Your level of skill, efficiency, and design of goods and services often decides your
survival. Your plan is what determines and controls your efficiency and design. Without careful planning, today’s high speed machinery can turn out bad product at an alarming rate.
You benefit greatly from a good plan by avoiding production of the wrong or unsalable product. It also prevents producing product or service at excessive and disastrously high cost, which simply can’t be recovered be selling price. Our economy is market driven, as is increasingly true throughout the world. Customers will not pay more for a brand that is virtually identical to lower priced competitors. A moderate for a much superior product, yes, but otherwise customers are highly price sensitive.
The aim here is to give you some useful production planning guidelines. We will discuss and explain them, demonstrate them and then provide a practical production planning form.
The two keys to successful production planning have already been mentioned: the right product or services and the right price. Or, indifferent words, the proper design produced efficiently at low cost so a market price can cover costs and show a profit.
Efficiency. Since our economy is market driven, we prosper and are rewarded when we satisfy the customer at a reasonable price. If a production planner and manager can produce a product so efficiently that it can be priced lower than the competition, customers will reward that product by buying the producer. Clearly the action word is efficiently (meaning more and better goods from a limited set of resources). costs per unit are less.
Rewards. Some producers cry that they don’t see how their competitors can can sell their products so cheap they must be cheating. Probably not. More likely they have found a way of producing at a lower cost. That good old human ingenuity and free enterprise at work. Efficiency is rewarded.
To design a product that customers want and will buy, consider these steps.
- Check your sales, advertising and marketing people. They often know customers well.
- Check customer opinions, likes and dislikes. Design products customers want, not what you want.
- Check competitors. What do they sell most? Least? Avoid the bombs. Improve on the winners.
- Check your dealers. What do they recommend? They see the prospects and competitors every day, and they what sells. They aren’t always right, but they are usually well informed.
- Check your suppliers. They often have large research and development facilities, who have improved products materials, supplies, packages. Often this grows out customer surveys and is checked with prospects. Suppliers are rewarded for generating improvements. And this costs you little or nothing.
- Check independent research and design services. They can often improve your product or service cheaper than you could do it yourself. They may even have something at a bargain price, or be able to suggest low cost improvements.
Schedule production to match the marketing program. For example, product A might be set for promotion in the months two and three. Thus production of ‘A’ Should be increased to cater for the increase in sales.
Control volume cost and inventory. Clearly, as production volume goes up, some economies of quantity set in, and unit cost usually drops sharply. The cost per unit is less when a hundred are made than when only ten are made. But these three other factors raise costs:
- Total costs are more to make larger volume such as 100 than to make 20
- The larger volume must be handled, moved and stored, which takes time equipment, space, people and money.
- Capital funds are now tied up in inventory. Those funds if borrowed have an interest expense. They might also be profitably used elsewhere.
The point is that you must calculate volume savings, but you must also measure savings these other costs of large quantities. When you add it all up, they will reduce expected savings on volume production. Ignoring this is a mistake amateur planners often make.
Use just in time delivery and inventory control. If you plan your product by product or date with care and accuracy, you can enjoy added savings. Thoughtful plans replace cash and expense. You can and should schedule supplies to arrive “right on time” to be used in production This amazingly reduces the high cost of storage and productions well as tying up money in materials inventory. The key here is to work closely with a good supplier who can deliver proper amounts at precisely scheduled times. Suppliers too are watching their inventory.
Quality control is a vital part of production planning. First, have detailed and accurate knowledge of product specifications. Second, be sure that procedures produce to those specs exactly. Make small test runs if this is practical. Third, Review customer complaints and returned product to identify needed corrections. Fifth, make extra efforts to prevent flaws from the occurring. Sixth, arrange for inspection points and sampling. Seventh, give quality control a very high priority. Low performance in this area by many US companies has caused serious loss of market share, sales, profits and jobs.
Material handling is a source of high cost when done improperly, but of major saving when done correctly. An easy way to plan good, efficient methods at little or no cost is to talk to your material suppliers. Often, they will gladly tell you how your competitors do it? Also, material handling equipment sellers will gladly tell you how your competitors recommend various systems. But be careful: don’t buy fancy equipment that performs beyond your needs. In a small firm, simple methods and equipment usually do the job best.
Storage, packing and shipping plans are also major sources of costs or savings. Good programs can be obtained from the sources of cost just motioned, often at no cost. Test several methods and consider suggestions by the plant people who perform the functions every day. Offer a small incentive on volume handling and you will amazed at peoples ingenuity.
Production Plan Format
|Steps||Time in weeks/months|
Items that do not apply to your business can be left blank or marked n/a. Any other items that are not mentioned but are relevant to your business should be included.