Dimensions of Production Planning
Production planning is a name assigned to the various techniques used in production environments to maintain flow. Similar to a thermostat and the regulation of temperature, production planning involves the adjustment of the workforce and process flow to maintain optimal use of company resources and avoid the costs associated, for example, with bottlenecks and excessive storage/shortage costs.
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Definition
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Production planning involves all aspects of production, from the ordering of raw materials to delivery of the finished product, and is primarily concerned with the efficient use of resources. While production planning is typically seen in manufacturing environments, an increasing number of service-oriented industries are using techniques of production planning to increase the efficiency by which those services are provided.
Inventory Control
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Production is firstly managed by balancing the inventory with the customer demand. Different mathematical models are used to develop an optimal inventory, by which storage and ordering costs are balanced with shortage costs. Some of these models incorporate the cost-savings effects of synergy, which frequently occur in manufacturing environments to some degree.
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Aggregate Production Planning
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Aggregate planning takes the issue of inventory and adds the component of the workforce. Parallels can be drawn between inventory costs and work hours, such as the cost of labor, overtime and layoffs. These resources are lumped together by "labor resources" and "machine resources," providing a general overview of how resources are used to fulfill customer demand. While this aspect of production planning is effective, it should be remembered that it is based on certain assumptions regarding customer demand and delivery and, thus, is only as effective as those assumptions are correct.
Detailed Scheduling
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Detailed scheduling takes aggregate production planning to the next level. Detailed scheduling involves the careful examination of resources individually. This helps reduce bottlenecks, reduce lead times and increase production; it is essentially a tool that seeks to streamline the entire process. Detailed scheduling combines inventory management with aggregate production planning and includes a division of resources specific to function, as in "machines that press cogs" and "machines that pour the steel to make the cogs" rather than simply "machine resources."
Capacity Planning
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Capacity planning is related to detailed scheduling in that it too involves a careful examination of resources. However, capacity planning is different in that it not only seeks to determine the optimal output, it also looks to identify the maximum output. This is an important part of scheduling, particularly as, when required for only short periods, production can be ramped up with minimal extra cost, an ability that is lost in other aspects of production planning. That said, it should be remembered that maximum output is not necessarily optimal and may result in decreased quality as machines and people reach their maximum and essentially "burn out."
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