Learn more about production planning and control processes

Approach

In this comprehensive article, we will cover the main stages of production planning, highlighting key areas where specialized systems can solve complex problems that impact resource optimization and, consequently, the company's overall results.

Production planning and control (PPC) can be defined as a set of processes aimed at planning production activities in advance, as well as coordinating and monitoring their execution, ensuring that an organization's resources are used efficiently to meet market demands.  

This work directly or indirectly affects other departments within the company and has a decisive impact on its bottom line. The expected outcomes of PPC include:  

WHAT, HOW MUCH, WHEN, HOW, and WHERE to produce.  

The main stages can be described as follows:

‍Demand Forecasting

To begin, we must forecast future product demand within a timeframe that allows for the organization of production, logistics, supply, and financial resources to support a compatible supply. This horizon may be longer or shorter depending on the product type, production strategy, use of imported raw materials or components, and long lead times, among other factors. It is typically structured by product families, where grouped items share common characteristics sufficient for efficient planning. For example, relying on similar machine and equipment configurations to determine factory capacity to meet this forecast; common key raw materials, if the purchasing process needs to start in advance; and approximate price and cost to determine financial viability. If the grouping used for the forecast does not meet these requirements, one may opt for disaggregation based on it for a greater level of detail, using projections based on sales history, for example.

The demand forecasting process can start with historical data, market research, collaborative forecasting, or statistical methods, among others. However, simply projecting numbers is not enough; they must be aligned with production, optimizing the use of productive and financial resources to achieve the company's maximum results.  

And remember, Operacional provides its own production planning solution, with S&OP, IBP, and APS tools natively integrated into a specialist system configured and customized for your operation, which can help your company on the path toward maximum production performance.

S&OP (Sales and Operations Planning)

Following the initial demand, we have a cyclical process called S&OP (Sales and Operations Planning), which aims to align what we forecast to sell with what we can produce and supply, without losing sight of the goals defined in the strategic plan. It is a tactical-level planning process and usually occurs in an aggregated manner by product families.

It can involve various departments, such as sales, marketing, logistics, production, supply, and controlling, with PPC usually taking on the integrative role, as all functions are interconnected with it, requiring the creation of a viable plan for everyone.

As one might imagine, the amount of information that must be collected and organized for this to happen efficiently is vast, and having a specialized system for this is crucial. Although many companies use Excel, it can end up limiting the ability to simulate scenarios, whether due to data updates and accuracy, risks in transposing information and manipulating formulas, or the lack of tools to execute simulations quickly and efficiently. If the time required to build a new scenario is too long, it may prevent the company from achieving better results. Technical specifications, product stocks, inputs and raw materials, sales, delays, maintenance calendars, prices, lead times, and many other important pieces of information must always be up to date; otherwise, the created scenario may be compromised. The product mix itself, which can generate more or less equipment setup, must be taken into account in capacity calculations. The projected stock levels for each period must be aligned with the future demand curve and business strategy, and ultimately, the financial result of this entire set must be aligned with the company's stated objectives and support the business.  

Some articles present financial result simulation as a broader and more evolved value approach to the S&OP process, calling it IBP (Integrated Business Planning). In this sense, the S&OP system can benefit from the entire existing financial and cost structure if it is integrated with the ERP (Enterprise Resource Planning) system, and correctly project indicators, including idle capacity costs and the impact on the bottom line, which can be an important analysis tool in an increasingly competitive market.

Aligning what the market wants to buy with what we can effectively produce requires S&OP to be an interactive process, with commitment between parties, rather than a one-way flow that ends in a mere formal meeting with little capacity to drive better results. For products where we lack sufficient production capacity, we can simulate scenarios by choosing those with the highest contribution margin or those with larger stocks of components and raw materials, for example. Conversely, we can promote the sale of products using the same criteria, observing resources with higher idle capacity, which will absorb fixed costs and improve the company's overall results.

Greater and more dynamic access to information and the evolution of systems capable of simulating scenarios quickly are making S&OP an increasingly continuous process, with a higher level of detail and active interaction with short-term planning through S&OE (Sales and Operations Execution). The resulting short-term reaction capacity can represent significant gains, improving customer service levels, avoiding the buildup of unwanted inventory, and optimizing results. In many cases, this is only possible with a system that integrates all planning levels with real-time data and accounts for the specificities and rules of the business.

As a result, the decisions made in S&OP will become a joint action plan between departments, with an aggregated production and sales plan, commercial and marketing actions, logistics, HR, among others. ‍

Master Production Schedule

Once the S&OP scenario is approved, we generate the Master Production Schedule, which details the disaggregated production plan for the products that will effectively be produced—which may be finished goods in the case of make-to-stock or sales, and intermediates, for which the production of the final item can be triggered at a later stage. As an example, we can have a master schedule for the production of greige fabric, and continuously evaluate which dyed fabric needs to be replenished based on stock coverage calculations or firm orders, in shorter plans or directly in the scheduling, keeping replenishment closer to the final moment when the decision needs to be made. Similarly, for chemical production, we can have the production of intermediate products, such as raw materials for various final products to be scheduled and produced subsequently.

Since we have now defined the final product, we need to adjust production volumes while observing production lot sizes where applicable, re-analyze production capacity, and interact with materials planning, because when we define what we are going to produce, a component or raw material may be missing that can no longer be obtained in time to meet the replenishment deadline, and thus the plan needs to be adjusted.

Often, for the correct production quantity to be calculated, it may be necessary to evaluate product stock characteristics according to the lot, which may or may not fit demands based on specific characteristics and the requirements of different types of customers and processes. Ignoring important constraints at this point can lead to a lack of resources to fulfill what was planned, causing rescheduling and delivery delays, as well as synchronization problems and ripple-effect delays throughout the chain.

Materials Planning

With the production plan defined, we can generate the materials planning to ensure that the needs for raw materials, inputs, and components are met when necessary, optimizing inventory levels. For this to happen, the planning system must have access to product engineering, with the bill of materials and lead times, expected loss rates in each process, and a registry of substitutes and similar products, so that the material explosion is performed correctly. We may also encounter particularities, such as considering available stocks analytically, understanding rules for lots, quality, purpose, among others. A specific lot of raw material may be designated for specific applications, such as in the textile industry: the purpose of the yarn lot may imply a color restriction when dyeing the fabric, or in the chemical industry, where a specific characteristic of a raw material lot may also restrict the finished products in which the component can be used. The ability to automatically categorize stocks while accounting for these constraints in an optimized manner is only found in expert systems.

Depending on the type of material, demand dates can be adjusted with a higher level of detail after the production scheduling stage, where the specific start and end times of each production order are calculated, further optimizing inventory levels by calculating the exact moment of supply on the timeline.

Production Scheduling

In the production scheduling stage, we use the master production schedule and firm orders in the backlog as a basis to detail when and where to produce in the short term, generating production or assembly orders and sequencing the operations of these orders on production resources. This sequencing is essential so that the various production sectors are synchronized, optimized, and have a clear view of their priorities. Furthermore, sequencing allows for the calculation of time required for machine setups and promotes adjustments to achieve maximum performance during these changeovers whenever possible. A common way to perform this function is to use a Ganttchart, which allows for this management visually, regardless of whether the production model is push or pull. Another tool that can be used is Kanban boards, whether manual or electronic, which allow each workstation or supply point to clearly visualize the sequence and the right time to execute their task.

With proper scheduling and synchronization of operations, we can optimize material inventory levels and their movement with greater safety and precision regarding when they should occur. Furthermore, it provides updated information on order delivery forecasts, improving service levels and preventing or mitigating delays whenever possible.

To support this process, the use of APS (Advanced Planning and Scheduling) systems is becoming increasingly common, which can be translated as advanced planning and scheduling. These systems are designed to optimize resource utilization by automatically generating and sequencing production orders using heuristics developed to find solutions in complex environments. They must take into account the specific constraints and characteristics of each production environment and have the capacity to balance flow to optimize production as a whole, rather than just by sector. Information such as demand delivery dates, technical specifications, inventory, production calendars, performance indices, expected quality, and setup rules, among other data, must be kept up to date. Executing this function manually is inefficient in environments with large volumes of production orders or complex workflows.

This category of system can be integrated with an MES (Manufacturing Execution System) solution to actively command communication with process execution, incorporating the programmed sequence of tasks directly into equipment supervisory systems, for example, becoming an important step on the path to implementing Industry 4.0.

Calculating the estimated delivery date at the time of order entry is also a feature that some APS systems can offer, taking into account work-in-progress inventory and current factory capacity. This functionality can be a competitive advantage in customer negotiations, but beyond fast response times, it requires well-defined parameters, as the order entry sequence is not the same as the production sequence and must not negatively impact factory efficiency.

Depending on the type of industry, implementing an APS system can be quite complex, as tools do not always offer sufficient parameterization to account for existing constraints, or due to the inherent difficulty in gathering and integrating the necessary information and rules for the process. If even one relevant criterion is left out, everything generated ends up being lost. It is not uncommon in project meetings where parameters and rules are discussed for many practical constraints to be forgotten or omitted, leading to rework or, worse, compromising the entire result. In many cases, the APS software is purchased and implemented by the company only to be underutilized, resulting in a schedule that cannot be applied in practice. Consequently, it ends up being managed manually by production planning or even within each industrial department, preventing greater gains in resource optimization and delivery quality for customers.

Maintaining a native APS within our systems has become a key differentiator, both in the speed of response it enables regarding changes in planning scenarios and in the ability to address the specificities of each business through rule modeling in every project, generating real gains for production planning.  

Monitoring and control

Monitoring and tracking production operations is an essential part of the production planning role and aims to ensure they are aligned with what was planned. The planner must be attentive to production indicators, efficiency, quality, and deadline compliance, ensuring that deviations are evaluated and addressed at their source with agile corrective actions in each corresponding area, or that new standards are defined and used in the next planning cycle. Constant communication must be maintained with production, maintenance, logistics, and sales departments to coordinate the actions necessary to fulfill the established plan.

It is also a fundamental part of the role to closely track the progress of orders at each stage of the production process, and systems must provide this information consistently.  

With systems becoming increasingly connected to machines, obtaining important production information is no longer a challenge. The real differentiator is actively using this data to feed the planning system, updating scheduling scenarios in real time, adjusting planned sequences, and recalculating delivery forecasts.  

Conclusion

As we have seen in this article, where we summarized the key aspects of expert systems, many challenges surround production planning processes. While more information and tools are becoming available, complexity and constraints are also increasing. Deadlines are becoming tighter, the number of SKUs is growing, chemical development for new applications is expanding, exchange rate fluctuations affect raw material imports, collections are becoming shorter, and there is a rise in customization, B2C, and many other factors that lead to increasingly higher demands.

And remember, Operacional provides its own production planning solution, with S&OP, IBP, and APS tools native to Operacional SGT and PROCESS—expert, configurable systems for your operation that can help your company on the path toward maximum production performance.

Thanks for reading, and see you in the next article!