Production Planning

  • Production planning is the administrative process that takes place within a manufacturing business and which involves making sure that sufficient raw materials, staff and other necessary items are procured and ready to create finished products according to the schedule specified.  Production planning occupies significant place in an organisation because other functional areas of management viz., financing, marketing, personnel revolve around it. The data for this planning comes from the marketing department which forecasts the demand and determines the quantities of various products needed to fulfill the orders. The delivery schedules are also established. The available stocks and buffer stocks (inventory) needed to meet the urgency are also considered.
  • According to Kim bait and Kimball Jr. “The planning of industrial operations involves four considerations, namely, what work shall be done, how the work shall be done and lastly, when the work shall be done”.
  • According to Alford and Beatty “production planning is a technique of forecasting or picturing ahead every step in a long series of separate operations, each step to be taken in the right place of the right degree and at the right time and each operation to be done at maximum efficiency”.
  • According to Bethel, Smith and others “Production planning is a series of related and co-ordinated activities performed by not one but a number of different departmental groups, each activity being to systematise in advance the manufacturing efforts in its area. ”

Objectives or Functions of Production Planning

  • Production planning ensures the effective utilization of all the resources, plant capacity and machinery. It results in lowering the cost of production and thus increase in returns to the firm.
  • Production planning ensures a regular and steady flow of production. The inputs are available at right place and right time. This ensures uninterrupted supply to consumers.
  • After receiving the forecasts of the demand from marketing department production planning determines the quantities of various products needed to fulfill the orders. Then the estimation of the resources like men, materials, etc. required to execute the order is done.
  • The level of inventories should be monitored carefully. Due to overstocking the working capital of the firm gets blocked while due to understocking the production schedule is disturbed and delivery of finished products gets affected. Production planning takes step to maintain proper level of inventory which is neither overstocking nor understocking. Stock of raw material is maintained at a proper level in order to meet the production demands, while stock of finished goods is also maintained to meet regular demands from customers.
  • Production planning coordinates with different departments like marketing, purchase and human resources, so that the profit of the firm is maximized.
  • Production planning ensures correct level of inventory and material handling. This ensures minimization of wastage of raw material and other resources. It reduces the cost of production. The waste of one department can be used as a raw material for other department.
  • Production planning helps in providing better work environment and conditions like proper working hours, leaves and holidays, proper wages and incentives to workers.
  • Proper planning ensures optimum use of all resources like men, material, machines and plant capacity which results in improvement of productivity of the production department which in turn increases the profit of the firm. It also reduces the cost of production. The training of workers, use of modern automatic machinery and proper flow of the work ensures increase in the productivity. At the same time the quality of product can be improved.
  • Production planning ensures a regular uninterrupted output of product, which guarantees market presence and satisfy consumer’s demand. It helps in increasing the market share for the product. It also results in consumer satisfaction.

Stages or Steps in Production Planning

Aggregate Planning:

  • Aggregate planning is an attempt to balance capacity and demand in such a way that costs are minimized. The term “aggregate” is used because planning at this level includes all resources. Aggregate resources may be the total number of workers, hours of machine time, or the raw materials, etc.
  • In aggregate planning, all inputs that are required to meet the targets such as, machinery, raw materials, number of machines and their types, workforce, storage space, facilities for material handling and storage, and policy options like sub-contracting, overtime, hiring, and laying off workers are considered.
  • For doing aggregate planning complete information is required about available production facility, other options like sub-contracting or outsourcing, the status of the workforce and their skill level, raw materials, exact demand for the relevant period, schedule of delivery, quality requirement, inventory level, financial planning, and organizational policy.

Aggregate Planning Strategies:

  • Make or buy decisions have to be taken to meet the varying demands to avoid the deficits or excesses. Methods used are matching demand and level capacity.
  • The choice between the strategies is determined by the capacities available, availability of part-time labour, the reliability of subcontractors, and management’s policies.
  • Level Strategy:

  • In this strategy, a steady production rate and workforce level are maintained. In order to satisfy changes in customer demand, the firm must raise or lower inventory levels in anticipation of increased or decreased levels of forecast demand.
  • A level strategy allows a firm to maintain a constant level of output and still meet demand. This is desirable from employee relations.
  • The disadvantage of level strategy is high inventory, subcontracting, overtimes, and increase backlogs.
  • Chase Strategy:

  • In this strategy, the production is matched dynamically with demand. This could result in a considerable amount of hiring, firing or laying off of employees. This strategy can impact employee relations. There is an erratic utilization of resources.
  • The major advantage of a chase strategy is that it allows inventory to be held to the lowest possible level.
  • Hybrid Strategy:

  • The hybrid strategy combines and looks for a balance between level strategy and chase strategy.


  • Estimating involves identifying the manpower requirements, machine capacity, and materials required to meet the planned production targets.


  • Routing can be defined as the process of deciding the path (route) of work and the sequence of operations. This stage includes the planning of where and by whom work shall be done, the path that works shall follow, and the sequence of operations. The data required for this stage is contained in the standard process sheet which helps in making out routing in the standard process sheet which helps in making out a routing chart showing the sequence of operations and the machines to be used.
  • It decides in advance, the quantity, and quality of the product, the men, machines, and materials to be used, the types and number of processes to be used, the sequences in which the processes or operations to be arranged. the place where the production is to be done.
  • Routing gives a very systematic method of converting raw materials into finished goods. It leads to an efficient flow of work,  optimum utilization of resources. Routing saves time and space. It influences the plant layout.
  • In mass production or continuous production the process of routing is simple but in job production it is complex.

Factors Considered During Routing:

  • Type of manufacturing process/Technique employed: In automobile production and batch production line type layout is used. In the line layout, the production process is serialized according to the sequence of operations. This makes routing process automatic. For a particular model, the layout remains constant. The set up requires change only when new models are introduced.
  • Plant equipment characteristics: If the same product can be manufactured on two or more machines, the cheapest one is selected. For this production, the planner should have information about the machinery available, jigs and fixtures, tools required, the special tool required, material handling facilities, etc.
  • Availability of plant and equipment etc.Production planner has to check the availability of machine, machine load conditions, breakdowns or absenteeism of workers. The production planner should have a substitute plan for an emergency.
  • Availability of requisite skilled manpower: Manpower required in the plant may be highly skilled, semiskilled, or unskilled. If a machine is selected and is available but the machine requires the availability of skilled labour to operate it. Then the availability of skilled labour to operate the machinery should be considered.


  • Scheduling is the next step in production planning. Scheduling is planning the time element of production. It fixes the amount of work to do. It arranges the different manufacturing operations in order of priority. It fixes the starting and completing, date and time, for each operation. For these different charts and control techniques are used. Scheduling is also done for materials, parts, machines, etc.
  • Schedules are of two types: Master schedule and Detailed schedule. In master schedule, the activities are recorded on a plant-wise basis, while in the detailed schedule the manufacturing and assembly operations required for each product are provided.
  • Scheduling helps to make optimum use of time. It sees that each piece of work is started and completed at a certain predetermined time. It helps to complete the job systematically and in time.
  • It helps in the delivery of the product to the customer on time. It helps in the optimum utilization of resources.

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