Navigating Production Planning for Small and Medium-Sized Manufacturers

Small and medium-sized manufacturers with successful supply chains rely heavily on robust production planning. Optimizing the production plan, which takes into account the manufacturing process from raw materials to finished goods, can enhance a company’s operational efficiency, cost savings, and customer satisfaction.

Using manufacturing production planning to strengthen the supply chain involves aligning production processes with overall supply chain goals. In this blog, we'll explore several strategies and practices to consider.

Demand Forecasting

Start by forecasting demand for the company’s products. Collaborate closely with sales and marketing teams to gather market insights and historical sales data.

Share demand forecasts with suppliers to ensure they can plan their production and deliveries accordingly. Providing a supplier with a blanket purchase order with timed release dates increases a manufacturer's bargaining power for better pricing and ensures timely delivery of raw materials and components.

Inventory Management

Implement inventory optimization techniques to maintain the right level of stock. This includes determining safety stock levels, reorder points, and economic order quantities. The objective here is to meet customer demand while avoiding overstocking or understocking issues.

If possible, utilize technology and inventory management software to track and control inventory levels in real time. Enterprise Resource Planning (ERP) and Manufacturing Resource Planning (MRP) systems provide data-driven insights for better decision-making in production planning and supply chain management. These tools provide visibility of inventory and track movements from raw materials to work-in-progress (WIP) to finished goods.

Production Scheduling

Create a detailed production schedule that considers lead times as well as labor and equipment resources. This involves determining which products to produce, when to produce them, and in what quantities.

If available, utilize ERP and MRP systems to automate and streamline production scheduling.

Capacity Planning

Assess manufacturing capacity regularly. Ensure that production facilities have the necessary equipment and workforce to meet demand. Weigh the costs and benefits regarding adding a second or split shift to meet demand if needed. Analyze capital expenditure (CapEx) budgets to determine if the company would benefit from additional or upgraded equipment. 

Allocating resources such as labor, machinery, and raw materials efficiently is critical. It ensures that production runs smoothly and assists manufacturers in making informed decisions about expanding or optimizing production capacity when needed.

Invest in Internet of Things (IoT) tools to monitor production performance and detect issues in real-time. Sensors can be an economical way to monitor equipment output, as well as detect production line issues for capacity planning.

Quality Control

As maintaining product quality throughout the entire production process is vital, manufacturers should prioritize quality control at every stage of production to reduce defects and costly rework.

Have a solid corrective action plan in place to handle non-conformance raw materials and WIP as well as rejected and returned finished goods.

KPI Analysis

Key Performance Indicators (KPIs) measure the results of production planning and provide valuable metrics that manufacturers can utilize to analyze processes and make adjustments when necessary to improve production and profitability. Below are a few KPI measurements that are common to production planning:

• Production rate: This rate calculates the number of items produced within a specific period. Increasing this rate is a sign that the production line is becoming more efficient.
• Downtime: Downtime tracks the percentage of time that production is on pause during scheduled operating hours. This metric can take a downturn if the production line has frequent accidents or machinery issues.
• Changeover time: This metric measures how long it takes to switch from one production task to the next. Optimizing it involves streamlining changes in staff, equipment, and raw materials.
• On-time delivery rate: On-time delivery rate measures the percentage of orders delivered on time. A high on-time delivery rate can lead to superior customer satisfaction. 
• Inventory turnover: This KPI monitors how quickly inventory is sold and replaced. High turnover is a healthy sign of efficient production planning and accurate demand forecasting.
• Resource utilization: Resource utilization tracks the production line’s utilization of labor, machinery, and raw materials. Increasing this metric can translate into cost savings.
• Defect rate: This rate showcases the percentage of products that are produced with defects. By improving quality control, manufacturers can reduce this rate and minimize waste.
  

Lean & Continuous Improvement

• Foster open communication lines with customers, suppliers, and internal teams. This involves a “See Something, Say Something” mentality by management.
• Collaborate with suppliers to identify areas for improvement and implement corrective actions as needed.
• Regularly meet with internal production and operation teams to review the production planning processes to increase efficiency and reduce costs.
• Provide customers a channel by which they can provide feedback on the goods or services received.
• Implement lean manufacturing principles to reduce waste, improve efficiency, and minimize production costs.

How Production Planning Contributes to Success

When done right, production planning can provide the following benefits:

• Elevated efficiency: Production planning aims to improve efficiency within every aspect of the production process.
• Reduced costs: Production planning can help companies eliminate bottlenecks, minimize waste, maximize its resource utilization, and operate much more cost-effectively.
• Better resource allocation: Manufacturing resources (staff, machinery, and raw materials) require valuable capital. As such, it is vital to allocate them effectively and efficiently.
• Enhanced agility: Effective production planning can enable companies to adapt faster in the face of unforeseen challenges, such as evolving customer demand and supply chain disruptions.
• Improved quality control: Proper production planning ensures consistent quality standards that satisfy customer expectations and strengthen a company’s reputation.
• Customer satisfaction: Delivering in full, on time (DIFOT) ensures customer loyalty. Production planning can facilitate accurate demand forecasting, responsive scheduling, and shorter lead times.

Common Production Planning Missteps and How to Avoid Them

Production planning is complex, so it's not uncommon for supply chain managers to overlook essential considerations from time to time. With that in mind, below are a few common mistakes of which companies should be aware:

• Inaccurate demand forecasting: Overestimating or underestimating demand can have costly consequences, ranging from excess inventory to delayed deliveries.
• Poor capacity planning: Miscalculations regarding production capacity can develop into bottlenecks that push back production schedules and cause delays.
• Disjointed communication across departments: Without consistent communication, production planners may miss out on valuable information that could enhance the accuracy of demand forecasts.
• Slow adoption of innovative technologies: From cloud computing to automation, there are many innovative manufacturing technologies that can enhance production efficiency. Neglecting industry technology can cause a company to fall behind its competitors.
• Managing remotely: While technology can provide real-time insights, it’s important to monitor production and assembly lines in person to observe potential bottlenecks and inefficiencies. 
• Overlooking contingency plans: From staffing shortages to machine breakdowns, no production line is without setbacks. It’s important to have business continuity and contingency plans in place to expedite decision-making when unexpected challenges arise.

Improve Production Planning With CMTC

There is a delicate balance that must be struck between managing resources and meeting the delivery expectations of customers. By integrating these practices into production planning, manufacturers can enhance the overall strength and resilience of their supply chain. This approach will help manufacturers to meet customer demands efficiently, reduce costs, and respond effectively to unexpected disruptions.

Need assistance? CMTC knows that production planning plays a pivotal role in a company’s long-term success.
Our team of experienced and knowledgeable consultants are standing by to help optimize these processes. 

Contact us today to schedule a complimentary consultation!