the right time, the plan needs to be changed.

Determining the required productivity, comparing it with existing productivity and making adjustments (or changing plans) must be carried out at all levels of the production planning and control system.

Every few years, mechanisms, equipment and units may be put into operation or stopped working. However, during the periods considered at the stages from production planning to control over production activities, changes of this kind cannot be made. During these periods of time, you can change the number of shifts, overtime procedures, subcontracting of work, and so on.

SALES AND OPERATIONS PLANNING (SOP)

A strategic business plan combines the plans of all departments of the organization and is updated, as a rule, annually. However, these plans should be adjusted from time to time to take into account recent forecasts and latest changes market and economic situation. Sales and Operations Planning (SOP) is a process designed to continually review the strategic business plan and coordinate the plans of various departments. An SOP is a cross-functional business plan covering sales and marketing, product development, operations, and business management. Operations represents supply and marketing represents demand. . SOP is the forum in which the production plan is developed.

The strategic business plan is updated annually, and sales and operations planning is a dynamic process during which the company's plans are adjusted regularly, usually at least once a month. The process begins with the sales and marketing departments, which compare actual demand with sales plans, assess market potential, and forecast future demand. The adjusted marketing plan is then transferred to production, technical and financial department, who amend their plans in accordance with the revised marketing plan. If these departments decide that they cannot implement the new marketing plan, it will need to be changed.

In this way, the strategic business plan is continually reviewed throughout the year and consistency across departments is ensured. In Fig. Figure 2.5 shows the relationship between the strategic business plan and the sales and operations plan.

Sales and operations planning has a medium duration and includes marketing, production, technical and financial plans. Sales and operations planning has a number of advantages:

• It serves as a means of adjusting the strategic business plan to take into account changing conditions.
• It serves as a change management tool. Instead of reacting to changes in the market or economy after they happen, managers using SOPs study the economic situation at least once a month and are in a better position to plan for change.
• Planning ensures that the plans of the various departments are realistic, consistent and consistent with the business plan.
• It allows you to develop a realistic plan to achieve your company's goals.
• It allows you to more effectively manage production, inventories and financing.

MANUFACTURING RESOURCE PLANNING (MRP II)

Because a large amount of data and many calculations will be required, the production planning and control system will probably need to be computerized. If you do not use a computer, you will have to spend too much time and effort on manual calculations, and the company's efficiency will be compromised. Instead of scheduling needs throughout the planning system, a company may be forced to extend lead times and build inventory to compensate for the inability to quickly schedule what will be needed when.

Figure 2.5 Sales and Operations Planning.

It is intended to be a fully integrated top-down planning and control system with bottom-up feedback. Strategic business planning integrates the plans and activities of marketing, finance, and operations to develop plans to achieve overall company goals.

In turn, master production scheduling, resource planning, production control and purchasing are aimed at achieving the goals of the production plan and strategic business plan and, ultimately, the company. If performance issues make it necessary to adjust the priority plan at any planning level, the changes made should be reflected at the above levels. Thus, feedback must occur everywhere in the system.

The strategic business plan combines the plans of the marketing, financial and production departments. The marketing department must recognize its plans as realistic and feasible.

Finance must agree that the plans are financially attractive, and production must demonstrate the ability to meet the corresponding demand. As we have already said, the production planning and control system determines the general strategy for all divisions of the company. This fully integrated planning and control system is called production resource planning system, or MRP II. The concept of “MRP II” is used to denote the difference between the “ production resource plan" ((MRP II) from the "resource requirement plan"((MRP). MRP II ensures the coordination of marketing and production.

The marketing, finance, and production departments agree on a common, workable plan expressed in a production plan. The marketing and production departments must interact weekly and daily to adjust the plan to reflect ongoing changes. It may be necessary to change the size of the order, cancel the order, or approve a suitable delivery date. Changes of this kind are carried out within the framework of the general calendar plan of production. Marketing and production managers can change master production schedules to reflect changes in forecasted demand. The management of the enterprise can change the production plan in accordance with general changes in demand or the situation with resources. However, all employees work within the MRP II system. It serves as a mechanism for coordinating the work of the marketing, financial, production and other departments of the company. MRP II is a method for efficient planning of all resources of a manufacturing enterprise.

The MRP II system is shown schematically in Fig. 2. 6. Pay attention to existing cycles feedback.

Figure 2.6 Manufacturing resource planning (MRP II).

ENTERPRISE RESOURCE PLANNING (ERP)

ERP system is similar MRP system II, but it is not limited to production. The entire enterprise as a whole is taken into account. The ninth edition of the APICS Dictionary by the American Association for Production and Inventory Control (APICS) defines ERP as a reporting information system for identifying and planning an enterprise—the global resources needed to produce, transport, and report on customer orders. For full operation, applications must be provided for planning, scheduling, costing, and so on at all levels of the organization, in work centers, departments, divisions, and all of them together.

It is important to note that ERP covers the entire company, while MRP II relates to production.

DEVELOPING A PRODUCTION PLAN

We briefly reviewed the goal, planning horizon, and level of detail of the production plan. In this section, we’ll talk more about developing production plans.

Based on marketing plan and information about available resources, a production plan sets limits or levels of production activity at some point in the future. It integrates enterprise capabilities and performance with marketing and financial plans to achieve the company's overall business goals.

The production plan establishes the general levels of production and inventories for the period corresponding to the planning horizon. The primary goal is to determine production standards that will allow the objectives set in the strategic business plan to be achieved. These include inventory levels, order backlog (customer order backlog), market demand, customer service, cost-effective equipment operation, labor relations, and so on. The plan must cover a period long enough to provide for what labor, equipment, facilities, and materials will be needed to complete it. Typically this period ranges from 6 to 18 months and is divided into months and sometimes weeks.

The planning process at this level does not take into account details such as individual products, colors, styles or options. Since a long period of time is being considered and demand cannot be forecast with certainty over such a period, such detail would be inaccurate and unhelpful, and the development of a plan would be too expensive. Planning requires only a total unit of production or several groups of products.

Definition of product groups

Firms that produce one type of product or a range of similar products can measure output directly as the number of units they produce. For example, a brewery might use kegs of beer as a common denominator.

However, many companies produce several different types products, and it may be difficult or impossible for them to find a common denominator to measure the total volume of production. In this case, you need to enter product groups. While marketing specialists naturally view products from the customer's perspective, based on their functionality and application, the manufacturing department categorizes products based on processes. Thus, the firm must define product groups based on similarities in manufacturing processes.

The production department must ensure sufficient productivity to produce the required products. It is more concerned with the demand for specific types of productivity resources required for the production of products than with the demand for the products themselves.

Productivity is the ability to produce goods and services. This term refers to the availability of resources necessary to meet demand. In the time span to which the production plan relates, productivity can be expressed as the time available, or sometimes as the number of units that can be produced during that time, or dollars that can be obtained. Demand for goods needs to be converted into demand for productivity. At the level of production planning, where fine detail is required, this requires groups, or families of products, based on the similarity of production processes. For example, the production of several models of calculators may require the same processes and the same throughput regardless of differences between models. These calculators will belong to the same product family.

In the period of time to which the production plan relates, it is usually impossible to make major changes in productivity. During this period, it is impossible or very difficult to make additions to or decommission plant and equipment components. However, some things can be changed, and it is the responsibility of production management to identify and evaluate these opportunities. Typically the following changes are acceptable:

• You can hire and fire employees, introduce overtime and reduced working hours, increase or reduce the number of shifts.
• During a downturn in business activity, you can create inventories, and with increased demand, sell or use them.
• You can outsource work to subcontractors or rent additional equipment. Each option has its own benefits and costs. Production managers must find the cheapest option that would meet the goals and objectives of the business. Basic Strategies So, the problem of production planning has, as a rule, the following characteristics:
• A planning horizon of 12 months is applied, with periodic updates, such as monthly or quarterly.
• A production demand consists of one or more product families or common units.
• There are fluctuations or seasonal changes in demand
• In the period provided for by the planning horizon, the workshops and equipment do not change.
• Management faces various challenges, such as keeping inventories low, efficient operation of production facilities, high levels of customer service and good working relationships.

Let's say the forecasted demand for a certain group of products is shown in Fig. 2. 7. Please note that demand is seasonal.

Three basic strategies can be used when developing a production plan:

1. Pursuit strategy;

2. Uniform production;

3. Subcontracting. Pursuit strategy (demand satisfaction). Pursuing strategy refers to the production of the volume required at the moment. The level of inventories remains the same, and the volume of production changes in accordance with the level of demand. This strategy is shown in Fig. 2.8.

Figure 2.7 Hypothetical demand curve.

Figure 2.8 Demand satisfaction strategy.

The company produces the volume of products, which is just enough to meet the demand at a given time. In some industries it is possible to use only this strategy. For example, farmers must produce during the period when it is possible to grow it. Post offices have to process letters during the busy period before Christmas and during the calm periods. Restaurants are required to serve food when customers order it. Such enterprises cannot stock and accumulate products, they must be able to meet demand when it arises.

In these cases, companies must have sufficient capacity to be able to meet peak demand. Farmers need to have enough machinery and equipment to harvest their crops in the summer, although this equipment will be idle in the winter. Companies are forced to hire and train employees to work during peak periods, and fire them after this period. Sometimes it is necessary to introduce additional shifts and overtime work. All these changes increase costs.

The advantage of a chasing strategy is that inventory can be kept to a minimum. A product is produced when there is a demand for it and is not stockpiled. Thus, it is possible to avoid the costs associated with the storage of inventories. These costs can be quite high, as shown in Chapter 9 on Inventory Fundamentals.

Figure 2.9 Level production strategy.

Uniform production. With uniform production, a volume of output equal to the average demand is constantly produced. This relationship is shown in Fig. 2. 9. Enterprises calculate the total demand for the period covered by the plan and, on average, produce enough volume to meet this demand. Sometimes the demand is less than the volume produced, in which case inventories are accumulated. In other periods, demand exceeds production, then inventories are used.

The advantage of a level production strategy is that the operation is carried out at a constant level, and this avoids the cost of changing the level of production.

The business does not have to conserve excess capacity resources to meet peak demand. There is no need to hire and train workers, and then fire them during quiet periods. It is possible to form a sustainable labor collective. The disadvantage is the accumulation of inventories during periods of reduced demand.

Storing these inventories requires cash costs.

Uniform production means that a company uses production capacity at the same pace and produces the same amount of output on each working day. The amount produced per month (and sometimes per week) will vary because different months have different numbers of working days.

EXAMPLE

A company wants to produce 10,000 units of a product over the next three months at a uniform rate. The first month has 20 working days, the second - 21 working days, and the third - 12 working days due to the annual closure of the enterprise. What quantity should the company produce on average per day to ensure uniform production?

Answer

Total production volume – 10,000 units

Total number of working days =20 +21 +12 =53 days

Average daily production =10,000 /53 =188.7 units

Figure 2.10 Subcontracting.

For some types of products for which demand varies greatly between seasons, e.g. Christmas tree decorations, some form of smooth production will be required. The costs of maintaining idle production resources, hiring, training and firing employees using a pursuit strategy will be excessive.

Subcontract. As a pure strategy, subcontracting means constantly producing at minimum demand and subcontracting to meet higher demand. Subcontracting can mean purchasing shortfalls or rejecting additional demand. In the latter case, you can raise prices when demand increases or increase lead times This strategy is shown in Figure 2.10.

The main advantage of this strategy is the cost.

There are no costs associated with maintaining additional production resources and, since production is carried out uniformly, there are no costs for changes in production volume. The main disadvantage is that the purchase price (cost of the product, procurement, transportation and inspection) may be higher than the cost of the product when manufactured at enterprise.

Businesses rarely make everything they need themselves, or, on the contrary, buy everything they need. The decision about which products to buy and which to make themselves depends mainly on cost, but there are several other factors that can be taken into account .

A company may decide in favor of production in order to maintain the confidentiality of processes within the enterprise, guarantee the level of quality, and ensure employment of employees.

It is possible to purchase from a supplier who specializes in the design and manufacture of certain components, to enable the enterprise to focus on its area of ​​specialization, or to be able to offer accepted and competitive prices.

For many items, such as nuts and bolts or components that the company does not normally produce, the decision is obvious. For other items within the company's area of ​​expertise, a decision will need to be made whether to subcontract.

Hybrid strategy. The three strategies discussed above are variants of pure strategies. Each has its own costs: equipment, hiring/firing, overtime, inventory, and subcontracting. In fact, a company can use a variety of hybrid hybrid hybrid hybrid hybrid, or combined strategies. Each of them has its own set of cost characteristics. It is the responsibility of the production department management to find a combination of strategies that will minimize the total cost, while ensuring the required level of service and meeting the objectives of the financial and marketing plans.

Figure 2.11 Hybrid strategy.

One of the possible hybrid plans is shown in Fig. 2.11.

Demand is met to some extent, production is somewhat uniform, and some subcontracting is done during the peak period. This plan is just one of many options that can be developed.

Developing an inventory production plan

In a situation where products are produced for the purpose of replenishing warehouse stocks, the products are manufactured and inventories are created from them before receiving an order from the customer. Those goods that constitute inventories are sold and delivered. Examples of such products are ready-made clothing, frozen foods and bicycles.

Firms typically produce inventory when:

• Demand is fairly constant and predictable;
• Products vary slightly;
• The market requires delivery in much more short time than the production time of the product;
• The products have a long shelf life. To develop a production plan, the following information is required:
• Demand forecast for the period covered by the planning period;
• Data on the volume of inventories at the beginning of the planning period;
• Data on the required volumes of inventories at the end of the planning period;
• Information about current customer refusals of orders and about orders with overdue payment, customer orders. That is, about orders for which the decision on shipment is delayed;

  The purpose of developing a production plan is to minimize the costs of storing inventories, changing production levels, as well as the likelihood of the required products not being in stock (the inability to deliver the required product to the client on time).

In this section, we will develop a uniform production plan and a pursuit strategy plan.

Let's consider the general procedure for developing a plan for uniform production.

1.Calculate the total forecast demand for the planning horizon period.

2. Set the initial volume of inventories and the required final volume.

3.Calculate the total volume of products that need to be produced using the formula:

Total production volume = total forecast + backlog orders + final volume of inventories – initial volume of inventories

4. Calculate the volume of production that is required to be produced in each period, for this, divide the total volume of production by the number of periods.

5. Calculate the final volume of inventories in each period.

EXAMPLE

Amalgamated Fish Sinkers manufactures rod weights and wants to develop a production plan for this type of product.

The expected initial inventory is 100 sets, and by the end of the planning period, the company wants to reduce this to 80 sets. The number of working days in each period is the same. There are no failures or unpaid orders.

The projected demand for sinkers is shown in the table:

Answer
a. Required total volume of products produced = 600 +80 – 100 ==580 sets

Volume of products produced in each period = 580/5 = 116 sets
b.Final volume of inventories = initial volume of inventories + volume of manufactured products - demand

The final volume of inventories after the first period = 100 + 116 – 110 == 106 sets

The final volume of inventories in each period is calculated in the same way, as shown in Fig. 2.12.

The final volume of inventories in period 1 is the initial volume of inventories for period 2:

Final volume of inventories (period 2) = 106 +116 – 120 == 102 sets
c. The total cost of storing inventories will be: (106 +102 +88 +84 +80)x $5 = $2300
d. Since there were no situations where goods were out of stock and the level of production did not change, this will be the total amount of costs according to the plan.

Figure 2.12 Level production plan: inventory production.

Pursuit Strategy: Amalgamated Fish Sinkers produces another line of products called “fish feeders.” Unfortunately, this is a perishable product and the company does not have the ability to build up inventories to sell them later. It is necessary to use a pursuit strategy and produce the minimum volume of products that will satisfy demand in each period. The costs of storing inventories are minimal, and there are no costs associated with the lack of goods in the warehouse. However, costs arise due to changes in the level of production.

Consider the example above, assuming that changing the production level by one set costs $20. For example, moving from producing 50 sets to producing 60 sets would cost (60 – 50))x $20 = $200

The initial inventory quantity is 100 sets, and the company wants to reduce it to 80 sets in the first period. In this case, the required production volume in the first period is: 110 – ((100 – 80)) = 90 sets

Let's assume that the volume of production in the period preceding period 1 was 100 sets. Figure 2.13 shows changes in the level of production and the final volume of inventories.

Planned expenses will be:

Cost of changing production level =60 x $20 =$1200

Inventory holding costs = 80 sets x 5 periods x $5 = $2000

Total plan expenses =$1200 +$2000 =$3200

Development of a custom production plan

In made-to-order manufacturing, the manufacturer waits for the customer to receive an order and only then begins manufacturing the product.

Examples of such products are made-to-order clothing, equipment and any other goods that are made according to the customer's specifications. Very expensive products are usually made to order. Typically, businesses work to order when:

• The product is manufactured according to the customer's specifications.
• The client is ready to wait for the order to be completed.
• Manufacturing and storing the product is expensive.
• Several product options are offered.

Figure 2.13 Demand Compliance Plan: Inventory Production.

Assemble to order: When there are several variations of a product, as is the case in automobiles, and when the customer does not agree to wait for the order to be completed, manufacturers make and hold standard components in stock. Once a customer order is received, manufacturers assemble the product from the components they have in stock. according to the order. Because the components are already ready, the business only needs time to assemble before the product is shipped to the customer. Examples of assembled-to-order products include cars and computers. Build-to-order is a variant of the make-to-order system. order.

To draw up a production plan for products that are assembled to order, the following information is required:

• Forecast by periods for the duration of the planning horizon.
• Information about the initial order portfolio.
• Required final order portfolio.

Plan for uniform production. Let's consider the general procedure for developing a uniform production plan:

1. Calculate the total forecast demand for the planning horizon.

2. Determine the initial order book and the required final order book.

3. Calculate the required total production volume using the formula:

Total production = total forecast + initial order book - final order book

4. Calculate the required output for each period by dividing the total output by the number of periods.

5.Distribute the existing order book over the planning horizon period according to the order completion dates in each period.

EXAMPLE

A small printing house carries out individual orders. Since each time it is required to carry out various jobs, demand is projected as number of hours per week. The company expects demand to be 100 hours per week over the next five weeks. The order book is currently 100 hours, and after those five weeks the company wants to reduce it to 80 hours.

How many hours of work per week will it take to reduce the backlog? What will the backlog be at the end of each week?

Answer

Total production volume =500 +100 - 80 = 520hours

Weekly production =520/5 = 104 hours

The order portfolio for each week can be calculated using the formula:

Forecast order book = old order book + forecast - production volume

For the 1st week: Forecasted order portfolio = 100 + 100 – 104 = 96 hours

For the 2nd week: Forecasted order book = 96 + 100 – 104 = 92 hours

The resulting production plan is shown in Figure 2.14.

Figure 2.14 Level production plan: production to order.

Resource Planning

Having completed the development of a preliminary production plan, it is necessary to compare it with the resources available to the company. This stage is called resource requirements planning, or resource planning. Two questions must be answered:

1.Does the enterprise have the resources to fulfill the production plan?

2.If not, how can you fill the missing resources?

If it is not possible to achieve a performance that would allow the production plan to be met, then the plan must be changed.

One of the most commonly used tools is a resource inventory. It indicates the number of critical resources (materials, labor and a list of equipment with productivity) needed to produce one average statistical unit of products in this group. Figure 2.15 shows an example of a company’s resource inventory, which produces three types of products that make up one family - tables, chairs and stools.

If a firm plans to produce 500 tables, 300 chairs, and 1,500 stools in a given period, it can calculate how much wood and labor it will need to do so.

For example, the required volume of the tree:

Tables: 500 x 20 = 10,000 board linear feet

Chairs: 300 x 10 = 3000 board linear feet

Stools: 1500 x 5 = 7500 board linear feet

Total required volume of wood =20500 board, linear feet

Figure 2.15 Inventory of resources.

Required amount of labor resources:

Tables: 500 x 1.31 = 655 standard hours

Chairs: 300 x 0.85 = 255 standard hours

Stools: 1500 x 0.55 = 825 standard hours

Total required workforce = 1735 standard hours

The company must now compare the wood and labor requirements with the resources available. For example, let's say that the labor resources normally available during this period are 1600 hours. The priority plan requires 1735 hours, a difference of 135 hours, or about 8.4%. either find additional production resources or change the priority plan. In our example, it may be possible to organize overtime work to provide the missing volume of productivity. If this is not possible, it is necessary to change the plan to reduce the need for labor resources. It is possible to partially reschedule production to an earlier date deadline or postpone shipment.

SUMMARY

Production planning is the first stage of the production planning and control system. The planning horizon is usually one year. The minimum planning horizon depends on the time of procurement of materials and production of products. The level of detail is low. Typically, a plan is developed for product families based on similarities in manufacturing processes or a common unit of measurement.

Three basic strategies can be used to develop a production plan: pursuit, smooth production, and subcontracting. Each has its own advantages and disadvantages in terms of operations and costs. Manufacturing managers must select the optimal combination of these baselines that will keep total costs to a minimum while maintaining high levels of customer service.

The inventory production plan determines how much output should be produced each period to:

• Forecast implementation;
• Maintaining the required level of inventories.

While it is necessary to meet demand, it is also necessary to balance the costs of holding inventories with the costs of changing production levels.

The production-to-order plan determines the volume of products that must be produced each period to:

• Forecast implementation;
• Maintaining the planned portfolio of orders.

When the order backlog is too large, the costs associated with it are equal to the costs of rejecting the order. If customers have to wait too long for delivery, they may decide to order from another firm. As with an inventory production plan, demand must be met, and the costs of changing levels production must be balanced in plan with the costs that arise when the size of the order book turns out to be larger than required.

KEY TERMS
A priority
Performance
Manufacturing Resource Planning (MRP II)
Pursuit Strategy (Demand Matching)
Uniform production strategy
Subcontracting strategy
Hybrid strategy
Uniform production plan
Order book
Inventory of resources

QUESTIONS

1. What four questions should an effective planning system answer?

2. Define capacity and priority. Why are they important for production planning?

3. Describe each of the following plans, including the purpose, planning horizon, level of detail, and planning cycle for each:

• Strategic business plan
• Production plan
• Master production schedule
• Resource requirement plan
• Control of production activities.

4.Describe the responsibilities and contributions of the marketing, production, finance, and technical departments in developing the strategic business plan.

5.Describe the relationship between the production plan, the master production schedule, and the resource requirements plan.

6.What is the difference between strategic business planning and sales and operations planning (SOP)? What are the main benefits of SOP?

7.What is closed loop MRP?

8.What is MRP II?

9.How can you change performance over a short period of time?

10.Why is it necessary to choose when developing a production plan? common unit measurements or identify product groups?

11.On what basis should product groups (families) be determined?

12.Name five typical characteristics of a production planning problem.

13.Describe each of the three basic strategies, which are used to develop a production plan. State the advantages and disadvantages of each.

14.What is a hybrid strategy? Why is it used?

15.Name four conditions, depending on which a company produces inventories or produces to order.

16.What information is needed to develop an inventory production plan?

17.Name the stages of developing an inventory production plan.

18.Name the difference between production to order and assembly to order. Give examples of both options.

19.What information is needed to develop a custom production plan? How is it different from the information needed to develop an inventory production plan?

20.Describe the general procedure for developing a uniform production plan when using a make-to-order system.

21.What is a resource inventory? At what level of the planning hierarchy is it used?

TASKS

2.1.If the initial volume of inventories is 500 units, demand is 800 units, and production volume is 600 units, what will be the final volume of inventories?

Answer: 300 units

2.2.A company wants to produce 500 units of output at a steady pace over the next four months. These months have 19, 22, 20 and 21 working days, respectively. What volume of output should the company produce on average per day if production is uniform?

Answer: Average production per day = 6.1 units

2.3.The company plans to produce 20,000 units of product in a three-month period. These months have 22, 24 and 19 working days, respectively. What volume of products should the company produce on average per day?

2.4.According to the conditions of problem 2.2, what volume of products will the company produce in each of the four months?

1st month: 115, 9 3rd month: 122

2nd month: 134, 2 4th month: 128, 1

2.5.According to the conditions of problem 2.3, what volume of products will the company produce in each of the three months?

2.6.The production line must produce 1000 units per month. The sales forecast is shown in the table. Calculate the forecasted volume of inventories at the end of the period. The initial volume of inventories is 500 units. All periods have an equal number of working days.

Answer: in the 1st period, the final volume of inventories will be 700 units.

2.7. A company wants to develop a uniform production plan for a family of products. The initial volume of inventories is 100 units; by the end of the planning period, this volume is expected to increase to 130 units. Demand in each period is shown in the table. How much output should the company produce in each period? What will be the final volume of inventories in each period? All periods have an equal number of working days.

Answer: Total production = 750 units

Production volume in each period = 125 units

The final volume of inventories in the 1st period is 125, in the 5th period - 115.

2.8. A company wants to develop a uniform production plan for a family of products. The initial volume of inventories is 500 units, by the end of the planning period this volume is expected to be reduced to 300 units. Demand in each period is shown in the table. All periods have an equal number of working days. How much output should the company produce in each period? What will be the ending inventory volume in each period? In your opinion, are there any problems in executing this plan?

2.9.The company wants to develop a plan for uniform production.

The initial volume of inventories is zero. Demand in the next four periods is shown in the table.

a.At what rate of production in each period will the volume of inventories at the end of the 4th period remain zero?

b.When will debts on orders arise and in what volume?

c.What uniform rate of production in each period will avoid the occurrence of backlogs on orders? What will be the final volume of inventories in the 4th period?

Answer: a. 9 units

b. 1st period, minus 1

c. 10 units, 4 units

2.10.If inventory holding costs are $50 per unit in each period, and out-of-stock inventory costs $500 per unit, what will be the cost of the plan developed in Problem 2.9a? What would be the cost of the plan developed in Problem 2.9c?

Answer: Total plan costs in Problem 2.9 a = $650

Total costs according to the plan in problem 2.9 c = $600

2.11.A company wants to develop a uniform production plan for a family of products. The initial volume of inventories is 100 units; by the end of the planning period, this volume is expected to increase to 130 units. Demand in each period is shown in the table. Calculate total production, daily production, and production and inventory for each month.

Answer: Monthly production in May = 156 units

Final volume of inventories in May = 151 units

2.12. A company wants to develop a plan for uniform production for a family of products. The initial volume of inventories is 500 units, by the end of the planning period this volume is expected to be reduced to 300 units. Demand in each month is shown in the table. How much product should the company produce in each month? month? What will be the final inventory volume in each month? In your opinion, are there any problems in executing this plan?

2.13.In accordance with employment contract the company must hire enough employees to produce 100 units per week when working on one shift or 200 units per week when working in two shifts. You cannot hire additional workers, fire anyone, or organize overtime work. Fourth week, it will be possible to assign part or all of an additional shift to workers from another department (up to 100 units of production). In the second week, there will be a planned shutdown of the plant for maintenance, and therefore production volume will be halved. Develop a production plan. The initial volume of inventories is 200 units, the required final volume is 300 units.

2.14.If the initial order book volume is 400 units, the forecast demand is 600 units, and the production volume is 800 units, what will be the final order book volume?

Answer: 200 units

2.15.The initial volume of the order book is 800 units. The forecasted demand is indicated in the table. Calculate the weekly production volume for uniform production if the volume of the order book is expected to be reduced to 400 units.

Answer: Total production = 4200 units

Weekly production = 700 units

Volume of the order book at the end of the 1st week = 700 units

2.16.The initial volume of the order portfolio is 1000 units.

The forecasted demand is shown in the table. Calculate the weekly production volume under uniform production if the order book is expected to increase to 1200 units.

2.17. Based on the data given in the table, calculate the number of workers required for uniform production and the final volume of inventories at the end of the month. Each worker can produce 15 units per day, and the required final volume of inventories is 9,000 units.

Answer: Required number of employees = 98 people

Volume of inventories at the end of the first month = 12900 units

2.18. Based on the data given in the table, calculate the number of workers required for uniform production and the final volume of inventories at the end of the month. Each worker can produce 9 units per day, and the required ending inventory is 800 units.

Why is it impossible to achieve the planned final volume of inventories?

Receiving a profit, successful development, minimizing risks are the main goals of any company. These goals can be achieved through planning, which allows you to:

• foresee development prospects in the future;
• more rational use of all company resources;
• avoid bankruptcy;
• improve control in the company;
• increase the ability to provide the company with the necessary information.

It is advisable to divide the planning process into three stages:

1. Establishment quantitative indicators for the goals that the company must achieve.

2. Determining the main actions that need to be carried out to achieve goals, taking into account the influence of external and internal factors.

3. Development flexible system planning to ensure the achievement of set goals.

PRINCIPLES AND TYPES OF PLANNING

Any plan, including production, must be built on certain principles. Principles are understood as the basic theoretical principles that guide the enterprise and its employees in the planning process.

1. Continuity principle implies that the planning process is carried out continuously throughout the entire period of activity of the enterprise.
2. The principle of necessity means the mandatory application of plans when performing any type of work activity.
3. Unity principle states that enterprise planning must be systematic. The concept of a system implies the relationship between its elements, the presence of a single direction for the development of these elements, focused on common goals. In this case, it is assumed that the single consolidated plan of the enterprise is consistent with the individual plans of its services and divisions.
4. Principle of economy. Plans must provide for a way to achieve the goal that is associated with the maximum effect obtained. The costs of drawing up the plan should not exceed the expected income (the implemented plan must pay for itself).
5. The principle of flexibility provides the planning system with the opportunity to change its focus due to changes of an internal or external nature (fluctuations in demand, changes in prices, tariffs).
6. Precision principle. The plan must be drawn up with a degree of accuracy that is acceptable to solve the problems that arise.
7. Participation principle. Each department of the enterprise becomes a participant in the planning process, regardless of the function performed.
8. The principle of focusing on the final result. All parts of the enterprise have a single final goal, the implementation of which is a priority.

Depending on the content of the set goals and objectives, planning can be divided into the following types (Table 1).

PRODUCTION PLANNING

Production plans are an important component of the entire planning system at an enterprise, so let’s talk in more detail about the development of production plans. Let's consider a production planning system consisting of four main links:

• strategic production plan;
• tactical plan production;
• manufacturing program;
• production schedule.

The primary goal of production planning is define production standards to satisfy the needs of buyers, customers or consumers of the company's products.

When creating a production plan, there are four key issues to consider:

1. What, how much and when should be produced?

2. What is needed for this?

3. What production capacity and resources does the company have?

4. What additional costs will be required to organize the production and sale of products in the quantities necessary to meet demand?

These are priority and performance issues.

A priority- this is what you need, how much and at what point in time. Priorities are set by the market. Productivity is the ability of production to produce goods, perform work, and provide services. Productivity depends on the organization's resources (equipment, labor and financial resources), as well as on the ability to receive paid materials, work, and services from suppliers in a timely manner.

In the short term, productivity (production capacity) is the amount of work performed over a certain period of time using labor and equipment.

The production plan reflects:

• assortment and volume of products in physical and value terms;
• the desired level of inventories to reduce the risk of production stoppages due to a lack of raw materials;
• release schedule finished products;
• manufacturing program;
• need for raw materials and supplies;
• the cost of manufactured products;
• unit cost of production;
• marginal profit.

STRATEGY AND TACTICS IN PRODUCTION PLANNING

Strategic production plan is associated with the overall development strategy of the enterprise, sales and purchasing plans, volume of output, planned inventories, labor resources, etc. It is based on long-term forecasts.

Tactical plan aimed at achieving the goals of the strategic plan.

Tactical plans contain detailed data on the production divisions of the enterprise (availability of labor and material resources, equipment, transport, storage areas for inventories, finished products, etc.), the measures necessary for the implementation of the production program and the timing of their implementation.

Tactical action plans are supplemented by cost plans, which contain data on costs (cost) within departments, as well as plans for resource requirements.

Level of detail of manufactured products in production terms is usually low. Detailing is carried out by enlarged groups of goods (for example, refrigeration equipment, ovens, etc.).

PRODUCTION SCHEDULE

The production schedule is developed for production units. It represents a production schedule for certain types of products in fixed time. The following is used as initial information:

• production plan;
• sales orders;
• information about finished products in the warehouse.

In the calendar plan, the production plan is broken down by date and the number of final products of each type that needs to be produced in a certain period of time is determined. For example, the plan may indicate that each week it is necessary to produce 200 units of model “A” products and 100 units of model “B” products.

Scheduling allows you to:

• establish the sequence of orders and the priority of work;
• distribute material resources among production units;
• produce finished products in strict accordance with the sales plan, minimizing equipment downtime, excess inventories and idle personnel.

Level of detail here is higher than in production terms. The production plan is drawn up in larger groups, and the production schedule is developed for individual final products and types of work.

MANUFACTURING PROGRAM

Manufacturing program is part of the production plan and contains data on the planned volume of production and sales of products.

The production program may be accompanied by calculations:

• production capacity of the enterprise;
• production capacity utilization factor;
• intensity of workload of production units.

Product output volume

The planned production volume is calculated based on the sales plan and procurement plan.

The basis of the sales plan is:

• contracts concluded with consumers of the enterprise’s products (customers of works and services);
• sales data for previous years;
• data on market demand for products obtained from managers.

Basis of the procurement plan:

• agreements with suppliers of material and technical resources;
• calculation of the need for material assets;
• data on material assets in warehouses.

IT IS IMPORTANT

The quantity and range of products must satisfy market demand without going beyond the material reserves available at the enterprise.

The volume of finished products is planned by groups. A product belongs to one or another group according to classification criteria that allow one to distinguish one product from another (model, accuracy class, style, article number, brand, grade, etc.).

When planning the volume of output, priorities are given to goods that are in high demand among buyers and consumers (data provided by the sales department).

Production capacity of the enterprise

The production program determines the production capacity and compiles the balance of the enterprise's production capacity.

Under production capacity understand the maximum possible annual output of products in the nomenclature and assortment established by the plan, with full use of production equipment and space.

General calculation formula production capacity (M pr) looks like that:

M pr = P about × F fact,

where P about is the productivity of equipment per unit of time, expressed in pieces of products;

F fact - the actual operating time of the equipment, hours.

Main items of the balance of production capacity:

• capacity of the enterprise at the beginning of the planning period;
• the amount of increase in production capacity due to various factors (purchase of new fixed assets, modernization, reconstruction, technical re-equipment, etc.);
• the size of the reduction in production capacity as a result of disposal, transfer and sale of fixed production assets, changes in the nomenclature and range of products, changes in the operating mode of the enterprise;
• the amount of output power, that is, the power at the end of the planned period;
• average annual capacity of the enterprise;
• utilization rate of average annual production capacity.

Input power determined at the beginning of the year based on available equipment.

output power at the end of the planning period is calculated taking into account the disposal of fixed assets and the introduction of new equipment (or modernization, reconstruction of existing equipment).

Average annual capacity enterprises (M av/g) is calculated by the formula:

M av/g = M ng + (M inv × n 1 / 12) - (M select × n 2 / 12),

where Mng is the input power;

Mvv - power introduced during the year;

M out - power retired during the year;

n 1 - the number of full months of operation of newly introduced capacities from the moment of commissioning to the end of the period;

n 2 - the number of complete months of absence of retiring capacity from the moment of disposal to the end of the period.

Average annual production capacity utilization rate in the reporting period ( K and) is calculated as the ratio of actual production output to the average annual capacity of the enterprise in this period:

K and = V fact / M av/g,

Where V fact - actual output volume, units.

FOR YOUR INFORMATION

If the actual output volume is greater than the average annual production capacity, this means that the enterprise’s production program is provided with production capacity.

Let us give an example of calculating the average annual production capacity of an enterprise and the coefficient of actual use of production capacity to draw up a production plan.

There are 10 machines installed in the leading production workshop of the plant. The maximum productivity of each machine is 15 products per hour. It is planned to produce 290,000 products per year.

The production process is continuous, the plant works in one shift. The number of working days per year is 255, the average duration of one shift is 7.9 hours.

To calculate the production capacity of a plant, you need to determine operating time fund of a piece of equipment in year. To do this we use the formula:

F r = RD g × T cm × K cm,

where F r is the operating time of a piece of equipment, h;

RD g - number of working days per year;

T cm - the average duration of one shift, taking into account the operating mode of the enterprise and the reduction of the working day in pre-holiday days, h;

K cm - number of shifts.

Regime fund of work time 1 machine in a year:

F r = 255 days. × 7.9 hours × 1 shift = 2014.5 h.

The production capacity of the enterprise is determined by the capacity of the leading workshop. Leading workshop power and will be:

2014.5 hours × 10 machines × 15 units/hour = 302,174 units.

Factor of actual production capacity utilization:

290,000 units / 302,174 units = 0,95 .

The coefficient shows that the machines operate at almost full production capacity. The enterprise has enough capacity to produce the planned volume of products.

Unit load intensity

When drawing up a production program, it is important to calculate labor intensity and compare it with available resources.

Data on the labor intensity of a product (the number of standard hours spent on producing a unit of product) is usually provided by the economic planning department. An enterprise can independently develop labor intensity standards for manufactured types of products, carrying out control measurements of the time required to complete certain production operations. The time required to produce a product is calculated on the basis of the design and technological documentation of the enterprise.

The labor intensity of a product represents the cost of working time to produce a unit of product in physical terms according to the range of products and services produced. Labor intensity of production per unit of production(T) is calculated using the formula:

T = PB / K p,

where РВ - work time, spent on the production of a given amount of product, h;

K n - the amount of products produced over a certain period, in natural units.

The plant produces several types of products: products A, B and C. Two production workshops are involved in the production of products: workshop No. 1 and workshop No. 2.

To draw up a production program, the plant needs to determine the labor intensity for each type of product, the maximum load on production assets, as well as the products that this program will focus on producing.

Let's calculate the maximum possible working time for each workshop.

Represents the maximum amount of time that can be worked in accordance with labor legislation. The size of this fund is equal to the calendar fund of working time, excluding the number of man-days of annual vacations and man-days of holidays and weekends.

Workshop No. 1

The workshop employs 10 people.

Based on the given number of employees calendar fund working hours will be:

10 people × 365 days = 3650 person-days

Quantity non-working days per year: 280 — annual leave, 180 - holidays.

Then the maximum possible working time fund for workshop No. 1:

3650 - 280 - 180 = 3190 person-days, or 25,520 people.-h.

Workshop No. 2

The workshop employs 8 people.

Calendar working hours:

8 people × 365 days = 2920 person-days

Number of non-working days per year: 224 - annual vacations, 144 - holidays.

The maximum possible working time for workshop No. 2:

2920 - 224 - 144 = 2552 person-days, or 20,416 person-hours.

Let's calculate the intensity of workload of workshops. To do this, we will calculate the labor intensity of producing the planned number of products and compare it with the maximum possible working time. The data is presented in table. 2.

Based on the data in table. 2 you can do the following conclusions:

• Product B is the most labor-intensive;
• workshop No. 1 is 96% loaded, workshop No. 2 is 87.8% loaded, that is, the resources of workshop No. 2 are not fully utilized.

Feasibility of product release assessed using the ratio of labor intensity and marginal profit. Products with the lowest marginal profit per standard hour are usually excluded from the production program.

The write-off of indirect costs and the formation of product costs occurs using the direct costing method, that is, only direct costs are taken into account in the product costs. Indirect expenses are written off monthly to financial results. Direct costs include material costs and wages for production workers. Therefore, we will draw up an estimate of direct (variable) costs for production. Let's define marginal profit for products A, B and C. The data are presented in table. 3.

Product B has the lowest profit margin, so the production plan will focus on products with higher profit margins (A and C).

RESOURCE REQUIREMENT PLAN AND BASIC STRATEGIES FOR PRODUCTION PLAN

Usually attached to the production program resource requirement plan— plan for the production and purchase of raw materials and supplies that are used in the manufacture of products or performance of work provided for in the production schedule.

The resource requirement plan shows when raw materials, materials and components will be needed to produce each final product.

Production planning has the following characteristics:

• a planning horizon of 12 months is applied with periodic adjustments (for example, monthly or quarterly);
• accounting is carried out in aggregate by groups, unimportant details (colors, styles, etc.) are not taken into account;
• demand includes one or more types of goods or product groups;
• in the period provided for by the planning horizon, the workshops and equipment do not change;
• used when developing a production plan basic basic strategies:

Pursuit strategy;

Uniform production.

FOR YOUR INFORMATION

Businesses that produce one type of product or a range of similar products can measure output as the number of units they produce.

Enterprises that produce several different types of products keep records of homogeneous groups of goods that have the same units of measurement. Such product groups are determined based on the similarity of manufacturing processes.

Pursuit strategy

The strategy of pursuit (satisfying demand) is understood as producing the amount of product needed at a given time (the volume of production changes in accordance with the level of demand).

In some cases, only this strategy can be used. For example, restaurants, cafes, and canteens prepare dishes as orders are received from visitors. Such catering establishments cannot accumulate products. They must be able to meet demand when it arises. The pursuit strategy is used farms during harvest and enterprises whose demand for products is seasonal.

Companies must maximize their productivity when demand peaks. Possible actions to achieve this goal:

• additionally hire employees under a contract;
• introduce overtime work due to production needs;
• increase the number of shifts;
• if there is not enough capacity, transfer part of the orders to subcontractors or rent additional equipment.

NOTE

During a period of downturn in business activity, it is permissible to introduce a shortened working day (week), reduce the number of shifts, and offer employees vacation at their own expense.

The pursuit strategy is important advantage: the volume of inventories may be minimal. A product is produced when there is a demand for it and is not stockpiled. This means that it is possible to avoid the costs associated with storing inventories.

The production program for the pursuit strategy can be designed as follows:

1. Determine the projected volume of production for the period of peak demand (usually this is the season).

2. We calculate the volume of products that need to be produced during the peak period based on the forecast.

3. Determine the level of product inventories.

• planned cost of finished products (full or incomplete);
• planned cost per unit of production;
• additional costs that are incurred to produce products during periods of demand;
• marginal profit per unit of production.

Uniform production

With uniform production, a volume of output equal to average demand is constantly produced. Businesses calculate the total demand for a planned period (for example, a year) and, on average, produce sufficient volume to satisfy this demand. Sometimes the demand is less than the quantity produced. In this case, product inventories accumulate. At other times, demand exceeds production. Then the accumulated stocks of products are used.

Advantages uniform production strategies:

• equipment is operated at a constant level, which avoids the cost of its conservation;
• the enterprise uses production capacity at the same pace and produces approximately the same volume of products every month;
• the enterprise does not need to maintain excess productivity resources to meet peak demand;
• there is no need to hire and train new employees, and fire them during periods of recession. It is possible to form a permanent workforce.

Disadvantage of the strategy: During periods of decreased demand, inventories and finished products accumulate, the storage of which requires costs.

General procedure for developing a production program for uniform production:

1. The total projected demand for the planning horizon period (usually a year) is determined.

2. The forecasted balances of finished products at the beginning of the planning period and the balances of products at the end of the period are determined.

3. The total volume of products that need to be produced is calculated. Calculation formula:

Total production volume = Total forecast + Finished product balances at the beginning - Finished product balances at the end.

4. Calculate the volume of products that need to be produced in each period. To do this, the total volume of production is divided by the number of periods. If the plan is broken down by months, then the planned annual output is divided into 12 months.

5. Finished products are distributed (on the basis of supply contracts), shipped according to the dates indicated in the delivery schedules.

The production plan reflects the planned costs for the production of finished products and the standard cost of one product, determines the marginal profit per product and its selling price.

Here are examples of the application of the strategies presented above.

The chemical plant has several lines for the production of de-icing reagents. These products are in demand in winter period. When developing a production plan for this species products the plant uses pursuit strategy.

Peak sales occur in December-February. The shelf life of the reagents is 3 years. The expected balances of reagents in the warehouse at the beginning of the planning year will be 1 t.

Production of the reagent is planned to begin in November and end in March. The balance of finished products at the end of March is minimal.

The formation of the production program in terms of volume for November-March is reflected in Table. 4.

In a production program, the supply plan is adopted at the demand level. The balance of finished products at the beginning of each month is equal to the balance of finished products at the end of the previous month.

Production plan for each month is calculated using the formula:

Production plan = Delivery plan - Finished product balance at the beginning of the month + Finished product balance at the end of the month.

The planned balances of finished products at the end of the month should not exceed 5 % from the planned volume of product supply to customers.

During the demand period falling on December-March, the plant plans to produce 194.6 t of reagent.

Having determined the required production output in the peak period in the program, the plant compiled a planned production cost estimate for 1 ton of reagent (Table 5).

Based on the production program and calculation of the cost of 1 ton of reagent, a production plan is drawn up. The data is reflected in table. 6.

The planned volume of production is 194.6 tons, the total amount of expenses is 1,977,136 rubles.

Sales plan - 195 tons, sales amount - 2,566,200 rubles. (RUB 13,160 × 195 t).

Profit company: RUB 2,566,200 - 1,977,136 rub. = RUB 589,064.

In addition to deicing products, the chemical plant specializes in the production of household chemicals. Production is uniform, products are released throughout the year. The enterprise forms a production program and production plan for the year.

Let's consider the annual production program and the annual production plan of a washing powder plant.

The annual production plan for finished products is adopted at the level of demand for the previous year. The demand for washing powder for the previous year, according to the sales department, was 82,650 kg. This volume evenly distributed over the months. In each month it will be:

82,650 kg / 12 months = 6887 kg.

Supply plan is formed on the basis of existing orders and concluded supply contracts, taking into account changing market demand.

Example of a production release program washing powder for the year is presented in Table. 7.

The expected balance of powder in the warehouse at the beginning of the planning year will be 200 kg.

The balance of finished products in stock at the end of each month are determined by the formula:

Balances of finished products in the warehouse at the end of the month = Planned volume of production + Balances at the beginning of the month - Volume of supplies.

The rest of the finished product:

At the end of January:

6887 kg + 200 kg - 6500 kg = 587 kg;

At the end of February:

6887 kg + 587 kg - 7100 kg = 374 kg.

Similarly, the calculation is carried out for each month.

The following data will be reflected in the production plan:

1. Planned standard cost of 1 kg of powder - 80 rub.
2. The price of storage costs is 5 rubles. for 1 kg.
3. Planned production costs:

. per month:

6887 kg × 80 rub. = 550,960 rub.;

. in year:

82 644 kg × 80 rubles. = 6,611,520 rub.

1. Finished product storage costs — RUB 19,860.

When calculating storage costs, the balances of finished products at the end of each month are taken into account (Table 8).

1. There are no ready-made production plans. We need an integrated approach to the development of an optimal production plan, taking into account economic activity and production technology.
2. The production plan should reflect changes in both external (fluctuations in market demand, inflation) and internal factors (increase or reduction in production capacity, labor resources, etc.).

E. V. Akimova, auditor

A production plan is an integral part of any business plan, which should describe all production or other work processes of the company. Here it is necessary to consider all issues related to production premises, their location, equipment and personnel, and also pay attention to the planned involvement of subcontractors. It should be briefly explained how the system for releasing goods (providing services) is organized and how control over production processes. Consideration must also be given to the location of production facilities and the placement of tools, equipment and work stations. This section should indicate delivery times and list the main suppliers; describes how quickly a firm can increase or decrease its output of goods or services. An important element of the production plan is also a description of the company's quality control requirements at all stages of the production process.

The main task of this section of the business plan is to determine and justify the company’s choice of a particular production process and equipment.

It should be noted that before compiling this section The business plan involves industry specialized design companies, which is understandable, since the choice of technology and method of organizing the production process largely determines the effectiveness of any production project.

production system

Every organization has a production system that receives various inputs (personnel, technology, capital, equipment, materials, and information) and transforms them into goods or services (Figure 1).

Rice. 1. Production system

Production planning

Production plans are usually classified by scope (strategic and operational), time frame (short-term and long-term); nature (general and specific) and method of use (one-time and permanent) (Table 1).

Table 1. Types of production plans

Speaking of long term strategic planning, then at this level decisions are made in four main areas: utilization of production capacity (in what quantity a product or service will be produced), location of production capacity (where a product will be produced or a service provided), production process (what production methods and technologies will be used to produce a product or provide a service) and the placement of tools and equipment (how work centers and equipment will be located in enterprises). Having decided these strategic issues for himself, the developer must also draw up and include in the production plan of his business plan the following three documents: a general (aggregate) plan (what is the general production plan for all types of goods or services offered by the company), a master work schedule (how many units of each type of product or service the company will have to produce or provide over a certain period of time) and a plan for the company's need for material resources (what materials and in what quantities will the company need to complete the main work schedule). These plans are called tactical.

Planning of production capacity utilization

Let's assume that the ABC company decided to produce lawn mowers. Through a comprehensive marketing research and market analysis, she determines that middle-class tools are in greatest demand among consumers. So the company knows what it should produce. Next, she needs to determine in what quantity to produce the product, i.e. how many lawn mowers of the selected model should be produced in a certain period of time. It is on this decision that other issues related to planning the utilization of production capacity will depend.

Planning of production capacity utilization is based on forecasts of future demand, which are transformed into requirements for production volumes. For example, if the ABC company produces lawn mowers of only one specific model, it plans to sell them for an average of 3,000 rubles. per piece and assumes that during the first year it will be able to achieve a sales volume of 3 million rubles, which means that it will need production capacity that allows it to produce 1000 mowers per year (3000 x 1000 = 3,000,000 rubles). This determines the physical requirements for the utilization of production capacity. It is clear that if the ABC company produces several models of lawn mowers and some other equipment, then in this case the calculations will be more complex.

If a company has been in business for a long time, the commercial forecast of future demand is compared with its actual production capacity, which allows it to determine whether it will need additional capacity given such demand. It should be noted that planning capacity utilization is an activity that is carried out not only by manufacturing firms, but also by service companies. Yes, administrators. educational institutions similarly determine the number of places required to ensure the educational process for the projected number of students, and network managers fast food— how many hamburgers they need to cook during rush hour.

Once the business forecast for future demand is translated into capacity utilization requirements, the company begins to develop other plans to ensure it can meet those specific requirements. However, both the company and the people to whom it will present its business plan should remember that plans for the utilization of production capacity may subsequently change, both upward and downward. In the long term, these indicators change quite significantly, because the company acquires new equipment or sells its existing production facilities, but in short term modifications should not be significant. The company can introduce an additional work shift, change the volume overtime work, reduce the duration of some work shifts, temporarily suspend production, or invite third parties as subcontractors to perform certain operations. In addition, if a company's product can be stored for a long time and especially if it is seasonal (such as ABC lawn mowers), during periods of low demand it can create additional inventories and sell them during periods of peak sales, i.e. at a time when its existing production facilities are not able to fully satisfy the demand for its goods.

Planning for the location of production facilities

If a company plans to expand its production capacity in the future, in the section of the business plan we are describing, it must indicate what buildings and structures it will need to ensure normal work processes. This activity is called capacity planning. The location of any company's buildings and structures is primarily determined by which factors most strongly influence its overall production and distribution costs. These are factors such as the availability of qualified personnel, labor costs, electricity costs, proximity of suppliers and consumers, etc. It should be noted that the importance and significance of these factors tend to vary depending on the business in which the company operates.

For example, many companies operating in the field of high technology (and primarily requiring a large number of qualified technical specialists for normal functioning) are concentrated in large cities where there are universities and large research centers. On the other hand, many companies specializing in labor-intensive manufacturing locate their production facilities abroad, usually in countries with low wages. For example, many development companies software, are actively creating research centers in India, which is Lately is famous for its specialists in this field, capable of working with no less high productivity than their American and European colleagues, but at a significantly lower cost. American tire manufacturers have traditionally built their plants in northern Ohio, allowing them to operate in close proximity to their main customers, the giant Detroit automakers. If we talk about service companies, then the decisive factor for them is usually the convenience of consumers, as a result of which most large shopping centers are located on major highways, and cafes and restaurants are located on busy city streets.

What factors will be most important for the ABC company from our example? Obviously, she will need qualified technical personnel who can design and manufacture lawn mowers. The location of consumers plays an equally important role in this case, which means that it is best for her to locate her enterprises near large agricultural centers. After selecting a region, the company will need to select a specific location and land plot.

Production process planning

During production process planning, a company determines exactly how its product or service will be produced. When designing a production process plan for inclusion in its business plan, a firm must carefully analyze and evaluate its available production methods and technologies and select those that can most effectively achieve its specific production goals. When choosing any production process, both in the production and in the service sector, there are various options. For example, starting your journey in restaurant business, the company can choose between a fast food establishment; a fast food establishment with a limited menu; a company specializing in delivery ready meals or servicing motorists; she may choose an option such as a luxury restaurant offering gourmet dishes, etc. When planning its production process, a company must answer a number of key questions that will determine its final choice. What technology will she use: standard or customized? To what extent will its production process be automated? What is more important for a company: efficiency or flexibility of the production system?

For example, the ABC company may well choose such a common and effective method of organizing the production process as conveyor assembly, especially if it does not plan to produce lawn mowers according to special customer orders. But if a company intends to produce personalized products tailored to the specific wishes of consumers - which, admittedly, is becoming an increasingly common approach in both the manufacturing and service sectors - then it will, of course, need completely different technologies and production methods.

It should be noted that planning the production process is an extremely important and complex task. It is very difficult to determine the optimal combination of indicators such as cost levels, quality, labor efficiency, etc., since there is a close relationship between them. This means that even a small change in one component of the production process usually entails a number of changes in other components. It is precisely because of this complexity that the task of planning production processes is usually assigned to highly qualified specialists in the production field, whose activities are directly controlled by the top management of the company.

Equipment placement planning

The final strategic decision when drawing up the production section of a business plan is to evaluate and select the optimal placement of equipment, tools and work centers. This procedure is called equipment placement planning. The goal here is to physically arrange equipment, tools, work centers, and locations to maximize the efficiency of the production process while making it easy for staff—and often customers—to use.

Drawing up an equipment layout plan begins with assessing the physical space required for it. At this stage, the company must determine what production areas, rooms for storing tools and equipment, warehouses, workshops, employee rest rooms, offices, etc. she will need to ensure the normal production process. Then, based on its existing production plans, the company can evaluate different equipment configurations and layouts for production efficiency. In this case, a variety of methods and tools help firms develop a solution - from elementary scaled plans and maps to complex computer programs, which allow you to process huge volumes of variable indicators and print out different options for layout plans for machines, tools and other equipment.

There are three main approaches to the physical organization of the production process. In a production process design, all elements (work centers, equipment, departments) are arranged in production areas based on the similarity of the functions they perform. The second way to place equipment and workplaces is a linear (or flow) layout of equipment placement. In this case, the components of the production process are distributed in space in accordance with the successive stages of product production. The third approach is the layout, due to the fixed position of the product. It is used in cases where, due to its impressive size or for some other reason, the product being manufactured must remain in one place, in a fixed position, throughout the entire production process, and materials, tools, equipment and personnel are delivered to it. Examples of such layouts include hangars in aircraft manufacturing or shipyards in shipbuilding.

Drawing up a general (aggregate) plan

Having decided on strategic issues, the company begins to make tactical decisions and, above all, to general, aggregate planning of its production activities and the production resources necessary for it. The result of this process is a document known as a general (aggregate) plan, which is drawn up for a certain period of time - usually one year.

General (aggregate) planning allows a company to include what is called the overall picture in its business plan. When drawing up a general (aggregate) plan, based on forecasts of future commercial demand and planning the utilization of production capacity, the company determines inventory levels, production standards and the number of personnel (per month) that it will need over the next year. It should be remembered that the focus is on the overall production concept and not on specific details. Thus, during aggregate planning, entire categories of goods are considered, and not individual types. For example, the general plan of a company specializing in the production of paints and varnishes will indicate how many liters of facade paint it will need to produce over a certain period, but it will not specify what colors and packaging it will be produced in. Such plans are especially important for large manufacturing enterprises producing a large assortment goods. IN small company, which produces any one product (as, for example, the company ABV from our example), overall plan will rather resemble the main work schedule, except perhaps drawn up for a longer period (more on this in the next section). Thus, we can say that a correctly drawn up general (aggregate) plan reflects two main indicators of the company’s performance: the optimal production rate and the total number of personnel that the company will need in each specific period within the framework of this plan.

Drawing up a master work schedule

The main work schedule is drawn up on the basis of the general (aggregate) plan described above. We can say that this is a more detailed version of the aggregate plan. The main schedule indicates the quantity and type of each type of product produced by the company; how, when and where they will be made next day, next week, next month; it also includes information about the required labor force and the firm's inventory requirements (that is, the totality of all inventories of the enterprise, including stocks of raw materials, components and semi-finished products, work in progress and finished goods).

First of all, the main work schedule is drawn up with the aim of disaggregating the general (aggregate) plan, i.e. break it down into separate, detailed operating plans for each product or service the company offers. Subsequently, all these individual plans are combined into a common master work schedule.

Material requirements planning

Having determined exactly what types of goods or services it will produce or provide, the company must analyze each of them and determine as accurately as possible its needs for raw materials, materials, components, etc. Materials requirements planning is an advanced planning concept that includes elements of modeling and the ability to create various scenarios for the development of events depending on the situation. Using this concept, a firm can accurately schedule its future requirements for materials needed to produce its final products, expressing them in specific numerical terms. Thanks to the advent of sophisticated computer programs modern managers got the opportunity to analyze all specifications in detail and specifications of their goods and services, as well as accurately identify all materials, raw materials and components necessary for their production or provision. This vital information combined with computerized inventory data, allows managers to determine the quantity of each part held in stock and therefore calculate how long the firm is stocked. After the company has decided on the lead time (i.e., the time between the confirmation of the order for materials and the receipt of these materials) and the requirements for buffer (reserve) stocks (we will talk about them later), all these data are entered into the computer, and they become the basis for providing the company with the necessary material resources. Thus, thanks to the material requirements planning system, the company has fairly reliable guarantees that all the materials it needs will be available and in the right quantity when they are needed in the production process.

The latest MRP software is truly powerful in terms of production planning and scheduling. Thanks to it, managers, when making decisions about the allocation of resources of the company, can take into account various limiting and situational factors, such as equipment downtime, lack of labor resources, bottlenecks in the production process, shortage of important raw materials, etc.

Production Planning Tools

The following are the tools for making production plans, thanks to which the company can significantly increase the efficiency of this process and present in its business plan a really clear and complete plan for its future production activities.

If you observe the work of lower-level managers for several days, you can be sure that they are constantly discussing what work needs to be done by their subordinates, in what order, who exactly and what operations will be performed, and by what time this or that work should be completed. . All this activity is united under one common name - time-based (calendar) planning. Below, we will look at the three main tools that managers use in this process: the Gantt chart, the load distribution chart, and the PERT network analysis.

Gantt chart

This tool, the Gantt chart, was created in the early 1900s by Henry Gantt, an associate of the famous theorist and practitioner in the field of scientific management Frederick Taylor. Essentially, a Gantt chart is a histogram on which time periods are plotted horizontally, and all types of work activities for which, in fact, the schedule is drawn up vertically. The columns display the planned and actual results of the production process over a certain period of time. Thus, the Gantt chart clearly displays what production tasks and when they should be performed, and allows you to compare the planned result with the actual performance of the work. This is a fairly simple, but convenient and useful tool with which managers can fairly accurately determine what still needs to be done to complete a particular work task or project, and evaluate whether it is being completed ahead of schedule, on schedule, or behind schedule. In the latter case, they should take steps to correct the situation.

Load distribution scheme

The load distribution scheme is nothing more than a slightly modified Gantt chart. Unlike the Gantt chart, it does not indicate types of work vertically, but departments or specific organizational resources. Thanks to this tool, firms can more effectively plan and control the use of the organization's production capacity.

Network analysis PERT

It should be noted, however, that the Gantt chart and load distribution scheme are convenient if it is necessary to control the implementation of a relatively small number of different types of work, and not interrelated. If a company needs to plan a large-scale project—for example, aimed at completely reorganizing one of its divisions, reducing costs, or developing a new type of product or service—then it will need to coordinate the actions of employees from a variety of departments and services. Sometimes these projects involve coordinating hundreds or even thousands of activities, many of which must be completed simultaneously, while others can only be started after the previous ones are completed. It is clear, for example, that during the construction of a building it is impossible to put on a roof without erecting walls. In such situations, managers use another tool known as PERT (Program Evaluation and Review Technique) network analysis.

A PERT network analysis is a diagram that displays the sequence of all the activities that must be performed as part of a project, as well as the time and money costs for each of them. This method was developed in the late 1950s to coordinate work on the Polaris submarine, a project that involved more than three thousand different contractors. Through PERT network analysis, the project manager can determine what exactly needs to be done in the project and what events will depend on each other, as well as identify potential project problems. In addition, with the help of PERT, he can easily compare how certain activities can affect the work schedule and project costs. alternative actions. As a result, thanks to the PERT network analysis, the manager, if necessary, can redistribute the resources available to his company, thereby preventing the project from deviating from the planned schedule.

To build a PERT network diagram, you need to know and understand four important concepts: events, activity types, slump period, and critical path. Events are endpoints that separate major activities and indicate the completion of one and the beginning of the next. Activities are the time or resources required to move from one event to another. The slump period is the period of time during which execution a separate type work can be slowed down without slowing down the entire project. The critical path is the longest or most time-consuming sequence of events and activities in the PERT network. Any delay in completing events on the critical path will invariably delay the completion of the project as a whole. In other words, activities on the critical path have a zero decay period.

To create a PERT network diagram, a manager needs to identify all the major activities needed to complete an upcoming project, arrange them in the order they should be completed, and estimate how much time it will take to complete each one. This process can be represented in five stages.

1. Define everything significant species work to be performed to complete this project. During each of these types of work, certain events occur or certain results are achieved.

2. Determine the order of events that occurred in the previous stage.

3. Draw up a flow diagram of work types from start to finish, identifying separately each type of work and its relationship with other types of work. Events on the diagram are indicated by circles, and jobs by arrows; the result is a clear block diagram, which is called a PERT network (Fig. 2).

4. Estimate the time required to complete each type of work. This operation is performed by using a so-called weighted average. To obtain this indicator, take an optimistic estimate of time, t 0, i.e. assessment of the duration of a particular type of work under ideal conditions; the most probable estimate of time, t m, i.e. assessment of the duration of this type of work when normal conditions; and a pessimistic estimate of time, t p , i.e. assessment of the duration of work under the worst possible conditions. As a result, we have the following formula for calculating the expected time t e:

5.

6. Using a network diagram that estimates the duration of each type of work within the project, plan the start and end dates of each type of work and the project as a whole.

Rice. 2. Example of a PERT network diagram

As we said above, a tool such as PERT network analysis is typically used to plan very complex projects consisting of hundreds or even thousands of events. Therefore, calculations in this case are performed using computer technology using special software.

Production planning methods

Modern managers have to solve a very difficult task - planning the activities of their organizations in a complex and extremely dynamic environment. external environment. To solve it, project management and scenario-based planning have proven themselves well. Both methods pursue one primary goal - to increase the company's flexibility, without which it is impossible to succeed in today's ever-changing business world.

Project management

Today, many manufacturing firms operate on a project basis. A project is a series of interrelated works that has clear starting and ending points. Projects vary in significance and scope; it could be like a startup project spaceship, and organizing a sporting event at the local level. Why are companies increasingly organizing and planning their activities on the basis of projects? The fact is that this approach best suits the dynamic external environment, which requires modern organizations to have increased flexibility and the ability to quickly respond to any changes in the situation. Modern companies implement unusual and even truly unique production projects related to solving a huge variety of complex interrelated tasks, the implementation of which requires specific skills and qualifications. All this absolutely does not fit into standard procedures production planning, which a company can use in its routine, daily activities. What are the features of project planning?

Project planning process

In a typical project, work is performed by a dedicated project team whose members are assigned to work on the project temporarily. They all report to a project manager, who coordinates their work in collaboration with other departments and divisions. However, since any project is a temporary undertaking, the project team exists only until the tasks assigned to it are completed. The group is then disbanded, and its members are transferred to work on other projects, either they return to the departments where they work permanently, or they leave the company.

The planning process for any project, including production, includes a number of stages. It starts with clearly defining the project's goals. This stage is mandatory because the manager and team members must clearly know what they must achieve by the time the project is completed. Then it is necessary to determine all the types of work to be performed within the project and the resources required for this. In other words, at this stage it is necessary to answer the following question: what labor and materials will be required to implement this project? This stage is often associated with certain difficulties and requires a considerable amount of time, especially if the project is fundamentally new or even unique, i.e. when the company does not have any experience in implementing projects of this type.

After determining the types of work, it is necessary to determine the sequence of their implementation and the relationships between them. What should you do first? What jobs can be done at the same time? In this case, the person planning the production project can use any of the production planning tools described earlier: create a Gantt chart, a workload distribution chart, or a PERT network diagram.

Next, you should create a schedule for the project. The first step is to preliminarily estimate the completion time of each work, and on the basis of this assessment, a general project schedule is drawn up and the exact date its ending. After this, the project schedule is compared with previously established goals and the necessary changes and adjustments are made. If it turns out that the project's timeline is too long - which does not meet the company's goals for the project - the manager can allocate additional resources to the most important species works to speed up the implementation time of the entire project.

With the advent of many different computer programs running on the Internet, the procedure for planning and managing production projects has become significantly simplified. It should also be noted that often the company's suppliers and even its consumers take an active part in this activity.

Scenario planning

A scenario is a forecast of probable future developments of events, which is characterized by a certain sequence of these events. In this case, it is assessed how this or that development of events will affect the environment in which the company operates, the company itself, the actions of its competitors, etc. Different assumptions can lead to different conclusions. The purpose of such an analysis is not to try to predict the future, but to clarify the situation as much as possible and make it as certain as possible by “losing” possible options development of events taking into account different initial conditions. Even the process of scenario writing forces company leaders to rethink and better understand the business environment because the activity forces them to view it from a perspective they may never otherwise have considered.

Although scenario planning is a very useful way to predict future events (which can be predicted in principle), it is clear that predicting random, arbitrary events is very difficult. For example, hardly anyone could have predicted such a rapid spread and incredible popularity of the Internet in recent decades. Similar events will undoubtedly occur in the future. And although they are extremely difficult to predict and respond to correctly, managers must strive to somehow protect their organizations from their consequences. Scenario planning serves this purpose, including in the production sector.

Production control

An important element of the production plan within any business plan is a description of how the firm intends to control its production system, in particular its elements such as costs, purchasing, Maintenance and quality.

Cost control

It is believed that American managers often treat cost control as a kind of corporate "crusade", which is undertaken from time to time and carried out under the leadership of the company's accounting department. It is accountants who set cost standards per unit of production, and managers must find an explanation for any deviation. Have the company's material costs increased? Maybe not used effectively enough work force? Perhaps, in order to reduce the volume of defects and waste, it is necessary to improve the skills of workers? However, now most experts are convinced that cost control should play a major role already at the stage of development and planning of an organization's production system and that all managers of the company, without exception, should be constantly engaged in this activity.

Currently, many organizations are actively using an approach to cost control based on the so-called cost centers. These are responsibility centers for which separate cost accounting is maintained, but which are not directly related to making a profit; the efficiency of such departments is determined based on the compliance of actual costs with the planned or standard volume.

Since all costs must be controlled at some organizational level, the company needs to clearly define at what level certain costs are controlled and require company managers to report on those costs that fall within their area of ​​responsibility.

Control over procurement

In order to efficiently and effectively produce certain goods and provide services, the company must be constantly provided with all the necessary resources, including materials. She needs to constantly monitor supply discipline, monitor the characteristics of goods, their quality, quantity, as well as prices offered by suppliers. Effective control over procurement not only ensures that all the resources the company needs in the right amount, but also their proper quality, as well as reliable long-term and mutually beneficial relationships with suppliers. All these points should be reflected in the production section of the business plan.

So what can a company do to make it easier and more efficient to control inputs? Firstly, to collect the most complete and accurate information about the dates and conditions of delivery. Secondly, to collect data on the quality of supplies and how they correspond to the company's production processes. And, thirdly, to obtain data on the prices of suppliers, in particular, on the correspondence of actual prices to the prices that were indicated by them when placing an order.

All of this information is used to rank and identify unreliable suppliers, allowing the firm to select the best partners in the future and monitor various trends. So, suppliers can be evaluated, for example, by the speed of their response to changes in demand, by the quality of service, the level of reliability and competitiveness. We'll talk more about relationships with suppliers in the next section.

Control over suppliers

Modern manufacturers strive to form strong partnerships with suppliers. Instead of dealing with dozens of sellers who will certainly compete with each other for a customer, manufacturers today often choose two or three suppliers and establish close relationships with them, ultimately increasing both the quality of the products supplied and the effectiveness of this cooperation.

Some firms send their design engineers and other specialists to their suppliers to solve all sorts of technical problems; others regularly send teams of inspectors to suppliers' plants to evaluate various aspects of their operations, including delivery methods, manufacturing process features, statistical controls used by suppliers to identify defects and their causes, etc. In other words, today companies in all countries are doing what Japan has traditionally always done - they are striving to establish long-term relationships with their suppliers. Suppliers who partner with a manufacturing company are able to provide higher quality resources and reduce defect rates and costs. If any problems arise with suppliers, open and direct communication channels allow them to be resolved quickly and efficiently.

Inventory control

To effectively and efficiently achieve its goals, any company must control the replenishment of its inventory. For this purpose, a re-order system is used when a certain stock level is reached.

This type of reordering system is used to minimize the ongoing costs associated with holding inventory and ensure the appropriate level of customer service (since it reduces the likelihood that at some point the desired product will not be in stock).

Using various statistical procedures, companies typically set the reorder point at a level that ensures that they have enough inventory to last between reorder placement and fulfillment. At the same time, they usually retain some additional “safety” reserve, which allows them to avoid complete depletion of the reserve in unforeseen circumstances. This so-called “buffer” or reserve serves as a reliable protection for the company if, in the period between a re-order and its fulfillment, a greater than usual need for a product or material arises, or if replenishment of stock is delayed for unforeseen reasons.

One of the simplest, but very effective ways Using a reorder system when a certain inventory level is reached is to store tracked inventory in two different containers. In this case, goods or materials are taken from one container until it is empty. At this point, a reorder is made, and until it is completed, the products are taken from the second container. If the company has correctly determined the demand, then the reordered goods will arrive before the second container is empty, and there will be no delay.

The second modern and already very common method of reordering upon reaching a certain stock level is based on computer control. In this case, all sales are automatically recorded by the central computer, which is programmed to initiate a new order procedure when the stock in the warehouse reaches a certain critical level. Currently, such systems are actively used by many Retail Stores. Another fairly common system is the re-order system after a certain time interval. In this case, inventory control is exercised solely on the basis of a clearly defined time factor.

Maintenance control

The production section of the business plan should also indicate how the firm will monitor the effectiveness of maintenance. In order to quickly and efficiently provide consumers with goods or services, a company must create a production system that guarantees maximum efficient use equipment and its minimal downtime. Therefore, managers, among other things, must constantly monitor the quality of maintenance. The significance and importance of this activity largely depends on the production technologies used by the company. For example, even a minor glitch on a standard assembly line can stop hundreds of workers from working.

There are three main types of maintenance in manufacturing organizations. Preventative repairs are carried out before an accident. Restorative repair requires complete or partial replacement of the mechanism or its repair on site immediately after a breakdown. Conditional repair is a major repair or replacement of parts based on the results of a previously conducted technical inspection.

It should be noted that the need for control over maintenance must be taken into account already at the design stage of the equipment. So, if a failure or downtime of equipment leads to serious problems in the production system or is too expensive for the company, then it can increase the reliability of mechanisms, machines and other tools by incorporating additional characteristics into the equipment design. IN computer systems For example, redundant, backup subsystems are often introduced for this purpose. In addition, equipment can be initially designed in such a way as to simplify and make its subsequent maintenance cheaper. It should be borne in mind that the fewer components included in the equipment, the less often breakdowns and malfunctions occur. In addition, it is advisable to place parts that often fail in an easily accessible place or even mount them in separate units, which can be quickly removed and replaced if they break down.

Quality control

Quality control is a comprehensive, consumer-oriented program designed to continually improve the quality of a company's production processes and the goods or services it produces. The production section of the business plan should indicate how the company will carry out quality control.

This activity involves constantly monitoring the quality of products to ensure that they consistently meet the established standard. Quality control must be performed several times, beginning with the initial entry of inputs into the firm's production system. And this activity must continue throughout the entire production process and end with the control of finished goods or services at the exit of the production system. This procedure also provides for quality assessment at intermediate stages of the transformation process; It is clear that the sooner you identify a defect, or an ineffective or unnecessary element of the production process, the lower your costs will be to correct the situation.

Before implementing quality control, managers must ask themselves whether 100% of the goods (or services) produced need to be inspected or whether samples can be done. The first test option is appropriate if the cost of ongoing assessment is very low or if the consequences of statistical error are extremely serious (for example, if the company produces complex medical equipment). Statistical sampling is less expensive and is sometimes the only cost-effective quality control option.

Sampling control during acceptance consists of evaluating materials or goods purchased or manufactured by the company; it is a form of feedforward or feedback control. In this case, a certain sample is made, after which the decision as to whether to accept or reject the entire batch is made based on the results of the analysis of this sample, based on a risk assessment.

Process control is a procedure in which sampling is carried out during the process of converting inputs into goods or services, thereby determining whether the production process itself is out of control. With this type of control, statistical tests are often used to determine at different stages of the production process the extent to which deviations have exceeded the acceptable level of quality. Since no production process can be considered perfect and some minor deviations are simply inevitable, such tests allow the company to identify serious problems in time, i.e. quality problems that the company should respond to immediately.

Production Control Tools

It is obvious that the success of any organization is largely determined by its ability to efficiently and effectively produce goods or provide services. This ability can be assessed using a number of production control methods.

Production control, as a rule, consists of monitoring the production activities of an organization or a separate department in order to ensure its compliance with a previously drawn up schedule. Production control is used to determine the ability of suppliers to provide the appropriate quality and quantity of supplies at the lowest cost, and to monitor the quality of products to ensure they meet established standards and check the condition of production equipment. We've already discussed the basic aspects of controlling manufacturing operations, but two critical manufacturing control tools—the TQM control schedule and the economic order quantity model—deserve more attention.

TQM control charts

It should be remembered that effective quality control, which we discussed above, is aimed not only at the production quality goods or providing quality services. To ensure the high quality of both the products themselves and the processes by which they are produced, a company must control all aspects of its production system. Modern firms accomplish this task thanks to a tool known as the TQM control chart.

The TQM control chart is an effective production control tool. Essentially, it is a graph that indicates certain statistically upper and lower control limits and displays the measurement results for the reporting period. Control charts clearly show whether a production process has exceeded its pre-established control limits. As long as the results of checks at various stages of the production process are within a certain acceptable range, the system is considered to be in control (Figure 3). If the measurement results fall outside the established limits, then the deviations are considered unacceptable. Continuous quality improvement efforts should, over time, result in a narrower range between the upper and lower control limits as they eliminate the most common causes of deviation.

Rice. 3. Example of a control chart

When drawing up such a schedule, it is necessary first of all to take into account that in each production process there can be two sources of deviations. The first of these is unpredictability, due to which corresponding deviations may occur. Such deviations are possible in any process, and it is impossible to control them without fundamental changes to the process itself. Another source is non-random circumstances. Such deviations can be identified and are subject to control. It is clear that control charts are used to identify precisely such causes of deviations.

Control charts are created using some basic statistical concepts, including the well-known law of normal distribution (which states that variations tend to be distributed in a bell-shaped curve), and standard deviation (a measure of variability in a group of numerical data). When drawing up a control chart, the upper and lower limits are determined by the degree of deviation that is considered acceptable. According to the law of normal distribution, about 68% of the set of values ​​are in the range from +1 to -1 from the standard deviation. (As the sample size increases, the sampling distribution becomes closer to normal.) In this case, 95% of the values ​​lie in the range from +2 to -2 from the standard deviation. In the process of monitoring manufacturing operations, limits are usually set in the range of three standard deviations; this means that 97.5% of the values ​​should be within the reference range (Fig. 4).

Rice. 4. Example of a control chart with a control range of three standard deviations

If the sample mean is outside the control range, i.e. is above its upper limit or below its lower limit, this means that the production process appears to be out of control and the company needs to do everything possible to identify the causes of the problem.

Model EOQ

We have already said that control over a firm's inventory is the most important aspect of production control. Firms' investments in these inventories are typically significant; Therefore, each organization strives to determine as accurately as possible how much new goods and materials to order and how often this should be done. The so-called EOQ model helps them with this.

The economic order quantity (EOQ) model is designed to determine the quantity of goods that should be ordered to satisfy forecast demand and minimize the cost of storing and purchasing inventory.

Using the EOQ model, two types of costs are minimized: order fulfillment and operating costs. As the volume of orders grows, the average amount of inventory increases, and the current costs of maintaining them also increase accordingly. However, placing larger orders means fewer orders and therefore lower fulfillment costs. The lowest total costs and, accordingly, the most economical order size are observed at the bottom point of the total costs curve. This point at which order fulfillment costs and operating costs are equal is called the point of most economic order sizing. To calculate this indicator, the following data is needed: predicted need for inventories for a certain future period (D); costs of placing one order (OS); costs or purchase price (V) and the ongoing costs associated with storing and processing the entire volume of inventory, as a percentage (CC). Having all this data, you can use the standard EOQ formula:

It should be remembered, however, that the use of the EOQ model assumes that the demand and lead time of the order are precisely known and constant. Otherwise it should not be used. For example, it is generally not applicable to determining order quantities for parts used in the production process, since they tend to come from the warehouse in large and uneven quantities. But does this mean that the EOQ model is useless for manufacturing firms? Not at all. It can be used to determine the optimal cost and identify the need to change the order batch size. Although, it should be recognized that more complex models are used to determine batch sizes in conditions of variable needs and other non-standard situations.

Modern aspects of production

When preparing the production section of a business plan, it is important to remember the modern realities of the production sector. Today, companies face many daunting challenges to improve productivity. They should strive to make the most of the benefits of new technologies, implement the described TQM concept; certify your products by obtaining ISO 9000 certification; constantly reduce inventory; establish partnerships with suppliers; achieve competitive advantage through flexibility and quick response to changes in demand, etc. Therefore, the company should reflect in its business plan how all these tasks will be accomplished.

Technologies

Increasing competition in most markets is forcing manufacturers to provide consumers with increasingly high-quality products at increasingly lower prices, while significantly reducing their time to market. Two factors contribute to accelerating the development of new types of products: the company's focus on reducing the development cycle and the efficiency of investments in new technologies.

One of the most effective tools, with the help of which modern manufacturers reduce the time to bring new goods and services to the market, is complex automation production (Computer Integrated Manufacturing - CIM). CIM is the result of combining a company's strategic business and operational plan with computer software. It is based on computer-aided design (Computer-Aided Design - CAD) and computer-aided manufacturing (Computer-Aided Manufacturing - CAM) technologies. As a result of the emergence and widespread use of all kinds of automation tools, the old way of developing products has become hopelessly outdated. With the help of computer technology to visually display graphical objects, design engineers are designing new products much faster and more efficiently than before. Automated manufacturing is made possible by the use of computers to control the production process. Thus, numerically controlled machines can be programmed to produce new models literally in a matter of seconds.

According to experts, further improvement of CIM technology will ensure continuity of the entire production cycle. If each stage - from placing an order for raw materials to shipping finished products - is displayed in the form of numerical indicators and processed on a computer, companies will be able to respond very quickly to any market changes. They will be able to make hundreds of design changes in a matter of hours, quickly move to a wide variety of product variations, and produce them in very small batches. An organization that uses comprehensive production automation will not have to stop the assembly line and waste valuable time replacing pressing dies or other equipment to produce a new standard or non-standard product. One change in the computer program, which takes a few seconds, and the production process is completely rebuilt.

The most important condition efficient work modern companies is the constant updating of the technology by which the input stream raw materials turns into a stream of finished products. Major technological changes usually involve the automation of production, which we discussed above, as well as the introduction of new equipment, tools or work techniques and computerization.

However, it appears that the most significant technological change in last years became universal computerization. Most organizations today have developed sophisticated Information Systems. For example, many retail chains use scanners connected to computers, with the help of which you can instantly obtain complete information about the product you are interested in (its price, code, etc.). And of course, these days you will not find a single office that does not use computer technology.

Implementation of TQM

Currently, many companies have already implemented the TQM philosophy. The idea of ​​total quality management covers not only large but also small firms and enterprises. TQM (total quality management) is a concept that implies the participation of all employees of the company in improving the quality of products and services, optimizing production processes and management, etc.

Unfortunately, we must admit that not all efforts aimed at implementing TQM concepts were successful. Research in this area does not confirm that firms that have adopted TQM consistently operate at higher rates. high performance efficiency than companies that did not. There are a number of factors that can significantly reduce the effectiveness of TQM. In particular, the researchers found that the success of some core TQM concepts—such as the use of teams, benchmarking, additional training, and employee empowerment—depended significantly on the company's ongoing performance.

From a technological perspective, the TQM concept focuses on developing flexible processes that support continuous quality improvement. The fact is that employees who have adopted the TQM philosophy are constantly looking for what can be improved or corrected, so work processes must be able to easily adapt to constant changes. In this regard, to successfully implement a TQM program, a company must constantly improve the qualifications of its personnel. It needs to provide its employees with opportunities to acquire and develop skills in areas such as problem solving, decision making, negotiation, statistical analysis and teamwork. Employees of these companies must be able to analyze and interpret data, and firms should provide their work teams with all the necessary information about the quality of their products, in particular about the rates of damage, defects, waste, etc. They should also inform staff about customer opinions and provide them with the information needed to create and manage control charts. And of course, the organization's structure must provide teams with sufficient authority to continually improve operations.

Reengineering

Reengineering is a term used to describe radical changes to all or part of a company's work processes in order to increase productivity and improve financial indicators. In the process of reengineering, the structure, technology and personnel of the company undergo major changes, since in this case the methods of doing work in the organization are revised almost from scratch. During reengineering, managers constantly ask questions: “How else can this process be improved?” or “How can this be accomplished? work order faster and better? etc.

Regardless of what caused the need for change - fluctuations in demand, a change in the economic situation or a change in the strategic direction of the organization - the person who decided to carry out reengineering must first evaluate the effectiveness of the staff and the quality of interaction between people within the organization. After a critical assessment of work processes, the company begins to search for ways to increase labor productivity and product quality: begin implementing a TQM program, change organizational culture or implement other changes. However, in any case, the essence of reengineering is that the company completely abandons the old ways of working and decides to radically change its work process.

You might be wondering: isn't the term "reengineering" synonymous with TQM? In no case! Although both of these processes are aimed at introducing change in the organization, their goals and means are completely different. The TQM program is based on the idea of ​​continuous, incremental change. It means continuous improvement the work of an organization that is generally doing well. In addition, TQM is implemented from the bottom up and the emphasis is on employee participation in decision making regarding the planning and implementation of the program. And reengineering is a radical change in the way an organization operates. This process involves fundamental changes and a complete overhaul of work practices. Reengineering activities are initiated by the firm's top management, but when the process is completed, virtually all employees typically gain greater authority in their jobs.

A characteristic feature of reengineering is that you have to start from scratch and rethink and rebuild the entire work scheme, i.e. structure of all work processes. Traditional, well-known ways and methods are immediately excluded. In other words, the company completely abandons incremental changes in the production system, since the ways and methods by which the company will produce goods or provide services are radically changed. Entirely new work processes and operations are invented and implemented. When reengineering, what came before should under no circumstances serve even Starting point, because reengineering is a radical, fundamental change in the very foundations of an organization. Despite the significant stress and increased uncertainty among staff that typically accompany the reengineering process, it can produce excellent results.

ISO Standards

To openly and clearly demonstrate our commitment to quality improvement, modern organizations trying to get ISO certification. What is its essence? These are the quality management standards that companies around the world are guided by. They cover literally everything: from contract rules to product development and delivery. ISO standards are set by the International Organization for Standardization and are used as an international benchmark to compare firms operating in the global marketplace. A company's certificate indicates that it has developed and implemented an effective quality management system.

Quality certificates today are received by small sales and consulting companies, software development firms, city public utilities, and even some financial and educational institutions.

However, it should be remembered that although the certificate provides the company with a lot of advantages and significantly strengthens its competitive position, the main goal of the company should be the process of improving the quality of its goods or services. In other words, obtaining a certificate should not be an end in itself; In order to achieve this, the company must create work processes and a production system that will allow all its employees to perform their work with consistently high quality.

Reduction of inventories

As we have already said, a very significant part of the assets of most companies is its inventory. Firms that manage to significantly reduce their inventory levels—i.e. raw materials, semi-finished products and finished goods in the warehouse - can significantly reduce the cost of storing them and thus increase their productivity. How the company intends to solve this problem should also be reflected in the production section of the business plan.

Modern companies take this problem very seriously. In recent years, managers in all countries have been actively looking for ways to improve the efficiency of inventory management. Thus, during the input phase, they seek to improve the communication between internal production schedules and forecast consumer demand. Marketing managers are increasingly being asked to provide accurate and timely information about future sales volumes, which is then combined with specific data about the company's production systems to determine the optimal production volume to meet existing demand. Production resource planning systems are ideally suited to perform this function.

Today, companies around the world are actively experimenting with another technique, which has been successfully used in Japan for a long time and is called the Just-In-Time (JIT) system. Under this system, goods and materials arrive at the manufacturer exactly when they are needed in the production process, rather than being stored in a warehouse. The ultimate goal of implementing a JIT system is to completely eliminate raw material warehouses through precise coordination of the production and delivery processes. If such a system works effectively, it provides significant benefits to the manufacturer: its inventory is reduced, equipment set-up time is reduced, the cycle of product transformation processes is accelerated, production time is reduced, production space is freed up and often even the quality of the products is improved. Of course, in order to achieve all this, it is necessary to find suppliers who will deliver quality materials on time.

However, it should be taken into account that not every manufacturer can use the JIT system. So, for its implementation, it is necessary that suppliers are located close to the enterprises of the buyer and supply materials without defects. This system also requires reliable transport links between suppliers and the manufacturer, effective methods acceptance, processing and distribution of materials, careful planning of the production process. If all these conditions are met, JIT will help to significantly reduce the company's warehouse costs.

Outsourcing and other types of partnerships with suppliers

The production section of the business plan should also indicate how the company intends to work with suppliers and improve the efficiency of this process. As already mentioned, one of the most important trends in the manufacturing sector recently has been a strong trend towards the formation of partnerships between manufacturers and suppliers. It should be noted that, among other things, this often involves outsourcing some of the work, where manufacturers, in an effort to reduce high labor costs, outsource the production of some parts and components to their suppliers, who can produce them at a lower cost. This relationship is called outsourcing.

Today, alliances between manufacturers and suppliers have become much closer and stronger. Suppliers are becoming increasingly involved in the product manufacturer's production process. Many operations that were previously the sole responsibility of manufacturers are now carried out by their main suppliers, i.e. Some of the work is transferred to third-party contractors. At the same time, manufacturers are increasingly playing the role of “conductors” and limit themselves to only coordinating the activities of different suppliers. According to experts, the trend towards strong and close partnerships between suppliers and manufacturers will continue in the future, as the latter are constantly looking for new sources of competitive advantage in the global market, and one of such sources is close relationships with suppliers.

Flexibility as a competitive advantage

In today's rapidly changing business world, companies that are unable to quickly adapt to change are doomed to failure. Since this ability is provided by the flexibility of the production process, many organizations are actively developing and implementing flexible production systems.

Modern factories and factories often resemble scenes from a science fiction movie in which remote-controlled carts transport workpieces to computerized machining centers. Robots automatically change the position of workpieces, and the machine, manipulating hundreds of tools, turns the workpiece into a finished part. Every minute and a half, a finished product leaves the assembly line, somewhat different from the previous ones. There are no workers or usual machines in the workshop. No costly downtime required to change dies or tooling. One modern machine is capable of producing dozens and even hundreds of very different parts, making them in any programmed order.

A unique feature of agile manufacturing systems is the integration of computer-aided design, engineering and production processes, enabling factories to produce small, custom batches at prices previously only possible with mass production.

As a result of the use of flexible manufacturing systems, economies of scale are being replaced by economies of breadth. Organizations no longer need to produce thousands of identical products to keep their unit costs down. To move on to the release of a new product, they need not change the machines and equipment, but only make changes to the computer program.

Speed ​​as a competitive advantage

It is known that a company that is able to quickly develop and bring new products and services to the market provides itself with significant competitive advantage. Consumers prefer a particular company not only because its products or services are cheaper, have an original design or are of high quality, but often because they highly value the opportunity to receive them as quickly as possible. There are many examples of companies that have achieved significant success in reducing the design and production time of goods and services. To speed up the production process and increase competitive pressure, many organizations around the world are looking to reduce bureaucratic constraints and simplify their organizational structures; They create complex work groups, rebuild the sales structure, use JIT methods, CIM systems, flexible manufacturing systems, etc. And all this must be reflected in the production plan, indicating what opportunities are available to you to speed up the cycle of introducing new products or services to the market.

The basis for planning the work of any enterprise is the production plan. This document records the volume and procedure for the production of goods or the provision of services with associated characteristics: the volume of raw materials used, cost, labor costs. Let's consider how to draw up a production plan, what purposes it serves, what must be reflected in this document and its sample.

A production plan is a document with the help of which the management of an enterprise organizes work and controls the labor process, consumption of raw materials and energy, and the employment of personnel. The production plan is the basis of the company's activities. Without it, it is impossible to effectively control the enterprise, track profits and losses, and find ways to optimize.

Such a document sets a task for each department/structural unit. The production plan is drawn up at each enterprise independently. It is virtually impossible to find a ready-made template: each organization has its own specifics. At the same time, there are generally accepted approaches and algorithms for compiling this document. Their use greatly simplifies the procedure. It is also important to know that you cannot write a plan once and use it constantly. The document requires regular updating.

Working in accordance with the production plan is more promising

What does it give

Any production plan serves several purposes simultaneously:

1. Determining the number of units of goods and services needed to make a profit.
2. Planning a specific profit margin, the ratio of expenses and income, and any other important financial indicators.
3. Assessment of the efficiency of use of resources and raw materials.
4. Quality control. The document can record specific characteristics of goods and achieve them.
5. Planning of raw material costs.
6. Finding ways to optimize the process and work options.
7. Capacity control.
8. Monitoring the efficiency of use of labor resources.
9. Sales efficiency assessment.
10. Development of optimal ways to use the budget.
11. Standardization of reporting.

Thus, the list of tasks solved by the production plan is very wide. In addition, depending on the wishes of management, the document may include any other indicators and goals for structural divisions. The document helps to develop a development strategy - a list of specific actions of the enterprise necessary to achieve work goals. The plan helps to allocate resources effectively.

Types of production plans

All production plans can be divided into the following types:

1. Short-term - 1-2 years. Divided into quarters and half-years. They establish what goals the company must achieve within a year.
2. Medium-term - from 2 to 5 years. The main goal is to determine organizational structure, the number of employees, capital investments and production capacity, the volume of annual income and growth dynamics, the need for investment and loans.
3. Long-term - from 10 years and above. The goal is to develop an economic strategy, determine the organization’s place in the market, and position among competitors.

The long-term plan is concretized in the medium-term, the medium-term - in the short-term. All three plans must be consistent with each other. They cannot contradict each other. Planning must provide for the dynamics of development. The documents should indicate what indicators the enterprise will consistently achieve.

Large organizations draw up all 3 types of plans, smaller ones - only medium-term and short-term ones. The work of any enterprise, especially one producing material assets, is ineffective without a plan. A development strategy is necessary even in the service sector and trade.

It is better to entrust drawing up a plan to specialists with specialized education

Features of drawing up a plan

A production plan is not one document, but several at once. The most standard kit includes:

1. A plan for the main activity, fixing the goals of the enterprise, categories of goods and volumes of their production.
2. Work schedule - a list of categories of goods indicating their quantity, cost, and required raw materials. Production dynamics - how much goods to produce and sell in each month, in each year.
3. Table of the company's needs for funds, investments, loans.

Among the important indicators that should be recorded in the plan of any manufacturing enterprise are:

• tariffs for public utilities, the costs of paying them;
• wage fund;
• consumption of raw materials per unit of product or service;
• production process technology;
• marginal profit;
• availability of specialists with a certain level of qualification;
• amounts borrowed money, interest rate.

Identification of capacity utilization

Determining capacity utilization - that is, the optimal methods of using equipment and raw materials to produce the maximum volume of products - is one of the most important parts of the production plan. How is it calculated?

1. Determine the categories and specific product models most in demand on the market.
2. Calculate the amount of resources that must be used to produce one unit.
3. They predict the number of units of goods that can be sold in the shortest possible time.
4. They determine how many units of goods and in what time frame the existing equipment can produce.
5. They analyze how long it will take to produce the required batches of goods using existing equipment.

This is a simplified algorithm for calculating power. As a rule, these operations are trusted to professional economists. To correctly calculate modalities, you need to know the productivity of the equipment, the speed of work of personnel and the consumption of raw materials. This process involves planning and guessing about the market situation. Establishing the exact required production volume is almost impossible. Success is considered to be achieving the indicators that are closest to reality.

Sample production plan indicating units of production for each month of work

Reflection of the production process

Any sample production plan for an enterprise must include a description of the production process: both global and for each product model. Only accurate recording of the entire process will help you plan and optimize your work correctly.

It is most convenient to reflect the production process in the form of a diagram, where each action will be displayed in stages.

A clear diagram indicating the equipment, personnel and raw materials involved will help management evaluate the effectiveness of the existing work procedure and, if necessary, find ways to optimize. Based on the analysis, it will be possible to determine optimal operating methods.

Operating schedule

The production plan includes a section that describes the work schedule, namely:

• number of shifts, duration;
• number of days off/no days off;
• number of workers per shift;
• expected productivity of each shift.

Room or area for equipment placement

Such a document describes all available premises indicating their purpose. It is necessary to record the area, ceiling height, condition (whether repairs are required), connected communications, entrances, exits, windows, and, if necessary, describe the finishing. Make a conclusion about the suitability of the premises for production in the medium and long term.

If the analysis of the premises shows that it is unsuitable for increasing productivity, the search for suitable real estate with clarification of specific requirements should be included in the medium-term plan. It is important to reflect the advantages and disadvantages of the existing workshop to achieve maximum profit.

An enterprise can plan to open new workshops, create representative offices in other regions - all this must also be recorded in medium- and long-term planning. Mandatory with a description of the requirements for real estate.

The planners independently think through its structure

Material requirements and raw material suppliers

Planning helps to use resources wisely, but only if it contains information about materials and their suppliers. Information about the quality and cost of raw materials will help evaluate the quality of products and the feasibility of working with a specific supplier. Information about the conditions of working with counterparties will help, if necessary, quickly predict how a change in the price of any of its goods will affect production.

The most convenient way to describe the need for materials and their suppliers is through tables for each product. Please indicate:

• weight/color/size of goods;
• its key characteristics;
• full composition indicating the volumes of raw materials used;
• the ability to replace any components;
• supplier information;
• the price of each component.

Fixed costs

An important section that will present a list of fixed expenses similar to most enterprises:

• rental of premises;
• Communal expenses;
• raw materials and starting materials;
• taxes and mandatory payments;
• logistics and transport;
• wage fund.

The document should record the current and planned values ​​of each flow rate, possibly indicating acceptable limits. This approach will help make the plan more flexible, adapted to changing market conditions. Knowing the acceptable limits of each area of ​​fixed costs will help, if necessary, more quickly regulate product prices.

Product cost

The manufacturer must calculate the full cost of each of its products. Without knowing this indicator, it is impossible to correctly select the price, which means it threatens losses. To calculate full cost add up all the values ​​of expended resources:

• starting materials;
• depreciation of equipment;
• utility and other energy costs;
• employee salary;
• salary of management personnel;
• insurance premiums;
• transportation costs;
• advertising;
• sales expenses.

Example of a production plan

A typical example of a 1 year production plan is shown in the image below. It is made according to the most common structure and reflects the most important indicators for the manufacturer. You shouldn’t use someone else’s plans, but you can analyze them and adapt them for your own production.

Production plan option

Common errors

The most common mistakes when drawing up such a document are incorrect accounting of material consumption, incorrect assessment of equipment capacity, and inflated expectations of demand. These inaccuracies have a detrimental effect on the content of the document: it is less connected with reality. An incorrect development strategy built on erroneous calculations will inevitably lead to bankruptcy.

Therefore, it is extremely important to track indicators as accurately as possible and, if necessary, adjust them. The more the company monitors the content of the production plan, the more likely it is to achieve the optimal ratio of income and expenses.

When planning, it is extremely important to take into account the likelihood of sudden circumstances: equipment breakdown, a large private order or a disruption in the supply of raw materials. The enterprise must have measures in place for each such case. It makes more sense to initially set lower indicators, not at the limit of the equipment’s capabilities, and if successful, increase them slightly.

Monitoring the implementation of the plan

The implementation of the control plan is carried out by virtually the entire management team of the enterprise in their area of ​​​​responsibility. So, the production manager controls the production of the required batch of goods within a specific time frame, the head of the supply department monitors how much raw material they need to receive and ship every day, and so on. Control over all areas and implementation of the plan as a whole is the responsibility of the manager.

This article is a translation of material from the MBA knowledge base,
published on the website http://www.mbaknol.com, and prepared for readers who want to become acquainted with the basic principles and stages of effective production planning.
For more detailed acquaintance, please go to the website www.ortems.ru

The process of planning and control is one of the most important in production. In fact, it is the nervous system production organization. It is vital that production is carried out as efficiently as possible at the minimum cost, and that the right quality goods are produced at the right time.

But plans are not carried out by themselves, automatically releasing products. The production manager must take certain steps, such as assigning production tasks, monitoring the progress of work, and monitoring actual productivity against planned targets.

Thus, production control is management function, which involves the coordination and integration of various production processes to improve production efficiency. It is achieved through proper planning of work, establishing an exact sequence of operations, a correct schedule establishing the beginning and completion of each operation, timely issuance of orders and taking measures necessary to ensure the uninterrupted functioning of the enterprise.

In other words, production control includes planning, routing, production scheduling, issuing orders for production of products and monitoring execution.

Production Planning and Control Steps

1. Planning

The first important step in production planning and control involves the careful preparation of production plans. Production plans determine what will be produced and where, of what type, by whom and how. For detailed planning of production operations, relevant information can be obtained from several sources within the enterprise. Information about the quantity and quality of products to be manufactured can be obtained from customer orders and the sales budget, and information about production capacity can be obtained from production management and the engineering department. Thus, the planning function formulates production plans and translates them into requirements for personnel, machinery and materials.

Whatever the planning period, production planning helps to avoid accidents in production by ensuring a continuous flow of production activities, maximum utilization of production capacity to minimize operating costs and meet delivery deadlines; coordinating the various departments of the enterprise to maintain a proper balance of activities, and, above all, providing the basis for control in the enterprise.

2. Drawing up a production plan (routing)

The next important function of production planning and management is drawing up a production plan, which includes determining the route for the movement of raw materials along various types equipment and plant operations. Routing involves planning where work will be carried out and by whom, determining the path along which the work should be carried out, and the necessary sequence of operations. To find this path, the emphasis is on defining operational data, which typically includes planning WHERE and BY WHOM the work is to be performed, as well as the required sequence of operations. This operational data is contained in the standard card technological process, which helps in the design of a route diagram showing the sequence of operations and a list of machines that will be used. If the diagram indicates that certain vehicles are not available, an alternative route may be included in the plan. It is possible that an effective route may not be available due to the unavailability of certain machines at a particular time. In other words, “routing establishes a list of operations, their sequence and the required class of machines and personnel needed for these operations.”

Based on the above, we can conclude that routing is one of the very important elements of production control, since many production management functions are closely related to production processes and depend on the routing function. Thus, it is very important to decide various problems related to: relevant personnel; full utilization of production capacity and determination of the exact time required at each stage of production.

3. Scheduling

Scheduling determines the time for each stage of production, that is, it predetermines “when the work must be done.” It consists of the start and end times of the various operations that will be performed. In other words, the scheduling function determines when each activity and the entire job should be performed. The optimal schedule determines the time when each operation begins and ends on a specified machine to meet desired delivery dates. Good management involves specifying not only the time at which each operation is to begin, but also indicating the progress of each production part, the amount of work for each machine, and the availability of each machine to perform a new task.

Schedules can be of two types: master schedule (master production plan) and detailed schedule. The tasks described in the master schedule are used to plan the capacity of the entire plant, while the detailed schedules are used to plan the production and assembly operations required for each product.

4. Issuing orders (dispatching)

Dispatching is part of production control, which translates work planned on paper into actual production. Dispatch functions are performed taking into account all the details of the drawn up production plan and schedule. Thus, dispatch makes sure that the material is moved to the right place of production, that the tools are in the right place, that the work moves along the route map. Dispatching carries out the organization of direct work in accordance with the plan. Thus, dispatching involves issuing work orders. These work orders initiate production. The orders contain the following information:

• Name of product
• Name of manufactured parts, assemblies or final assembly
• Order number
• Quantity
• Description and number of necessary operations, their sequence
• Units involved in each stage
• Tools needed for every operation
• The machines and machines involved in each operation and the start dates of each operation

5. Execution control

Execution control is the last stage in the production management process. This feature is designed to track production activities. The goal is to ensure that what is planned is accomplished. The control function consists of reporting data on production and investigating deviations from predetermined time schedules. Control includes the following functions:

• Checking that all materials, tools, components and accessories required for production according to current work orders are available at all workplaces, in the specified quantities for starting and carrying out technological operations.
• Checking the progress of work and operations at various stages of production. Includes the collection of information related to the start and finish times of tasks and completion dates of work, the status of actual work relative to planned completion dates, the position of movement of materials, components and assemblies in production, and verification of results.
• Preparing work progress records and monitoring their relevance.
• Reporting to production managers on all significant deviations to enable corrective actions to be taken. Also includes reporting to the production planning department to adjust future plans.

Thus, production planning and control, going through all the phases discussed above, ensures production of proper quality, quantity and ensures shipment within the stated time frame. It must be borne in mind that production planning and control is a continuous process, and its functions are interdependent.

Difficulties with managing orders and properly loading production capacity force enterprises to seriously think about increasing their competitiveness.

One of our clients, Director of IT Department managing organization"AEM ​​Technologies" to CNews, how the introduction of a production planning system helped one of the largest machine-building enterprises North-West Russia - Petrozavodskmash to comply with production deadlines and improve its quality.