Production Planning for Small Manufacturers

"Plans are worthless. Planning is essential." - Dwight D. Eisenhower

 

During the past decades, the concept of doing business has changed dramatically. Previously unimaginable things are now essential parts of our everyday lives. For good or bad, changes come very rapidly, leaving the previously dominating things behind.

People are not always able to change as quickly as times require. For this reason, a lot of manufacturers still plan their production using the same methods used in the previous century. At that time, if you did production planning, you must have had a massive business with lots of workers and a huge workflow.

Nowadays, the idea that only big manufacturers need or can afford management of their production planning is still alive. This mindset excludes the possibility of implementing it in small or medium productions and leads to losses in competition.

 

Why is production planning important?

 

No matter what kind of business you have, there are the same main principles of success.

You need to accomplish only two things:

  • Good product
  • Good service

That’s all you really need to reach the hearts of your customers.

The product you are selling must be well-made, easy-to-use, of good quality, appealing, etc. Your attitude towards clients must be caring. Delivery must be in a promised time period, invoices must be correct, etc. With these two points, every client will be yours - for a long time.

But maintaining this is not as easy as it looks. For example, suddenly you have more items ordered than you usually have. That’s good news! A big order! You happily go check your stock and suddenly find that you don’t have enough items to fulfill this order. You start contacting your supplier and other suppliers, but the earliest date your items will arrive is way past your deadline. Long story short, you failed, and this customer will never contact you again.

How can you prevent a situation like this from happening?

Yes, right - production planning.

It plays an important role in any successful business, and it’s hard to find a case where planning plays as great a role as with manufacturing companies, where bad production planning could be a trigger to a catastrophe, or oppositely, proper planning may become a strong competitive advantage.

As Benjamin Franklin once said, “If you fail to plan, you are planning to fail!”

The importance of production planning is that it gives you knowledge: what you have, what you need to purchase, when you need it, how long will it take to get it and much more essential information about your business. It gives you full control over your manufacturing process, and this, in turn, gives you the power to stop wasting time, to avoid bottlenecks, to manage your crew effectively and to make the process flow without stops and troubles. Does it sound like “efficiency” to you? Because it is.

The definition of production planning goes something like this:

“Production planning can be defined as the technique of foreseeing every step in a long series of separate operations, each step to be taken at the right time and in the right place and each operation to be performed with maximum efficiency (Kumar, 2008).” “Garment Manufacturing Technology,” Woodhead Publishing, 2015.

It sounds good, but let's sort out all that "production something."

 

What is production planning and what is production scheduling?

 

Production planning is your strategy for the whole manufacturing process. You’re making a map consisting of all the processes that are needed to manufacture your product. This map leads from nothing to the final product. Your manufacturing process will follow, step-by-step, this map.

Production scheduling is the same as planning but process specific. It organizes separate parts of the whole production process and is adjusted depending on the real-time workflow.

From clever production planning and scheduling comes good production control.

Production control means that you always have an actual overview of your manufacturing, all information about your inventory is quickly accessible, you know everything about real-time workflow and are ready to immediately react in an unforeseen situation.

Never underestimate production control!

Without it, efficiency is unreachable. Great production control is a competitive advantage, because it gives you great confidence in your manufacturing. You are sure that you have all the needed raw materials, you know your capacity and how much you can produce at what time.

You need it even if you are a small make-to-order enterprise. You will feel confident in front of a client and will be able to quickly make accurate estimates. It will give the client a sense of safety and confidence in you. Right after getting the order you will quickly schedule everything needed, and it will become a part of your production plan.

Now, when all the terms that start with “production” are clear, let’s get further into it.

 

Production planning know-how

 

All manufacturing businesses - from a small bakery to factory production - have the same goal: to make quality goods with minimal time and resources.

Let’s step-by-step look at what you need to achieve that.

First, what information is needed for proper manufacturing planning?

Of course, you must have a full overview of the needed materials and components for your product. That’s the first thing needed in production planning.

1. Components of your product:

  • Bill of Materials (BOM)
  • Routing (how the item is going to be produced)
  • Raw materials availability in stock
  • Cost of raw materials
  • Supplier's lead times and prices

Then, you need to connect all the components into one product. That's the job for the workers or machines; that’s why it is the second category of needed information for production planning.

2. Workstations and workers

  • Availability
  • Information about other works on the machines
  • Capacity and productivity
  • Costs related to machines or workers on the workstations

Now, let’s stop for a second and think, why did we gather all that info?

The answer is:

With this information, it is possible to answer two key questions: when will the product be ready and what will it cost?

And yes, answers to these questions are worth the wasted time.

As was said earlier, the goal is to “make quality goods with minimal time and resources.

If we know when the product will be ready, we can plan to start manufacturing of the next product right after finishing the previous one. It will make the process as fast as possible.

Correctly calculating the cost of production will help to estimate the best optimal price for the manufacturer and the client.

That sounds great, but if we look at the amount of this information with a pinch of realism, it will be clear that making all needed calculations will take a huge amount of time and effort. The scheduling will take more time than simply doing it.

Oh, don't be so dramatic! You just have to use the right tool to do that for you.

The human brain is 10 million times slower in calculating than a computer. Then why not leave it all the hard work?

 

The right tool

 

For some manufacturers, choosing the right production planning software is the hardest part of all the processes of optimization for their production.

The classic of classics, a veteran of spreadsheets – Excel

Everyone who was forced to do something in Excel loves it and hates it. Unfortunately, Excel is not suitable for manufacturing planning and scheduling.

  1. It doesn’t update automatically, which means that a worker has to do it by hand. It’s very easy to make a mistake when you are filling tens of columns and rows with different data.
  2.  It takes a lot of time and effort. It is nearly the same as doing everything on paper.
  3. Why use multidisciplinary Excel when there are systems made especially for manufacturers?

Some manufacturers still use Excel because they believe that all production planning systems are the same giant monsters as SAP, and to implement it, you need a budget greater than the yearly budget of the USA.

Also, many are confused by the large variety of software solutions and terms, like MRP, MRP II, ERP, APS, etc.

Don’t be afraid. You don’t need to be a manufacturing software specialist to find the right solution for your production. You need only two things:

  • Knowledge about your company (e.g. size, number of workers)
  • Free trial

Usually, production software providers give information on their homepage regarding for whom they are suitable. It doesn’t mean that you can’t try it if you are a bit different from their requirements. It only means that their software was made with the thought of their target group manufacturers and their needs, which may differ from your needs.

The best way to understand whether this solution is suitable for you is to try it! Nowadays, the vast majority of SaaS (system as a service) companies have free trials. It is not said in vain that it is better to see once than to hear one hundred times.

Right now, you have an overview of why production planning is crucial and you are willing to optimize your production process with some good manufacturing software.

That’s great already, but now you have to find the best production planning system, and you have only a vague idea of what functionality you need in it.

Let’s make it clear right now…

 

What functionality is needed for good production planning?

 

As a rule, very often manufacturing starts from customer orders. So, the information about the customers and their orders should be stored somehow.  This is the task of the CRM part of the software system.

CRM (abbreviation from Customer Relationship Management) not only stores the above-mentioned information. Its main functions are:

  • Being the right hand of the Sales or Customer Service Department by storing and reflecting the sales pipeline
  • Being a source of information for the Production Planning Department by storing customer orders alongside their delivery times
  • Being the source of important accounting information by providing invoices and shipping documents
production-planning-customer-orders    

It is not possible to produce goods from thin air. So, raw materials and needed components should be ordered prior to production. There are three departments responsible for that.

  • The Product Department is responsible for developing product documents, which are, in general, BOM (Bill of Materials) and Routing. Often, they are supplemented with drawings
  • BOM is the list of materials and components needed for producing the final product, with their quantities per one unit, or per some minimum producing quantity
  • Routing is the list of manufacturing operations with the needed equipment, working time and often also labor resources needed
production-planning-bom  

However, for the final answer, it is needed to have the information in the Stock module of the Manufacturing ERP software system: what materials and components are available in stock, how many of them are free and how many are booked already for previous orders?

If there are not enough parts and materials for manufacturing the product, they should be procured. The Purchasing Department, in the Procurement module, has all needed information about possible suppliers, their delivery terms and prices. It allows a purchasing order to be created quickly and planned delivery dates be entered before the goods will physically arrive to stock.

The important functionality of a Stock module is the ability to clearly distinguish between inventory currently on hand and inventory expected to arrive. Also, it helps you to reduce manufacturing costs by optimizing inventory and avoiding overstocking.

production-planning-stock    

So, all these above-mentioned components of a Manufacturing ERP system participate in effective production planning. An important functionality of such a system is an easy rescheduling of work orders, so the system with dynamic possibilities (drag and drop at the monitor screen) has an advantage.

 

MRPeasy is a cloud-based ERP software for small manufacturers (10-200 employees)

Simple yet powerful self-service manufacturing ERP/MRP system. Seamless management of production, stock, customers, purchases, finances, and the team.

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Integrated Manufacturing Software for Business Growth

  • Production Planning

    Accurate automatic planning and realistic production schedule. Reschedule dynamically by just dragging and dropping manufacturing orders and operations in the calendar or Gantt chart.

  • Stock

    Inventory management, stock movements, batch and serial number tracking. Set and optimize stock levels and avoid stock-outs. Have a clear history of your stock operations.

  • CRM (Sales Management)

    Just a few clicks to calculate the product cost and the best delivery time. Send quotations and invoices, prepare shipments. Send confirmed customer order to production. Track the sales process all the way from quotation right down to delivery using a simple pipeline view.

  • Team

    Simple environment for line workers to follow tasks on desktop or mobile device. Real-time shop floor reporting. Real-time overview of the need and availability of human resources.

  • Purchasing

    Manage purchases and raise pre-filled purchase orders with a single click. Vendors, prices, lead times, it’s all there. Manage your supply chain with the help of accurate statistics. Forecast your procurement needs.

  • Accounting

    Enjoy clear visibility to your business performance. Follow your cash flow, balance sheet and profit/loss in real time. Understand the profitability of the business, and more.

More than 500 manufacturers trust MRPeasy

Reviews

Brandon Ames

CEO, Anicell Biotech

MRPeasy gives us the ability to track all of our manufacturing lot costs right down to the individual serial number of our products. MRPeasy provides the software as a remote service and has never been unavailable to us except in…

David Altemir

CEO, Altemir Consulting

The user interface is excellent, I think. It really is at the right level of complexity for many of my clients. All the screens are very straightforward. For example, the single object in the purchasing section of MRPeasy is the…

Francois Byrne

Hybrid Power Solutions

Great customer service and overall the product is quite strong. Definitely one of the best bang for your buck. Stock, BOM, and inventory management are excellent. Managing production and assembly orders is a breeze.

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