However, to be profitable in manufacturing, it is necessary to manufacture the right product, at the right time, with the right quality yet optimizing the cost when doing so.
Production Planning involves integrating the marketing plan and resources into a production plan that provides production capacity for the immediate (short term) future to achieve the company’s goals.
There are several key strategies used to meet customer demand, i.e., ‘make-to-stock,’ or ‘make-to-order,’ each using different operational plans. For example, in a ‘make-to-stock’ strategy, there is ‘level production planning’ or a ‘chase’ (replenishment) strategy. And, for the ‘make-to-order’ plan, it is assembling products for a specific customer order.
Make to Stock Strategy Level Production Plan —— PLN-4400-FMIn a make-to-stock plan, products are made and put into inventory. Customer orders or Sales are made from inventory. Here is a simple example. |
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Make to Order Strategy Managing B/L —— PLN-4500-FMIn a make-to-order plan, companies wait until a customer order is received before doing anything, including ordering raw materials and components. |
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