The production plan is the ‘agreed to’ plan by senior management determining what product lines and which items in those product lines will be manufactured to meet the sales and revenue objectives of the company.
Furthermore, the Production Plan – along with the overall plan that is typically called Manufacturing and Resource Planning or MRP II – reconciles the sales forecast with available resources of labor and machine capacity.
It is important to note that the Production Plan is also the authorization for the Planning department to convert finished good requirements into a more granular schedule (commonly referred to as the Master Production Schedule, or MPS).
Below is a snapshot of a company’s production plan for finished goods in 2018.
CALENDAR YEAR – 2018
The Master Production Schedule drives the Material Requirements Planning (MRP) system, or something similar, detailing what resources and materials are needed to meet the production schedule.
These outputs provide the Purchasing and Production Control departments with information they need to have the required materials on-hand and schedule labor and machinery to produce the products.
These two departments rely heavily on data, transactions, and communication. This ‘need’ is one of the major reasons why many companies, both small and large, now use Enterprise Resource Planning (ERP) or, at a minimum, a Material Requirements Planning (MRP) system.
Another factor that has broadened the appeal of these systems is that the ‘total cost’ of these computer programs have now become very reasonable. And the amount of efficiency gained in all departments is significant.
The bottom line is that the Production Plan is the company’s approved plan for producing products to meet the company’s sales and marketing plans. The Production Plan is translated into a Master Production Schedule for the company’s finished goods. The Master Production Schedule breaks down the finished goods into raw materials and a shop floor plan so that Purchasing and Production Control can manage the production of the company’s products.
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