Production Planning Process: 6 Key Steps to Avoid Chaos
In the previous article, we agreed that effective production planning is the absolute foundation of a profitable company. It’s the backbone that turns chaos into predictable profit.
Theory is important, but I know what you’re waiting for now. You’re asking: “OK, I get it. But how do I actually start tomorrow morning?”
Perfect. Time to turn theory into action.
Step by step, without unnecessary jargon, I’ll show you what a solid production planning process looks like. This is a proven, logical sequence of actions that will help you regain control, reduce costs, and sleep more peacefully.
Before You begin: 3 fundamentals without which any plan will collapse
Before you even think about creating schedules, you need solid input data. Trying to plan without them is like building a house without blueprints – it ends in disaster. Here’s your absolute “holy trinity”:
- Accurate demand forecast: You must know (or estimate with the highest possible probability) how many products and when your customers will want to buy. Base this on historical data, insights from sales reps, and market trends.
- Bill of Materials (BOM): This is the recipe for your product. A BOM is a detailed list of all raw materials, components, and subassemblies needed to produce one finished unit. Without this, you won’t know what to order.
- Routing: This is the execution instruction for the recipe. A routing describes, step by step, which technological operations must be performed, in what order, and on which machines (workstations), for the product to be completed. Thanks to this, you know how long production takes.
Got it? Great. Now we can move on to the actual planning process.
The production planning process in 6 key steps
The output of one stage becomes the input for the next. That’s why sequence and consistency are so important.
Step 1: Creating the Master Production Schedule (MPS)
What is it? The MPS is the overarching plan that specifies what (specific products), how many (in what quantities), and when (in which periods, e.g., weeks) you intend to produce.
Purpose: Carefully analyze market trends, customer orders, and sales forecasts to determine how many products will be needed in a given period. Based on this, you can determine what resources will be required and what delivery deadlines apply. This can be done using historical sales data, market forecasts, and marketing research.
Input: Demand forecast, confirmed customer orders, current finished goods inventory, historical sales data, market forecasts, marketing research.
Output: A binding plan, e.g., “In week 42 we produce 500 units of Product A and 300 units of Product B.”
Step 2: Material Requirements Planning (MRP)
What is it? With the MPS in place, you know what you want to produce. Now the Material Requirements Planning system breaks this plan down into its components.
Purpose: Calculate the exact quantities and delivery dates of all raw materials and components needed to fulfill the MPS. Determine the optimal inventory levels for raw materials, components, and finished goods. Maintaining the right level avoids shortages or surpluses that can cause financial losses. Plan deliveries so that materials are available at the right time and in the right quantity. Long-term agreements with suppliers can help avoid future delivery problems.
Input: MPS, BOMs, current raw material inventory.
Output: Purchase orders (what and how much to buy) and production orders for semi-finished goods (what and how much to produce internally), with required deadlines.
MRP is the logistical brain of operations. It ensures that the production floor never runs out of necessary “building blocks.”
Step 3: Capacity Requirements Planning (CRP)
What is it? This is the crash test for your plan. CRP checks whether the plan generated by MRP is actually feasible with your resources (machines, people).
Purpose: Compare the required production capacity (from the plan) with the actual availability of that capacity.
Input: MRP results (planned orders), routings (showing how long each operation takes on a machine).
Output: A workstation load report. It immediately reveals bottlenecks – machines or departments that will be overloaded – and those with idle capacity. This lets you react in time, e.g., by planning overtime or reallocating orders.
Step 4: Creating the Detailed Production Schedule
What is it? Now we go down to the finest level of detail. You take confirmed production orders and arrange them in the optimal sequence on specific machines.
Purpose: Create a precise day-by-day, hour-by-hour work plan for the shop floor. The schedule defines when and in what sequence products will be manufactured. Consider production cycle time, machine and staff availability, and delivery deadlines. The schedule must be realistic and account for possible delays or technical issues.
Input: Approved production orders, knowledge of machine and workforce availability.
Output: A detailed production schedule, often in graphical form (e.g., Gantt chart), serving as a simple and clear instruction for supervisors and operators.
This is the plan that physically reaches the shop floor and is used to execute the work.
Step 5: Execution and Real-Time Monitoring
What is it? Launching production according to the schedule and… continuously monitoring progress.
Purpose: Track actual plan execution, identify deviations, and react quickly to unforeseen events (e.g., breakdowns, material shortages).
Input: Production data (e.g., from reporting panels, machine sensors) on operation start/end, quantities produced, and working time.
Output: Real-time feedback, enabling schedule updates and informed decisions. The loop closes – execution data becomes input for future planning.
Step 6: Evaluation and improvement
Regularly evaluate and refine the production planning process. Analyze production data to identify areas for improvement. Remember, production planning is a continuous process that must adapt to changing market conditions and business needs.
From theory to practice: how technology ties it all together
Reading about these 6 steps, you may have thought: “This sounds like a huge amount of work!” And you’re right. Trying to manage this manually in spreadsheets is a nightmare.
Imagine: you update the MPS in one file. Then you open 20 BOM files to calculate what you need. Then you open your inventory file to check what’s in stock. You compare everything, create a purchase list in another file… And if the customer changes their order? You start the tedious process all over again.
This is where technology becomes your superhero.
Modern, dedicated software works as one integrated organism:
- A change in the MPS automatically recalculates material requirements (MRP).
- The system checks inventory and suggests what to order.
- A graphical CRP panel instantly shows where bottlenecks will form.
- You can adjust the production schedule with simple drag-and-drop, and the system automatically recalculates consequences.
- Production data flows in live, giving you a real-time view, not a historical report.
👉 Want to see how such an automated process could work in your company? Schedule a no-obligation call and we’ll show you the possibilities.
Frequently Asked Questions (FAQ)
💡 What’s the difference between the Master Production Schedule (MPS) and the detailed schedule?
The MPS is a strategic plan showing what we will produce over longer periods (e.g., weeks). The schedule is an operational plan that precisely sequences tasks on specific machines over shorter horizons (days, hours). MPS is the “WHAT,” the schedule is the “HOW and WHEN EXACTLY.”
💡 Do I need perfect BOMs and routings from the start?
The more accurate the data, the better the plan. But the process can be implemented gradually. Start with your key products, gather precise data for them, and then expand the system to the rest of your range. A good plan for 80% of production is better than no plan for 100%.
💡 How can a small company implement this process without a huge budget?
Instead of investing in a massive, boxed ERP system, a small company can start with a lighter, dedicated solution focusing on automating the most important steps (e.g., MPS and MRP). This approach significantly lowers the entry barrier and allows the system to grow as the company expands.
