What Is Production Planning? (And 4 Steps To Use It)

By Indeed Editorial Team

Updated July 21, 2022 | Published June 22, 2021

Updated July 21, 2022

Published June 22, 2021

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

Production planning helps companies organize the manufacturing process. Organizations can also use production planning to define operations and increase efficiency. It's helpful to learn how to make a production plan to increase output and reduce waste in manufacturing company products.

In this article, we explain what production planning is, discuss its benefits, list four steps you can take to create a production plan and offer helpful tips.

What is production planning?

Production planning is a manufacturing strategy that outlines the step-by-step process of creating your product from conception to completion. A production plan informs manufacturers of the amount of product to produce and provides a deadline for production. This strategy helps identify the raw materials needed to produce a product and allocates resources. Production planning creates a process map that can help managers develop production schedules.

Related: A Guide to Process Mapping: Types and Tips

What are the benefits of production planning?

The benefits of production planning include:

Organization

Production planning identifies which materials a manufacturing project requires and improves the allocation processes for acquiring the correct resources. This process also helps define timelines for when to complete production tasks and organize production crews. By clarifying expectations and needs, teams and processes can operate more efficiently.

Related: 8 Organization Strategies for Project Success

Communication

Business processes often facilitate communication by making information about job tasks clear and accessible. The production plan enables manufacturers to communicate with suppliers about which raw materials they need, the amount they require and when they need the materials. Improving communication is an important aspect of production planning because it helps achieve efficiency.

Efficiency

Organizing plans to get and disburse your products often allows your production process to run more efficiently. This is because you already understand each aspect involved in the production of your product. Because of this, you can pre-establish practices that allow you to create and disburse goods quickly.

Related: 5 Types of Production Planning (With Examples and Tips)

Resource allocation

Having an effective production plan allows you to decide how to best use the company's resources. These resources include the materials you use to make your products, the time of participating professionals and the company's monetary assets. Production plans often include a mention of how to use these resources, which ensures professionals don't encounter shortages or an excess of materials.

Related: What Is Resource Management and Why Is It Important?

Cost efficacy

Planning the details of your company's production schedule and process allows you to make the most cost-effective decisions. This is because you can plan to use cheaper resources and eliminate waste in the production process. Considering costs when creating your production plan allows you to use the company budget appropriately and possibly even reduce the cost of production.

Related: Top 11 Production Skills To Develop

Production planning vs. production scheduling

Both production planning and production scheduling are processes that help organize business operations. These two processes depend on one another's success to accomplish the overall goals of a business. Together, production planning and production scheduling determine the who, what, when and how of manufacturing.

The difference between the two processes is that production planning determines what the business produces and how much product to make, while production scheduling determines who production involves and when they complete production tasks. For example, production planning observes supply and demand and uses customer orders to determine how many units of a certain product to produce. Production scheduling uses the production plan to decide which employees fill the customer orders and provides a deadline for the tasks to be completed.

Related: Production vs. Manufacturing: What's the Difference?

How to plan production

You can follow these four steps to perform the production planning process at work:

1. Determine the sequence

Determining the sequence of your production, also known as routing, involves planning what you want to sell. Then, you decide about the product, such as the quantity you plan on making, the resources you can access and the method you plan to use in your production process. After you determine these specifics about your product, try to plan a location in which you can create your product.

When determining the sequence of your production plan, consider‌ the:

  • Production type: It's important to consider if you want your production process to be continuous or intermittent. This helps you to calculate the amount of resources you use and how much product you can create.

  • Manufacturing setting: Consider how the layout of your manufacturing location may affect your production process. It's important to include plans for a safe and effective work environment.

  • Employees: Try to consider the needs and abilities of the professionals who create the product. The number of employees working in a manufacturing plant can affect the number of goods you produce and the cost of production.

2. Develop a timeline of operations

Developing a timeline of operations includes scheduling goals for professionals to accomplish and setting a deadline for that goal. This helps employees predict how much product they can produce and allows for time-efficient practices.

When developing a timeline of operations, be sure to create‌ a: 

  • Master schedule: A master schedule accounts for the total amount of a product that companies need to produce.

  • Operation schedule: the operation schedule for a production plan includes when employees work and which equipment they use.

  • Daily schedule: A daily schedule accounts for day-to-day activities and sets a specific goal that accommodates the master schedule.

3. Allocate resources

After establishing where and how to make your product, allocate your resources so that your team can begin production. Allocating your resources includes ensuring each manufacturing professional has the materials they need to meet their production goals. Properly allocating resources allows your production team to work efficiently and helps you understand the costs of production.

When allocating resources, consider‌ factors like: 

  • Materials: The materials of your production process include any ingredients you use to make your product. Be sure to consider the equipment you need too, such as machinery and protective attire for professionals.

  • Work instructions: When preparing for production, it's important to ensure that each professional understands their role‌. Providing work instructions gives professionals clarity on what they can expect during their workday.

  • Employees: Depending on your production needs, you may need a varying amount of employees. Be sure to schedule the correct amount of professionals to complete your production process.

4. Evaluate the strategy

After you enact your production plan, it's important to evaluate its efficiency and success. This includes following up with professionals regarding your company's production goals and examining areas in your plan that you may need to improve.

When evaluating your production strategy, consider the following:

  • Expected performance: Expected performance represents the calculations you originally make in your production plan. It's important to understand your company goals when evaluating production performance.

  • Actual performance: Actual performance represents the current production level of your company. Compare this to the expected performance to gain perspective on the capacity in which your company is achieving its goals.

  • Production issues: It's important to evaluate any issues within your production, especially if the actual performance of your company is a lower value than what you expect. Evaluate the effectiveness of your machinery, employees and production practices to understand any deviations and flaws in your production plan.

Tips for improving production planning

Here are tips to help improve your production planning process:

Perform market research

Market research helps forecast sales and estimate the demand for your products. This helps reduce waste and schedule production to meet consumer demand. You can forecast the market for your production by researching the history of similar products, market trends and previous customer orders.

Related: What Is a Marketing Forecast?

Improve inventory management

Inventory management helps to ensure that you adequately stock to fill production orders. This also helps reduce cost by limiting waste in materials and over-stocking. Using an inventory system that regularly checks items in stock can help improve inventory management.

Related: What Is Inventory Management? Definition and Techniques

Create repeatable processes

You can increase efficiency by planning production processes that you can repeat or automate for future use. Mapping the process you plan can help standardize the workflow. A map also helps visualize the process and identify where you could make improvements to increase efficiency.

Related: 6 Ways To Streamline Business Processes and Workflows

Identify risk factors

Identifying risk factors such as machinery malfunctions helps plan solutions and minimize risks. Fewer risks in the production plan can mean increases in efficiency and revenue. A risk assessment can help analyze a production plan and suggest adjustments to reduce risks the plan may involve.

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