For companies that offer tangible products, the need for a production plan is not just important; it’s imperative. Even if you offer online products like software or training materials, following a clear and directive production plan will guide you from conception to completion. Essentially, a production plan is a medium-range planning strategy succeeding long-range planning.

The Small and Medium-sized Enterprise Toolkit defines a production plan as, “the authorization of your manufacturing department to produce the items at a rate consistent with your company’s overall corporate plan.”

The Purpose of a Plan

In order to maximize productivity, it’s essential that companies make use of an effective plan. Production plans are a crucial segment of your wider business plan and will enable you to outline a schedule of production while allowing you to keep checks on each step of a product’s journey.

Since the central purpose of a production plans is to determine the output of the manufacturing department at each stage of the production process, it would be best to involve your operations team in the creation of the plan.

Advantages of a Plan

The main advantage of an effective plan is to help your company realize its production objectives while reducing costs and increasing functionality in a range of areas, including:

  • Minimizing labor expenses by enhancing the process flow and avoiding unproductive work time
  • Minimizing inventory costs, reducing the need for safety stocks and unnecessary work-in-process inventories
  • Optimizing the use of equipment and increasing capacity
  • Improving the rate of product and service deliverables

Understand Important Factors

There are a few areas and activities that will have a direct impact on the production process and it’s important to be aware them. They include:

Market Conditions

Understanding the current market conditions is essential to effective planning. You’ll need to make reliable estimations on projected sales figures and, although you may not have a definite set of figures to use, you can predict future sales by evaluating market trends and analysing historical sales data.

Inventory Control

The inventory levels that feed the pipeline need to be distinguished. Ensure that you have a good inventory system and strategy in place in order to create an accurate plan.

Human Resources and Equipment 

In business speak, “open time” is the period of time that is allowed between processes to ensure that orders run smoothly within your production line. A production plan can help you effectively manage your open time and avoid any potential delays.

According to the Business Development Bank of Canada, a point worth noting is that planning should help to maximize your operational capacity, but not go beyond it. Be sure not to plan for full capacity so that there is enough room available for unexpected changes.

Take Note of Each Step

The best way to determine each step in production is to map the processes in the order in which they occur and then note the average time it takes for the work to be completed. Once the process map is completed, you can analyse the time it takes to complete the whole process.

However, when there is duplicated work, it’s important to standardize the time and work involved. Make note of any comparable occurrences and use them as a baseline to distinguish future times and routings. You’ll notice a significant increase in the speed of your planning process.

Identify the Risk Factors

During the process mapping stage, you may come across “waste” or “excess items.” Evaluate these factors by looking at historical data that shows the time and materials involved, and various failures that were encountered.

If there are significant risks, you could conduct an FMEA (failure mode effect analysis) and then take the necessary action to minimize them.

Although this is more common in assembly businesses and manufacturing, you could take a similar approach to your business by using the FMEA template as a guide.

Internal and External Factors

There may be a number of internal reasons that could influence the level of demand for your company’s products: marketing, product design, customer service, price, and product quality.

Additionally, marketplace factors like industry competition, consumer perception, and consumer behavior could impact the accuracy of demand forecasts.

Managing Changes in Demand

Your company can address demand fluctuations through the following three basic production-planning strategies*:

Demand Chase Strategy

This strategy matches the demand (order) rate with the production rate through employee turnover as the order rate changes.

Level Production Strategy

This strategy helps maintain a steady workforce that works at a consistent production rate with the deficiencies and excesses absorbed by any of the below:

  • Modifying inventory levels
  • Permitting order backlogs (guaranteeing the customer that you will deliver the product at a later date)
  • Adopting marketing activities

Mixed Strategy

This strategy could include a combination of the following:

  • Maintaining a steady workforce, but adopting variable hours: various shift patterns, flex-hours, or overtime
  • Outsourcing work
  • Modifying inventory levels

Monitor the Effectiveness of Your Production Plan

You can monitor the efficacy of your production plan through three key areas: systems and procedures, production planning, and production control. There are a few things within each area that you should consider in order to evaluate how effective your plan is.

Ask yourself the following questions within each one:

Systems and Procedures

  • Is current documentation of the production plan, control systems, and procedures present? Have you communicated this to all persons involved?
  • Does the planning and control plan contain a proper monitoring system that will maintain and update the master scheduling accounts?
  • Is there a proper, sufficient system between sales forecasts, which can be detailed thoroughly so that they can be converted into specific production plans?

Production Planning

  • Does control and production planning formulate a master production schedule with each time allocation and production assignment?
  • Do the schedules allow for sufficient planning of inventory levels and purchases?
  • Are there any indications of low employee productivity or wasted time? If so, are the numbers significant?

Production Control

  • Can the work in process or order status be determined efficiently?
  • Are actual levels of production significantly different to planned schedules?
  • Are order shipments in accordance with the schedule?
  • Are important records (production control and reports) maintained in order to cover potential and present production loads?


Production plans are not cast in stone. It’s important to remember that workplace changes are a daily occurrence, so you must alter your plan in response to those changes.

When such changes occur, make it a point to communicate all details of the revised plan with all departments involved. After all, the production plan is everyone’s road map to producing a successful, final product.

*Source: Dilworth, James B. Production and Operations Management: Manufacturing and Services. Fifth Edition. McGraw-Hill, Inc. 1993

Read This FREE eBook:


Success! Your link was just sent to your email.