The importance production planning in business

December 16, 2021

Importance of production planning

When fulfilling orders on time, production planning plays a critical role. If companies do not know their job schedules, workstation availability, and supplies, they will find it hard to keep their customers happy and satisfied.

Production planning is critical, whether you are a new or a seasoned manufacturer. It ensures optimal usage of resources similar to how monthly plans and scrums run operations seamlessly.

Keep reading and get yourself familiar with what production planning is.

Production planning overview

Production planning refers to the act of developing a guide for a specific product or service design and production. It helps companies make an efficient production process. As it optimizes the manufacturing process, it is being applied in different forms of design, delivery, and production of software.

This manufacturing strategy outlines the step-by-step product creation process from conception to completion. It informs the manufacturers about the amount of product necessary to be produced. It also provides a production deadline. It helps the manufacturers determine the raw materials required for producing a particular product. 

Why production planning matters

With production planning, companies can create an efficient production process based on organizational and customer needs. It optimizes customer-independent processes like production cycle time and customer-dependent processes like on-time delivery.

Having a good production plan can reduce lead time, the amount passing between order placement and order completion and delivery. However, the definition of lead time may vary depending on the company and production planning type.

What are the different types of production planning

The different production planning types focus on different production process’ particulars, including:

Master Production Schedule (MPS)

This system involves schedules for individual, particular commodities that need to be produced in a specific period. It is usually generated by software, but users can make some adjustments.

Material Requirements Planning (MRP)

This system is often used for inventory control, production planning, and scheduling. It ensures raw materials availability and plans to purchase and manufacture activities. It is usually automated by software but also functions manually.

Workflow Planning 

This system involves planning the sequence of the operations performed by a team member or the whole team.

Capacity Planning 

This system refers to the process of identifying the capacity that organizations have to meet changing demands. 

Meanwhile, organizations may also encounter other planning types applying the production planning logic to areas in addition to manufacturing. For instance, human resources planning optimize processes that enable organizations to meet their talent and hiring demands. Check out the other examples below:

Sales and Operations Planning 

This process is used for more accurately matching a supply with the existing demand.

Enterprise Resource Planning (ERP)

This process integrates the main business processes into a unified system, usually via ERP manufacturing software.

Steps in production planning process

Below are the steps involved in the production planning process:

Estimate product demand

This step provides a rough outline of the number of products that need to be produced in a particular period. It is generated by integrating the historical production trends analysis to future market trends.

Weigh the production options 

This step involves accounting for available resources on hand. Then, it explores various methods according to projected demand estimates.

Most efficient option selection 

In this step, organizations have to choose the least costly and most time-efficient resources.

Monitoring and evaluation 

After carrying out the plan, the next step is to monitor what is happening according to the plan compared to what is actually happening. Then, organizations have to evaluate how well the two situations match up. 

Plan adjustment 

This step involves changing or adjusting the plan to ensure that the production plans in the future will meet customer KPIs more effectively. It also ensures that plans become more successful in their execution.

How to improve production planning

Before developing a production plan, organizations have to forecast product demands. It may not be accurate to the last digit, rough estimates rolling plays a critical role in allocating resources.

Companies can conduct forecasting according to several factors like market demands or trends and historical order data. If they draw out proper forecasts, it is easier for them to plan the material type and quantity to be produced. It also improves raw material procurement planning.

Efficient inventory control is also critical in production planning. It involves reordering once the existing dips below a specific level. It also involves factoring in storage conditions and calculating the lead times when ordering items that come with long lead times.


Without production planning, it is challenging to achieve efficient production. It is equivalent to an organized manufacturing process and minimizes waste in the manufacturing products. Companies use it to increase efficiency and define operations. So, it is essential to learn how to develop an effective production plan, whether you are a new or experienced manufacturer.

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