Production plan of an enterprise or organization. Production planning - the path to a successful business

11.10.2019

The basis for planning the work of any enterprise is the production plan. This document records the volume and procedure for the production of goods or the provision of services with associated characteristics: the volume of raw materials used, cost, labor costs. Let's consider how to draw up a production plan, what purposes it serves, what must be reflected in this document and its sample.

What is a production plan

A production plan is a document with the help of which the management of an enterprise organizes work and controls the labor process, consumption of raw materials and energy, and the employment of personnel. The production plan is the basis of the company's activities. Without it, it is impossible to effectively control the enterprise, track profits and losses, and find ways to optimize.

Such a document sets a task for each department/structural unit. The production plan is drawn up at each enterprise independently. It is virtually impossible to find a ready-made template: each organization has its own specifics. At the same time, there are generally accepted approaches and algorithms for compiling this document. Their use greatly simplifies the procedure. It is also important to know that you cannot write a plan once and use it constantly. The document requires regular updating.

Working in accordance with the production plan is more promising

What does it give

Any production plan serves several purposes simultaneously:

Determining the number of units of goods and services needed to make a profit.
Planning a specific profit margin, the ratio of expenses and income, and any other important financial indicators.
Assessment of the efficiency of use of resources and raw materials.
Quality control. The document can record specific characteristics of goods and achieve them.
Planning of raw material costs.
Finding ways to optimize the process and work options.
Capacity control.
Monitoring the efficiency of use of labor resources.
Sales efficiency assessment.
Development of optimal ways to use the budget.
Standardization of reporting.

Thus, the list of tasks solved by the production plan is very wide. In addition, depending on the wishes of management, the document may include any other indicators and goals for structural units. The document helps to develop a development strategy - a list of specific actions of the enterprise necessary to achieve work goals. The plan helps to allocate resources effectively.

Types of production plans

All production plans can be divided into the following types:

Short-term - 1-2 years. Divided into quarters and half-years. They establish what goals the company must achieve within a year.
Medium-term - from 2 to 5 years. The main goal is to determine the organizational structure, the number of employees, capital investments and production capacity, the volume of annual income and growth dynamics, the need for investments and loans.
Long-term - from 10 years and above. The goal is to develop an economic strategy, determine the organization’s place in the market, and position among competitors.

The long-term plan is concretized in the medium-term, the medium-term - in the short-term. All three plans must be consistent with each other. They cannot contradict each other. Planning must provide for the dynamics of development. The documents should indicate what indicators the enterprise will consistently achieve.

Large organizations draw up all 3 types of plans, smaller ones - only medium-term and short-term ones. The work of any enterprise, especially one producing material assets, is ineffective without a plan. A development strategy is necessary even in the service sector and trade.

It is better to entrust drawing up a plan to specialists with specialized education

Features of drawing up a plan

A production plan is not one document, but several at once. The most standard kit includes:

A plan for the main activity, fixing the goals of the enterprise, categories of goods and volumes of their production.
Work schedule - a list of categories of goods indicating their quantity, cost, and required raw materials. Production dynamics - how much goods to produce and sell in each month, in each year.
Table of the company's needs for funds, investments, loans.

Among the important indicators that should be recorded in the plan of any manufacturing enterprise are:

tariffs for utilities, costs for their payment;
wage fund;
consumption of raw materials per unit of product or service;
production process technology;
marginal profit;
availability of specialists with a certain level of qualification;
amount of borrowed funds, interest rate.

Identification of capacity utilization

Determining capacity utilization - that is, the optimal methods of using equipment and raw materials to produce the maximum volume of products - is one of the most important parts of the production plan. How is it calculated?

Determine the categories and specific product models most in demand on the market.
Calculate the amount of resources that must be used to produce one unit.
They predict the number of units of goods that can be sold in the shortest possible time.
They determine how many units of goods and in what time frame the existing equipment can produce.
They analyze how long it will take to produce the required batches of goods using existing equipment.

This is a simplified algorithm for calculating power. As a rule, these operations are trusted to professional economists. To correctly calculate modalities, you need to know the productivity of the equipment, the speed of work of personnel and the consumption of raw materials. This process involves planning and guessing about the market situation. It is almost impossible to establish the exact required production volume. Success is considered to be achieving the indicators that are closest to reality.

Sample production plan indicating units of production for each month of work

Reflection of the production process

Any sample production plan for an enterprise must include a description of the production process: both global and for each product model. Only accurate recording of the entire process will help you plan and optimize your work correctly.

It is most convenient to reflect the production process in the form of a diagram, where each action will be displayed in stages.

A clear diagram indicating the equipment, personnel and raw materials involved will help management evaluate the effectiveness of the existing work procedure and, if necessary, find ways to optimize. Based on the analysis, it will be possible to determine optimal operating methods.

Operating schedule

The production plan includes a section that describes the work schedule, namely:

number of shifts, duration;
number of days off/no days off;
number of workers per shift;
expected productivity of each shift.

Room or area for equipment placement

Such a document describes all available premises indicating their purpose. It is necessary to record the area, ceiling height, condition (whether repairs are required), connected communications, entrances, exits, windows, and, if necessary, describe the finishing. Make a conclusion about the suitability of the premises for production in the medium and long term.

If the analysis of the premises shows that it is unsuitable for increasing productivity, the search for suitable real estate with clarification of specific requirements should be included in the medium-term plan.

It is important to reflect the advantages and disadvantages of the existing workshop to achieve maximum profit.

An enterprise can plan to open new workshops, create representative offices in other regions - all this must also be recorded in medium- and long-term planning. Mandatory with a description of the requirements for real estate.

The planners independently think through its structure

Material requirements and raw material suppliers

Planning helps to use resources wisely, but only if it contains information about materials and their suppliers. Information about the quality and cost of raw materials will help evaluate the quality of products and the feasibility of working with a specific supplier. Information about the conditions of working with counterparties will help, if necessary, quickly predict how a change in the price of any of its goods will affect production.

The most convenient way to describe the need for materials and their suppliers is through tables for each product. Please indicate:
weight/color/size of goods;
its key characteristics;
full composition indicating the volumes of raw materials used;
the ability to replace any components;
supplier information;

the price of each component.

Fixed costs

An important section that will present a list of fixed expenses similar to most enterprises:
rental of premises;
Communal expenses;
raw materials and starting materials;
taxes and mandatory payments;
logistics and transport;

wage fund.

The document should record the current and planned values of each flow rate, possibly indicating acceptable limits. This approach will help make the plan more flexible, adapted to changing market conditions. Knowing the acceptable limits of each area of fixed costs will help, if necessary, more quickly regulate product prices.

The manufacturer must calculate the full cost of each of its products. Without knowing this indicator, it is impossible to correctly select the price, which means it threatens losses. To calculate the total cost, add up all the values of expended resources:

starting materials;
depreciation of equipment;
utility and other energy costs;
employee salary;
salary of management personnel;
insurance premiums;
transportation costs;
advertising;
sales expenses.

Example of a production plan

A typical example of a 1 year production plan is shown in the image below. It is made according to the most common structure and reflects the most important indicators for the manufacturer. You shouldn’t use someone else’s plans, but you can analyze them and adapt them for your own production.

Production plan option

Common errors

The most common mistakes when drawing up such a document are incorrect accounting of material consumption, incorrect assessment of equipment capacity, and inflated expectations of demand. These inaccuracies have a detrimental effect on the content of the document: it is less connected with reality. An incorrect development strategy built on erroneous calculations will inevitably lead to bankruptcy.

Therefore, it is extremely important to track indicators as accurately as possible and, if necessary, adjust them. The more the company monitors the content of the production plan, the more likely it is to achieve the optimal ratio of income and expenses.

When planning, it is extremely important to take into account the likelihood of sudden circumstances: equipment breakdown, a large private order or a disruption in the supply of raw materials. The enterprise must have measures in place for each such case. It makes more sense to initially set lower indicators, not at the limit of the equipment’s capabilities, and if successful, increase them slightly.

Monitoring the implementation of the plan

The implementation of the control plan is carried out by virtually the entire management team of the enterprise in their area of responsibility. So, the production manager controls the production of the required batch of goods within a specific time frame, the head of the supply department monitors how much raw material they need to receive and ship every day, and so on. Control over all areas and implementation of the plan as a whole is the responsibility of the manager.

Regardless of the type of future business activity, the basis of the business plan is its production section. It can be less or more detailed, which is determined by the knowledge and practical experience of the compiler.

For example, when a previous company is liquidated, all positive developments are taken from there, which are subsequently adjusted taking into account the mistakes or oversights made. But most often this point has to be started from scratch.

What should be included there?

It is assumed that the industry of future economic activity is well known to the newly minted businessman, otherwise at least one conscientious and faithful assistant will be required. If the enterprise is conceived alone, then you should start with a comprehensive assessment of the business’s prospects for the next few years. As a result, a forecast of the demand for products or services in a given region is compiled and then analyzed.

If the result of the analysis is positive, you should consider the prospects of the adopted technology - it should be at least 20-25% more advanced than its closest competitors. Special knowledge in this case weighs more than the services of a consulting firm: it is unlikely that the author of a business plan will immediately develop a plan for an ideal enterprise to the slightest accuracy; most likely, consultants will limit themselves to general assessments of the degree of favorability of the business.

It is characteristic that almost all analytical notes contain the concept of probabilistic assessment (“with a probability of 97% it can be assumed that...”). You should always remember that the chance to get into those same 3% for which the analytical assessment did not work means not only wasted money, but also a delay in the business start.

So, your own knowledge, capabilities and experience are the surest conditions for a successful business plan.

The technology selected for implementation determines the need for premises for the installation of production equipment, mechanization, warehouse equipment, etc. In this matter, it is worth assessing both the location of production facilities and their composition.

The infrastructure of the future enterprise will also play a great role. Depending on the main technological processes, the presence of certain transport equipment will be required, and not only cargo - many businessmen increase the prestige of their enterprises due to the convenient and quick delivery of their company’s personnel to the place of work.

How you can simulate and optimize a production section using a specialized program - see the following video:

Selection of main technological processes

The key features of the choice are not only the above-mentioned 20-25% of equipment perfection, but also its availability and the possibility of application in the specific operating conditions of the future enterprise. To do this, you should use the following sources of information:

Expanded technical characteristics of the equipment, for which it is necessary to use information from the official websites of manufacturers, as well as objective results of the use of this device by consumers. If information from the sources of the first group should be considered more or less reliable, then the assessment of usefulness by individual consumers should be approached more carefully: sometimes positive “cheating” of reviews is used, which, when checked, are not always fair.
Practical assessment of the performance of the closest analogues at enterprises of the same profile located in neighboring regions. At the same time, you should avoid excursions to nearby enterprises: no one is happy about potential competitors, and therefore actual advantages can be presented as disadvantages, and in the worst case, access may be denied altogether for various reasons.

In the process of making decisions on equipment, they are guided by the following operational advantages:

Durability(number of hours of warranty work against failure): if this parameter is not included in the basic characteristics, this may be a serious argument against purchasing this equipment.
Availability of a network of service centers in the region: if it exists, then the issues of supervision of installation of the purchased equipment, as well as its routine maintenance during the warranty period, are automatically resolved.
Degree of equipment versatility and its ability to perform a wide range of operations. In the operating conditions of a small enterprise, the serial production of products or provision of services is often quite low. To prevent equipment from being idle, it makes sense to use it for another purpose. Therefore, attention is often paid to the versatility of the unit’s design and to equipping it with additional tools or accessories.
The presence in the design of components produced by subcontractors– their routine maintenance may be difficult if there is no dealership center of this enterprise in the region. Modern technical means require high-quality maintenance of units, without which the risk of forced downtime results in noticeable losses and loss of prestige of the newly created enterprise.

Do not forget that the production section should also include calculation of the required quantity and standard sizes of the required office equipment.

Production facilities: buildings and premises

Having determined the overall dimensions of the equipment, its technological layout is carried out in accordance with the course of the main technological process. When developing a planning solution, the following are taken into account:

Direct-flow production, which eliminates loops and returns of semi-finished products.
Compliance with production, hygiene and fire safety standards.
Availability of optimal areas for warehouses: raw materials, interoperational and finished products.
Placement of all auxiliary areas - ventilation units, air conditioners, energy devices for lighting and heating of the building, water supply and sewerage systems.

An equipment layout plan should be developed for the prospect of possible expansion of production(usually the coefficient of reserve areas is taken within 10%).

An appropriate room is found for a ready-made planning solution. It is better if it already has built-in energy and water drainage systems. However, a number of energy carriers (for example, compressed air, hot water - both for heating and for technological needs) still have to be supplied independently.

Often abandoned or rented out large garages or empty production facilities of repurposed businesses are suitable options. Sometimes it is beneficial to enter into a space leasing agreement with the previous owners, which saves the new owner from many expenses. With the development of your own business, the purchase of such premises is provided for by the leasing system itself.

During the selection process, pay attention to the following:

Availability of natural light.
The height of the room, which should provide for a technologically competent arrangement of equipment.
Insulation of walls and roof, normal waterproofing, absence of cracks and deformations of the building.
A reliable foundation that must withstand technological and vibration loads.
Possibility of convenient travel and access to production sites, as well as removal of finished products to warehouses or direct consumers.
The degree of technological flexibility of the building, i.e. the possibility of its relatively inexpensive redevelopment in the event of changes in the main technological process.

Vehicles

The production plan includes the best selection of both internal and external transport. In the first case, we mean various types of loaders, manipulators, and conveyors operating on the territory of the enterprise itself. External transport means that which is used for the delivery of raw materials and materials, as well as for the export of finished products.

Internal transport is selected simultaneously when selecting basic technological processes and equipment.

For example, if automatic lines are to be purchased, then they usually include specialized vehicles. It is much worse to “save” on this and select transport separately: it may not be suitable for its production characteristics, as a result of which the productivity of the main equipment will decrease and more personnel will be required.

The situation is different with external transport. In many cases, there is no need to purchase it: it is enough to rent it for a long time, or even conclude an appropriate service agreement with a transport company. This solves several problems simultaneously:

No need for a garage.
The need for personnel who must deal with the daily qualified maintenance of this equipment is reduced.
The need for energy, fuel, consumables and spare parts will be reduced.
The costs of equipping production with fire-fighting and security equipment systems will be reduced.

Production personnel

Since an increase in staff beyond the required level has a negative impact on product costs, preference should be given to employees who have experience combining professions.

The staffing table is drawn up according to the already known composition of the equipment and the features of technological processes. The main categories of personnel are:

Production personnel, including also inland transport operators.
Office and management personnel.
Employees of supply and sales services (this can also include warehouse employees).
Security service (although here it is more advisable to enter into an agreement with a specialized company).

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Structure of the production section of the business plan

Essentially, the purpose of this chapter is to familiarize the investor with the production process, the list of necessary equipment and the number of personnel. In other words, the production plan must show that you are able to organize the production of the required volume of high-quality goods, as well as establish the sales process and prepare the necessary space within the planned time frame.

If we are talking about an enterprise that is focused on the production of a certain product, the first thing you need to clarify is whether you are the owner of an existing production facility or are just planning to open it.

Often the key guideline for writing this section is the product sales plan. Therefore, you need to describe in detail exactly how you plan to produce products and consider in detail all the stages of creating your product or service. Each position described should include an approximate time frame, as well as the costs that will be required to organize it.

1. Description of the production process

If you are planning to open a production facility, you definitely need to describe all the stages and features of the technological process, starting with the purchase of consumables and necessary raw materials, and ending with the sale of finished goods (even if you are planning to open a store, then a shortened version of the process from the delivery of goods to their placement in store and sale is simply necessary).

Think about how exactly you can modify this process. Describe your considerations and all the necessary activities and expenses for this. Particular attention should be paid to the structure and composition of production facilities. If you are planning to open a factory or, for example, a plant, this information should be presented in a special annex attached to the plan.

2. Description of raw materials and their suppliers

Supply issues should be a separate item. Describe what raw materials and supplies are required for production, and how exactly you plan to transport and store them. Moreover, you should also indicate how exactly you are going to carry out quality control and monitor timely deliveries, and whether there are alternative suppliers of raw materials in case of problems with existing ones.

3. Production premises and land plots

Next, you need to describe whether you own land, suitable buildings, raw materials or equipment. Where will the production be located, where is the warehouse for raw materials, where is the warehouse for finished products. If not, describe what kind of premises, equipment, etc. you plan to purchase or rent, what time frames will be required for paperwork and installation of equipment, and how much it will cost the company (information about the purchase of premises, equipment, and land plots will need to be indicated in the investment section of the business plan).

4. Energy supply

Again, if your project involves the opening of a serious production facility, you also need to describe the main issues of energy supply, namely the capacity of energy sources, their cost, availability on the market, and the possibility of temporarily replacing existing sources in the event of accidents and malfunctions.

5. Production costing and cost

In this section it will be necessary to show what costs of raw materials, materials or energy resources will be spent on the production of one unit of the project’s product. After which its cost must be calculated and the marginal profit of the product planned for production must be shown.

6. Fixed production costs

Remember, if you are planning to open a store, salon or other enterprise that does not involve the production of products, but only the sale of certain goods or services, this section of the production plan will be less detailed and highly specialized, but this does not mean that it can be completely ignored. In this case, you need to describe the area of your establishment, retail outlet, etc., dividing them into special zones, indicate all the amounts required for equipping the premises, purchasing raw materials and starting the sales process, as well as maintaining and developing the enterprise.

Example of a production plan for a business plan for opening a clothing store

The clothing store is located in the Sovetsky district of Yekaterinburg with a population of 250 thousand people. (the most crowded area of the city). In close proximity to the store there is a residential complex on a high-traffic street. Also nearby the retail outlet are bus stops (70 meters), office buildings and banks (190 and 230 meters), shopping centers, restaurants, cafes and grocery stores (from 80 meters).

The store is located on a rented area of 185 sq. m. The premises are divided into the following areas: entrance area (30 sq. m), sales area (100 sq. m), fitting room area (30 sq. m), cash desks (15 sq. m), bathroom (12 sq. m) . The rental cost is 100 thousand rubles per month. The lease agreement is valid for 5 years.

The costs of opening a clothing store, including the costs of developing a design project, repairs and remodeling (400 thousand rubles), purchasing equipment (400 thousand rubles), advertising campaigns and opening events (100 thousand rubles) and other expenses will amount to 1,500,000 rubles.

Fixed operating costs include the cost of purchasing batches of seasonal clothing. Also, fixed expenses include rent (100 thousand rubles), advertising costs (about 40 thousand rubles), utility bills, garbage removal, electricity payments (about 15 thousand rubles). Demand will be influenced by increased recognition of the store among the population. During the year, it is planned to increase store traffic to 80-85%.

A production plan is an integral part of any business plan, which should describe all production or other work processes of the company. Here it is necessary to consider all issues related to production premises, their location, equipment and personnel, and also pay attention to the planned involvement of subcontractors. It should be briefly explained how the system for producing goods (providing services) is organized and how production processes are controlled. Consideration must also be given to the location of production facilities and the placement of tools, equipment and work stations. This section should indicate delivery times and list the main suppliers; describes how quickly a firm can increase or decrease its output of goods or services. An important element of the production plan is also a description of the company's quality control requirements at all stages of the production process.

The main task of this section of the business plan is to determine and justify the company’s choice of a particular production process and equipment.

It should be noted that industry specialized design companies are involved in the preparation of this section of the business plan, which is understandable, since the choice of technology and method of organizing the production process largely determines the effectiveness of any production project.

Production system

Every organization has a production system that receives various inputs (personnel, technology, capital, equipment, materials, and information) and transforms them into goods or services (Figure 1).

Rice. 1. Production system

Production planning

Production plans are usually classified by scope (strategic and operational), time frame (short-term and long-term); nature (general and specific) and method of use (one-time and permanent) (Table 1).

Table 1. Types of production plans

If we talk about long-term strategic planning, then at this level decisions are made in four main areas: production capacity utilization (in what quantities will a product or service be provided), location of production facilities (where a product will be produced or a service provided), production process (what production methods and technologies will be used to produce a product or provide a service) and the placement of tools and equipment (how work centers and equipment will be located in enterprises). Having decided these strategic issues for himself, the developer must also draw up and include in the production plan of his business plan the following three documents: a general (aggregate) plan (what is the general production plan for all types of goods or services offered by the company), a master work schedule (how many units of each type of product or service the company will have to produce or provide over a certain period of time) and a plan for the company's need for material resources (what materials and in what quantities will the company need to complete the main work schedule). These plans are called tactical.

Planning of production capacity utilization

Let's assume that the ABC company decided to produce lawn mowers. Through extensive market research and market analysis, she determines that mid-range tools are in greatest demand among consumers. So the company knows what it should release. Next, she needs to determine in what quantity to produce the product, i.e. how many lawn mowers of the selected model should be produced in a certain period of time. It is on this decision that other issues related to planning the utilization of production capacity will depend.

Planning of production capacity utilization is based on forecasts of future demand, which are transformed into requirements for production volumes. For example, if the ABC company produces lawn mowers of only one specific model, it plans to sell them for an average of 3,000 rubles. per piece and assumes that during the first year it will be able to achieve a sales volume of 3 million rubles, which means that it will need production capacity that allows it to produce 1000 mowers per year (3000 x 1000 = 3,000,000 rubles). This determines the physical requirements for the utilization of production capacity. It is clear that if the ABC company produces several models of lawn mowers and some other equipment, then in this case the calculations will be more complex.

If a company has been in business for a long time, the commercial forecast of future demand is compared with its actual production capacity, which allows it to determine whether it will need additional capacity given such demand. It should be noted that planning capacity utilization is an activity that is carried out not only by manufacturing firms, but also by service companies. Thus, educational administrators similarly determine the number of seats needed to support the educational process for the projected number of students, and managers of fast food chains determine how many hamburgers they need to prepare during rush hour.

Once the business forecast for future demand is translated into capacity utilization requirements, the company begins to develop other plans to ensure it can meet those specific requirements. However, both the company and the people to whom it will present its business plan should remember that plans for the utilization of production capacity may subsequently change, both upward and downward. In the long run, these changes are quite significant because the firm acquires new equipment or sells its existing production capacity, but in the short run the modifications should not be significant. The company may introduce additional work shifts, change the amount of overtime work, shorten the duration of some work shifts, temporarily suspend production, or invite third parties as subcontractors to perform certain operations. In addition, if a company's product can be stored for a long time and especially if it is seasonal (such as ABC lawn mowers), during periods of low demand it can create additional inventories and sell them during periods of peak sales, i.e. at a time when its existing production facilities are not able to fully satisfy the demand for its goods.

Planning for the location of production facilities

If a company plans to expand its production capacity in the future, in the section of the business plan we are describing, it must indicate what buildings and structures it will need to ensure normal work processes. This activity is called capacity planning. The location of any company's buildings and structures is primarily determined by which factors most strongly influence its overall production and distribution costs. These are factors such as the availability of qualified personnel, labor costs, electricity costs, proximity of suppliers and consumers, etc. It should be noted that the importance and significance of these factors tend to vary depending on the business in which the company operates.

For example, many companies operating in the field of high technology (and primarily requiring a large number of qualified technical specialists for normal functioning) are concentrated in large cities where there are universities and large research centers. On the other hand, many companies specializing in labor-intensive manufacturing locate their production facilities abroad, typically in low-wage countries. For example, many software companies are actively setting up R&D centers in India, which has recently become famous for its specialists in this field, who can perform at least as high a productivity as their American and European counterparts, but at a significantly lower cost. . American tire manufacturers have traditionally built their plants in northern Ohio, allowing them to operate in close proximity to their main customers, the giant Detroit automakers. If we talk about service firms, then for them the decisive factor is usually the convenience of consumers, as a result of which most large shopping centers are located on large highways, and cafes and restaurants are located on busy city streets.

What factors will be most important for the ABC company from our example? Obviously, she will need qualified technical personnel who can design and manufacture lawn mowers. The location of consumers plays an equally important role in this case, which means that it is best for her to locate her enterprises near large agricultural centers. After selecting a region, the company will need to select a specific location and land plot.

Production process planning

During production process planning, a company determines exactly how its product or service will be produced. When designing a production process plan for inclusion in its business plan, a firm must carefully analyze and evaluate its available production methods and technologies and select those that can most effectively achieve its specific production goals. When choosing any production process, both in the production and in the service sector, there are various options. For example, when starting out in the restaurant business, a company may choose between a quick service establishment; a fast food establishment with a limited menu; an enterprise specializing in the delivery of ready-made meals or servicing motorists; she may choose an option such as a luxury restaurant offering gourmet dishes, etc. When planning its production process, a company must answer a number of key questions that will determine its final choice. What technology will she use: standard or customized? To what extent will its production process be automated? What is more important for a company: efficiency or flexibility of the production system?

For example, the ABC company may well choose such a common and effective method of organizing the production process as conveyor assembly, especially if it does not plan to produce lawn mowers according to special customer orders. But if a company intends to produce personalized products tailored to the specific wishes of consumers - which, admittedly, is becoming an increasingly common approach in both the manufacturing and service sectors - then it will, of course, need completely different technologies and production methods.

It should be noted that planning the production process is an extremely important and complex task. It is very difficult to determine the optimal combination of indicators such as cost levels, quality, labor efficiency, etc., since there is a close relationship between them. This means that even a small change in one component of the production process usually entails a number of changes in other components. It is precisely because of this complexity that the task of planning production processes is usually assigned to highly qualified specialists in the production field, whose activities are directly controlled by the top management of the company.

Planning equipment placement

The final strategic decision when drawing up the production section of a business plan is to evaluate and select the optimal placement of equipment, tools and work centers. This procedure is called equipment placement planning. The goal here is to physically arrange equipment, tools, work centers, and locations to maximize the efficiency of the production process while making it easy for staff—and often customers—to use.

Drawing up an equipment layout plan begins with assessing the physical space required for it. At this stage, the company must determine what production areas, rooms for storing tools and equipment, warehouses, workshops, employee rest rooms, offices, etc. she will need it to ensure the normal production process. Then, based on its existing production plans, the company can evaluate different equipment configurations and layouts for production efficiency. In this case, a variety of methods and tools help firms develop a solution - from elementary scaled plans and maps to complex computer programs that allow you to process huge volumes of variable indicators and print out different versions of layout plans for machines, tools and other equipment.

There are three main approaches to the physical organization of the production process. In a production process design, all elements (work centers, equipment, departments) are arranged in production areas based on the similarity of the functions they perform. The second way to place equipment and workplaces is a linear (or flow) layout of equipment placement. In this case, the components of the production process are distributed in space in accordance with the successive stages of product production. The third approach is a layout based on a fixed position of the product. It is used in cases where, due to its impressive size or for some other reason, the product being manufactured must remain in one place, in a fixed position, throughout the entire production process, and materials, tools, equipment and personnel are delivered to it. Examples of such layouts include hangars in aircraft manufacturing or shipyards in shipbuilding.

Drawing up a general (aggregate) plan

Having decided on strategic issues, the company begins to make tactical decisions and, above all, to general, aggregate planning of its production activities and the production resources necessary for it. The result of this process is a document known as a general (aggregate) plan, which is drawn up for a certain period of time - usually one year.

General (aggregate) planning allows a company to include what is called the overall picture in its business plan. When drawing up a general (aggregate) plan, based on forecasts of future commercial demand and planning the utilization of production capacity, the company determines inventory levels, production standards and the number of personnel (per month) that it will need over the next year. It should be remembered that the focus is on the overall production concept and not on specific details. Thus, during aggregate planning, entire categories of goods are considered, and not individual types. For example, the general plan of a company specializing in the production of paints and varnishes will indicate how many liters of facade paint it will need to produce over a certain period, but it will not specify what colors and packaging it will be produced in. Such plans are especially important for large manufacturing enterprises that produce a large range of products. In a small company that produces a single product (such as the ABC company from our example), the general plan will more closely resemble the main work schedule, except perhaps drawn up for a longer period (more on this in the next section). Thus, we can say that a correctly drawn up general (aggregate) plan reflects two main indicators of the company’s performance: the optimal production rate and the total number of personnel that the company will need in each specific period within the framework of this plan.

Drawing up a master work schedule

The main work schedule is drawn up on the basis of the general (aggregate) plan described above. We can say that this is a more detailed version of the aggregate plan. The main schedule indicates the quantity and type of each type of product produced by the company; how, when and where they will be made next day, next week, next month; it also includes information about the required labor force and the firm's inventory requirements (that is, the totality of all inventories of the enterprise, including stocks of raw materials, components and semi-finished products, work in progress and finished goods).

First of all, the main work schedule is drawn up with the aim of disaggregating the general (aggregate) plan, i.e. break it down into separate, detailed operating plans for each product or service the company offers. Subsequently, all these individual plans are combined into a common master work schedule.

Material requirements planning

Having determined exactly what types of goods or services it will produce or provide, the company must analyze each of them and determine as accurately as possible its needs for raw materials, materials, components, etc. Materials requirements planning is an advanced planning concept that includes elements of modeling and the ability to create various scenarios for the development of events depending on the situation. Using this concept, a firm can accurately schedule its future requirements for materials needed to produce its final products, expressing them in specific numerical terms. Thanks to the advent of sophisticated computer programs, modern managers have the opportunity to analyze in detail all the specifications and technical characteristics of their goods and services, as well as accurately determine all the materials, raw materials and components necessary for their production or provision. This critical information, coupled with computerized inventory data, allows managers to determine the quantity of each part in stock and therefore calculate how long the firm is stocked with inventory. Once the company has determined the lead time (that is, the time between confirmation of an order for materials and receipt of those materials) and the requirements for buffer (reserve) stocks (we will talk about these later), all this data is entered into the computer, and they become the basis for providing the company with the material resources it needs. Thus, thanks to the materials requirements planning system, the company has fairly reliable guarantees that all the materials it needs will be available and in the right quantity when they are needed in the production process.

The latest MRP software offers incredible capabilities when it comes to plant planning and scheduling. Thanks to it, managers, when making decisions about the allocation of company resources, can take into account various limiting and situational factors, such as equipment downtime, lack of labor resources, bottlenecks in the production process, shortages of important raw materials, etc.

Production Planning Tools

Next, we consider tools for drawing up production plans, thanks to which a company can significantly increase the efficiency of this process and present in its business plan a truly clear and complete plan for its future production activities.

If you observe the work of lower-level managers for several days, you can be sure that they are constantly discussing what work needs to be done by their subordinates, in what order, who exactly will perform what operations and by what time this or that work should be completed . All this activity is united under one common name - time-based (scheduling) planning. Below we look at three main tools that managers use in this process: the Gantt chart, the workload chart, and the PERT network analysis.

Gantt chart

This tool, the Gantt chart, was created in the early 1900s by Henry Gantt, an associate of the famous theorist and practitioner in the field of scientific management Frederick Taylor. Essentially, a Gantt chart is a histogram on which time periods are plotted horizontally, and all types of work activities for which, in fact, the schedule is drawn up vertically. The columns display the planned and actual results of the production process over a certain period of time. Thus, the Gantt chart clearly displays which production tasks should be completed and when, and allows you to compare the planned result with the actual completion of work. This is a fairly simple, but convenient and useful tool with which managers can fairly accurately determine what still needs to be done to complete a particular work task or project, and evaluate whether it is being completed ahead of schedule, on schedule, or behind schedule. In the latter case, they should take steps to correct the situation.

Load distribution scheme

The load distribution scheme is nothing more than a slightly modified Gantt chart. Unlike the Gantt chart, it does not indicate types of work vertically, but departments or specific organizational resources. Thanks to this tool, firms can more effectively plan and control the use of the organization's production capacity.

Network analysis PERT

It should be noted, however, that the Gantt chart and load distribution scheme are convenient if it is necessary to control the implementation of a relatively small number of different types of work, and not interrelated. If a company needs to plan a large-scale project—for example, aimed at completely reorganizing one of its divisions, reducing costs, or developing a new type of product or service—then it will need to coordinate the actions of employees from a variety of departments and services. Sometimes these projects involve coordinating hundreds or even thousands of activities, many of which must be completed simultaneously, while others can only be started after the previous ones are completed. It is clear, for example, that during the construction of a building it is impossible to put on a roof without erecting walls. In such situations, managers use another tool known as PERT (Program Evaluation and Review Technique) network analysis.

A PERT network analysis is a diagram that displays the sequence of all the activities that must be performed as part of a project, as well as the time and money costs for each of them. This method was developed in the late 1950s to coordinate work on the Polaris submarine, a project that involved more than three thousand different contractors. Through PERT network analysis, the project manager can determine what exactly needs to be done in the project and what events will depend on each other, as well as identify potential project problems. In addition, using PERT, he can easily compare how certain alternative actions could affect the schedule and costs of the project. As a result, thanks to the PERT network analysis, the manager, if necessary, can redistribute the resources available to his company, thereby preventing the project from deviating from the planned schedule.

To build a PERT network diagram, you need to know and understand four important concepts: events, activity types, slump period, and critical path. Events are endpoints that separate major activities and indicate the completion of one and the beginning of the next. Activities are the time or resources required to move from one event to another. A slump period is a period of time during which a particular activity can be slowed down without slowing down the entire project. The critical path is the longest or most time-consuming sequence of events and activities in the PERT network. Any delay in completing events on the critical path invariably results in a delay in the completion of the project as a whole. In other words, activities on the critical path have a zero decay period.

To create a PERT network diagram, a manager needs to identify all the major activities needed to complete an upcoming project, arrange them in the order they should be completed, and estimate how much time it will take to complete each one. This process can be represented in five stages.

1. Identify all significant activities that need to be performed to complete the project. During each of these types of work, certain events occur or certain results are achieved.

2. Determine the order of events that occurred in the previous stage.

3. Draw up a flow diagram of work types from start to finish, identifying separately each type of work and its relationship with other types of work. Events on the diagram are indicated by circles, and jobs by arrows; the result is a clear block diagram, which is called a PERT network (Fig. 2).

4. Estimate the time required to complete each type of work. This operation is performed by using a so-called weighted average. To obtain this indicator, take an optimistic estimate of time, t 0, i.e. assessment of the duration of a particular type of work under ideal conditions; the most probable estimate of time, t m, i.e. assessment of the duration of this type of work under normal conditions; and a pessimistic estimate of time, t p , i.e. assessment of the duration of work under the worst possible conditions. As a result, we have the following formula for calculating the expected time t e:

6. Using a network diagram that estimates the duration of each type of work within the project, plan the start and end dates of each type of work and the project as a whole.

Rice. 2. Example of a PERT network diagram

As we said above, a tool such as PERT network analysis is typically used to plan very complex projects consisting of hundreds or even thousands of events. Therefore, calculations in this case are performed using computer technology using special software.

Production planning methods

Modern managers have to solve a very difficult task - planning the activities of their organizations in a complex and extremely dynamic external environment. To solve it, project management and scenario-based planning have proven themselves well. Both methods pursue one primary goal - to increase the company's flexibility, without which it is impossible to succeed in today's ever-changing business world.

Project management

Today, many manufacturing firms operate on a project basis. A project is a series of interrelated works that has clear starting and ending points. Projects vary in significance and scope; This could range from a spaceship launch project to a local sporting event. Why are companies increasingly organizing and planning their activities on the basis of projects? The fact is that this approach best suits the dynamic external environment, which requires modern organizations to have increased flexibility and the ability to quickly respond to any changes in the situation. Modern companies implement unusual and even truly unique production projects related to solving a huge variety of complex interrelated tasks, the implementation of which requires specific skills and qualifications. All this absolutely does not fit into standard production planning procedures that a company can use in its routine, everyday activities. What are the features of project planning?

Project planning process

In a typical project, work is performed by a dedicated project team whose members are assigned to work on the project temporarily. They all report to a project manager, who coordinates their work in collaboration with other departments and divisions. However, since any project is a temporary undertaking, the project team exists only until the tasks assigned to it are completed. The group is then disbanded, and its members are transferred to work on other projects, either they return to the departments where they work permanently, or they leave the company.

The planning process for any project, including production, includes a number of stages. It starts with clearly defining the project's goals. This stage is mandatory because the manager and team members must clearly know what they must achieve by the time the project is completed. Then it is necessary to determine all the types of work to be performed within the project and the resources required for this. In other words, at this stage it is necessary to answer the following question: what labor and materials will be required to implement this project? This stage is often associated with certain difficulties and requires a considerable amount of time, especially if the project is fundamentally new or even unique, i.e. when the company does not have any experience in implementing projects of this type.

After determining the types of work, it is necessary to determine the sequence of their implementation and the relationships between them. What should you do first? What jobs can be done at the same time? In this case, the person planning the production project can use any of the production planning tools described earlier: create a Gantt chart, a workload distribution chart, or a PERT network diagram.

Next, you should create a schedule for the project. The first step is to preliminarily estimate the completion time of each work, and on the basis of this assessment, a general project schedule is drawn up and the exact completion date is determined. After this, the project schedule is compared with previously established goals and the necessary changes and adjustments are made. If it turns out that the project's timeline is too long - which does not meet the company's goals for the project - the manager can allocate additional resources to the most important activities to speed up the time to complete the entire project.

With the advent of many different computer programs running on the Internet, the procedure for planning and managing production projects has become significantly simplified. It should also be noted that often the company's suppliers and even its consumers take an active part in this activity.

Scenario planning

A scenario is a forecast of probable future developments of events, which is characterized by a certain sequence of these events. In this case, it is assessed how this or that development of events will affect the environment in which the company operates, the company itself, the actions of its competitors, etc. Different assumptions can lead to different conclusions. The purpose of such an analysis is not to try to predict the future, but to clarify the situation as much as possible and make it as definite as possible, “playing out” possible scenarios taking into account different initial conditions. Even the process of scenario writing forces company leaders to rethink and better understand the business environment because the activity forces them to view it from a perspective they may never otherwise have considered.

Although scenario planning is a very useful way to predict future events (which can be predicted in principle), it is clear that predicting random, arbitrary events is very difficult. For example, hardly anyone could have predicted such a rapid spread and incredible popularity of the Internet in recent decades. Similar events will undoubtedly occur in the future. And although they are extremely difficult to predict and respond to correctly, managers must strive to somehow protect their organizations from their consequences. Scenario planning serves this purpose, including in the production sector.

Production control

An important element of the production plan within any business plan is a description of how the firm intends to control its production system, particularly its elements such as costs, purchasing, maintenance and quality.

Cost control

It is believed that American managers often treat cost control as a kind of corporate "crusade", which is undertaken from time to time and carried out under the leadership of the company's accounting department. It is accountants who set cost standards per unit of production, and managers must find an explanation for any deviation. Have the company's material costs increased? Maybe the labor force is not being used effectively enough? Perhaps, in order to reduce the volume of defects and waste, it is necessary to improve the skills of workers? However, now most experts are convinced that cost control should play a major role already at the stage of development and planning of an organization's production system and that all managers of the company, without exception, should be constantly engaged in this activity.

Currently, many organizations are actively using an approach to cost control based on the so-called cost centers. These are responsibility centers for which separate cost accounting is maintained, but which are not directly related to making a profit; the efficiency of such departments is determined based on the compliance of actual costs with the planned or standard volume.

Since all costs must be controlled at some organizational level, the company needs to clearly define at what level certain costs are controlled and require company managers to report on those costs that fall within their area of responsibility.

Control over procurement

In order to efficiently and effectively produce certain goods and provide services, the company must be constantly provided with all the necessary resources, including materials. She needs to constantly monitor supply discipline, monitor the characteristics of goods, their quality, quantity, as well as prices offered by suppliers. Effective control over procurement not only ensures the availability of all the resources the company needs in the required volume, but their proper quality, as well as reliable, long-term and mutually beneficial relationships with suppliers. All these points should be reflected in the production section of the business plan.

So what can a company do to make it easier and more efficient to control its inputs? Firstly, collect the most complete and accurate information about the dates and conditions of deliveries. Secondly, collect data on the quality of supplies and how well they correspond to the company's production processes. And thirdly, obtain data on suppliers’ prices, in particular, on the correspondence of actual prices to the prices that were indicated by them when placing the order.

All this information is used to compile ratings and identify unreliable suppliers, which allows the firm to select the best partners in the future and monitor various trends. Thus, suppliers can be assessed, for example, by the speed of their response to changes in demand, the quality of service, the level of reliability and competitiveness. We'll talk more about relationships with suppliers in the next section.

Control over suppliers

Modern manufacturers strive to form strong partnerships with suppliers. Instead of dealing with dozens of sellers who will certainly compete with each other for the customer, manufacturing firms today often choose two or three suppliers and establish close relationships with them, ultimately increasing both the quality of the products supplied and the efficiency of this cooperation.

Some firms send their design engineers and other specialists to their suppliers to solve all sorts of technical problems; others regularly send teams of inspectors to suppliers' plants to evaluate various aspects of their operations, including delivery methods, manufacturing process features, statistical controls used by suppliers to identify defects and their causes, etc. In other words, today companies in all countries are doing what Japan has traditionally always done - they are striving to establish long-term relationships with their suppliers. Suppliers who partner with a manufacturing company are able to provide higher quality resources and reduce defect rates and costs. If any problems arise with suppliers, open and direct communication channels allow them to be resolved quickly and efficiently.

Inventory control

To effectively and efficiently achieve its goals, any company must control the replenishment of its inventory. For this purpose, a re-order system is used when a certain stock level is reached.

This type of reordering system is used to minimize the ongoing costs associated with holding inventory and ensure the appropriate level of customer service (since it reduces the likelihood that at some point the desired product will not be in stock).

Using various statistical procedures, companies typically set the reorder point at a level that ensures that they have enough inventory to last between reorder placement and fulfillment. At the same time, they usually retain some additional “safety” reserve, which allows them to avoid complete depletion of the reserve in unforeseen circumstances. This so-called “buffer” or reserve serves as a reliable protection for the company if, in the period between a re-order and its fulfillment, a greater than usual need for a product or material arises, or if replenishment of stock is delayed for unforeseen reasons.

One of the simplest but very effective ways to use a reorder system once a certain inventory level is reached is to store tracked inventory in two different containers. In this case, goods or materials are taken from one container until it is empty. At this point, a reorder is made, and until it is completed, the products are taken from the second container. If the company has correctly determined the demand, then the reordered goods will arrive before the second container is empty, and there will be no delay.

The second modern and already very common method of reordering upon reaching a certain stock level is based on computer control. In this case, all sales are automatically recorded by the central computer, which is programmed to initiate a new order procedure when the stock in the warehouse reaches a certain critical level. Currently, many retail stores actively use such systems. Another fairly common system is the re-order system after a certain time interval. In this case, inventory control is exercised solely on the basis of a clearly defined time factor.

Maintenance control

The production section of the business plan should also indicate how the firm will monitor the effectiveness of maintenance. In order to quickly and efficiently provide consumers with goods or services, a company must create a production system that guarantees the most efficient use of equipment and its minimum downtime. Therefore, managers, among other things, must constantly monitor the quality of maintenance. The significance and importance of this activity largely depends on the production technologies used by the company. For example, even a minor glitch on a standard assembly line can stop hundreds of workers from working.

There are three main types of maintenance in manufacturing organizations. Preventative repairs are carried out before an accident. Restorative repair requires complete or partial replacement of the mechanism or its repair on site immediately after a breakdown. Conditional repair is a major repair or replacement of parts based on the results of a previously conducted technical inspection.

It should be noted that the need for control over maintenance must be taken into account already at the design stage of the equipment. So, if a failure or downtime of equipment leads to serious problems in the production system or is too expensive for the company, then it can increase the reliability of mechanisms, machines and other tools by incorporating additional characteristics into the equipment design. In computer systems, for example, redundant, backup subsystems are often introduced for this purpose. In addition, equipment can be initially designed in such a way as to simplify and make its subsequent maintenance cheaper. It should be borne in mind that the fewer components included in the equipment, the less often breakdowns and malfunctions occur. In addition, it is advisable to place parts that often fail in an easily accessible place or even mount them in separate units, which can be quickly removed and replaced if they break down.

Quality control

Quality control is a comprehensive, consumer-oriented program designed to continually improve the quality of a company's production processes and the goods or services it produces. The production section of the business plan should indicate how the company will carry out quality control.

This activity involves constantly monitoring the quality of products to ensure that they consistently meet the established standard. Quality control must be performed several times, beginning with the initial entry of inputs into the firm's production system. And this activity must continue throughout the entire production process and end with the control of finished goods or services at the exit of the production system. This procedure also provides for quality assessment at intermediate stages of the transformation process; It is clear that the sooner you identify a defect, or an ineffective or unnecessary element of the production process, the lower your costs will be to correct the situation.

Before implementing quality control, managers must ask themselves whether 100% of the goods (or services) produced need to be inspected or whether samples can be done. The first test option is appropriate if the cost of ongoing assessment is very low or if the consequences of statistical error are extremely serious (for example, if the company produces complex medical equipment). Statistical sampling is less expensive and is sometimes the only cost-effective quality control option.

Sampling control during acceptance consists of evaluating materials or goods purchased or manufactured by the company; it is a form of feedforward or feedback control. In this case, a certain sample is made, after which the decision as to whether to accept or reject the entire batch is made based on the results of the analysis of this sample, based on a risk assessment.

Process control is a procedure in which sampling is carried out during the process of converting inputs into goods or services, thereby determining whether the production process itself is out of control. With this type of control, statistical tests are often used to determine at different stages of the production process the extent to which deviations have exceeded the acceptable level of quality. Since no production process can be considered perfect and some minor deviations are simply inevitable, such tests allow the company to identify serious problems in time, i.e. quality problems that the company should respond to immediately.

Production Control Tools

It is obvious that the success of any organization is largely determined by its ability to efficiently and effectively produce goods or provide services. This ability can be assessed using a number of production control methods.

Production control, as a rule, consists of monitoring the production activities of an organization or a separate department in order to ensure its compliance with a previously drawn up schedule. Production control is used to determine the ability of suppliers to provide the appropriate quality and quantity of supplies at the lowest cost, and to monitor the quality of products to ensure they meet established standards and check the condition of production equipment. We've already discussed the basic aspects of controlling manufacturing operations, but two critical manufacturing control tools—the TQM control schedule and the economic order quantity model—deserve more attention.

TQM control charts

It should be remembered that effective quality control, which we discussed above, is not only aimed at producing quality goods or providing quality services. To ensure the high quality of both the products themselves and the processes by which they are produced, a company must control all aspects of its production system. Modern firms accomplish this task thanks to a tool known as the TQM control chart.

The TQM control chart is an effective production control tool. Essentially, it is a graph that indicates statistically determined upper and lower control limits and displays the measurement results for the reporting period. Control charts clearly show whether a production process has exceeded its pre-established control limits. As long as the results of checks at various stages of the production process are within a certain acceptable range, the system is considered to be in control (Figure 3). If the measurement results fall outside the established limits, then the deviations are considered unacceptable. Continuous quality improvement efforts should, over time, result in a narrower range between the upper and lower control limits as they eliminate the most common causes of deviation.

Rice. 3. Example of a control chart

When drawing up such a schedule, it is necessary first of all to take into account that in each production process there can be two sources of deviations. The first of these is unpredictability, due to which corresponding deviations may arise. Such deviations are possible in any process, and it is impossible to control them without fundamental changes to the process itself. Another source is non-random circumstances. Such deviations can be identified and are subject to control. It is clear that control charts are used to identify precisely such causes of deviations.

Control charts are created using some basic statistical concepts, including the well-known law of normal distribution (which states that variations tend to be distributed in a bell-shaped curve), and standard deviation (a measure of variability in a group of numerical data). When drawing up a control chart, the upper and lower limits are determined by the degree of deviation that is considered acceptable. According to the law of normal distribution, about 68% of the set of values are in the range from +1 to -1 from the standard deviation. (As the sample size increases, the sampling distribution becomes closer to normal.) In this case, 95% of the values lie in the range from +2 to -2 from the standard deviation. In the process of monitoring manufacturing operations, limits are usually set in the range of three standard deviations; this means that 97.5% of the values should be within the reference range (Fig. 4).

Rice. 4. Example of a control chart with a control range of three standard deviations

If the sample mean is outside the control range, i.e. is above its upper limit or below its lower limit, this means that the production process appears to be out of control and the company needs to do everything possible to identify the causes of the problem.

Model EOQ

We have already said that control over a firm's inventory is the most important aspect of production control. Firms' investments in these inventories are typically significant; Therefore, each organization strives to determine as accurately as possible how much new goods and materials to order and how often this should be done. The so-called EOQ model helps them with this.

The economic order quantity (EOQ) model is designed to determine the quantity of goods that should be ordered to satisfy forecast demand and minimize the cost of storing and purchasing inventory.

Using the EOQ model, two types of costs are minimized: order fulfillment and operating costs. As the volume of orders grows, the average amount of inventory increases, and the current costs of maintaining them also increase accordingly. However, placing larger orders means fewer orders and therefore lower fulfillment costs. The lowest total costs and, accordingly, the most economical order size are observed at the bottom point of the total costs curve. This point at which order fulfillment costs and operating costs are equal is called the point of most economic order sizing. To calculate this indicator, the following data is needed: predicted need for inventories for a certain future period (D); costs of placing one order (OS); costs or purchase price (V) and the ongoing costs associated with storing and processing the entire volume of inventory, as a percentage (CC). Having all this data, you can use the standard EOQ formula:

It should be remembered, however, that the use of the EOQ model assumes that the demand and lead time of the order are precisely known and constant. Otherwise it should not be used. For example, it is generally not applicable to determining order quantities for parts used in the production process, since they tend to come from the warehouse in large and uneven quantities. But does this mean that the EOQ model is useless for manufacturing firms? Not at all. It can be used to determine the optimal cost and identify the need to change the order batch size. Although, it should be recognized that more complex models are used to determine batch sizes in conditions of variable needs and other non-standard situations.

Modern aspects of production

When preparing the production section of a business plan, it is important to remember the modern realities of the production sector. Today, companies face many daunting challenges to improve productivity. They should strive to make the most of the benefits of new technologies, implement the described TQM concept; certify your products by obtaining ISO 9000 certification; constantly reduce inventory; establish partnerships with suppliers; achieve competitive advantage through flexibility and quick response to changes in demand, etc. Therefore, the company should reflect in its business plan how all these tasks will be accomplished.

Technologies

Increasing competition in most markets is forcing manufacturers to provide consumers with increasingly high-quality products at increasingly lower prices, while significantly reducing their time to market. Two factors contribute to accelerating the development of new types of products: the company's focus on reducing the development cycle and the efficiency of investments in new technologies.

One of the most effective tools with which modern manufacturers reduce the time to bring new products and services to market is complex production automation (Computer Integrated Manufacturing - CIM). CIM is the result of combining a company's strategic business and operational plan with computer software. It is based on computer-aided design (Computer-Aided Design - CAD) and computer-aided manufacturing (Computer-Aided Manufacturing - CAM) technologies. As a result of the emergence and widespread use of all kinds of automation tools, the old way of developing products has become hopelessly outdated. With the help of computer technology to visually display graphical objects, design engineers are designing new products much faster and more efficiently than before. Automated manufacturing is made possible by the use of computers to control the production process. Thus, numerically controlled machines can be programmed to produce new models literally in a matter of seconds.

According to experts, further improvement of CIM technology will ensure continuity of the entire production cycle. If each stage - from placing an order for raw materials to shipping finished products - is displayed in the form of numerical indicators and processed on a computer, companies will be able to respond very quickly to any market changes. They will be able to make hundreds of design changes in a matter of hours, quickly move to a wide variety of product variations, and produce them in very small batches. An organization that uses comprehensive production automation will not have to stop the assembly line and waste valuable time replacing pressing dies or other equipment to produce a new standard or non-standard product. One change in the computer program, which takes a few seconds, and the production process is completely rebuilt.

The most important condition for the effective operation of modern companies is the constant updating of technology, with the help of which the input stream of raw materials is transformed into a stream of finished products. Major technological changes usually involve the automation of production, which we discussed above, as well as the introduction of new equipment, tools or work techniques and computerization.

However, by all accounts, the most significant technological change in recent years has been the widespread computerization. Most organizations today have developed sophisticated information systems. For example, many retail chains use scanners connected to computers, with the help of which you can instantly obtain complete information about the product you are interested in (its price, code, etc.). And of course, these days you will not find a single office that does not use computer technology.

Implementation of TQM

Currently, many companies have already implemented the TQM philosophy. The idea of total quality management covers not only large but also small firms and enterprises. TQM (total quality management) is a concept that implies the participation of all employees of the company in improving the quality of products and services, optimizing production processes and management, etc.

Unfortunately, we must admit that not all efforts aimed at implementing TQM concepts were successful. Research in this area does not confirm that firms that have adopted TQM consistently operate at higher levels of efficiency than firms that have not. There are a number of factors that can significantly reduce the effectiveness of TQM. In particular, the researchers found that the success of some core TQM concepts—such as the use of teams, benchmarking, additional training, and employee empowerment—depended significantly on the company's ongoing performance.

From a technological perspective, the TQM concept focuses on developing flexible processes that support continuous quality improvement. The fact is that employees who have adopted the TQM philosophy are constantly looking for what can be improved or corrected, so work processes must be able to easily adapt to constant changes. In this regard, to successfully implement a TQM program, a company must constantly improve the qualifications of its personnel. It needs to provide its employees with opportunities to acquire and develop skills in areas such as problem solving, decision making, negotiation, statistical analysis and teamwork. Employees of these companies must be able to analyze and interpret data, and firms should provide their work teams with all the necessary information about the quality of their products, in particular about the rates of damage, defects, waste, etc. They should also inform staff about customer opinions and provide them with the information needed to create and manage control charts. And of course, the organization's structure must provide teams with sufficient authority to continually improve operations.

Reengineering

Reengineering is a term used to describe radical changes to all or part of a company's work processes in order to increase productivity and improve financial performance. In the process of reengineering, the structure, technology and personnel of the company undergo major changes, since in this case the methods of doing work in the organization are revised almost from scratch. During reengineering, managers constantly ask questions: “How else can this process be improved?” or “What is the best way to complete this work task faster and better?” etc.

Regardless of what caused the need for change - fluctuations in demand, a change in the economic situation or a change in the strategic direction of the organization - the person who decided to carry out reengineering must first evaluate the effectiveness of the staff and the quality of interaction between people within the organization. After a critical assessment of work processes, the company begins to look for ways to improve productivity and product quality: begin implementing a TQM program, change the organizational culture, or implement other changes. However, in any case, the essence of reengineering is that the company completely abandons the old ways of working and decides to radically change its work process.

You might be wondering: isn't the term "reengineering" synonymous with TQM? In no case! Although both of these processes are aimed at introducing change in the organization, their goals and means are completely different. The TQM program is based on the idea of continuous, incremental change. This means continually improving the performance of an organization that is generally doing well. In addition, TQM is implemented from the bottom up and the emphasis is on employee participation in decision making regarding the planning and implementation of the program. And reengineering is a radical change in the way an organization operates. This process involves fundamental changes and a complete overhaul of work practices. Reengineering activities are initiated by the firm's top management, but when the process is completed, virtually all employees typically gain greater authority in their jobs.

A characteristic feature of reengineering is that you have to start from scratch and rethink and rebuild the entire work scheme, i.e. structure of all work processes. Traditional, well-known ways and methods are immediately excluded. In other words, the company completely abandons incremental changes in the production system, since the ways and methods by which the company will produce goods or provide services are radically changed. Entirely new work processes and operations are invented and implemented. When reengineering, what was before should in no case even serve as a starting point, because reengineering is a radical, fundamental change in the very foundations of the organization. Despite the significant stress and increased uncertainty among staff that typically accompany the reengineering process, it can produce excellent results.

ISO Standards

To openly and clearly demonstrate their commitment to quality, modern organizations strive to achieve ISO certification. What is its essence? These are the quality management standards that companies around the world are guided by. They cover literally everything: from contract rules to product development and delivery. ISO standards are set by the International Organization for Standardization and are used as an international benchmark to compare firms operating in the global marketplace. A company's certificate indicates that it has developed and implemented an effective quality management system.

Quality certificates today are received by small sales and consulting companies, software development firms, city public utilities, and even some financial and educational institutions.

However, it should be remembered that although the certificate provides the company with a lot of advantages and significantly strengthens its competitive position, the main goal of the company should be the process of improving the quality of its goods or services. In other words, obtaining a certificate should not be an end in itself; In order to achieve this, the company must create work processes and a production system that will enable all its employees to perform their work with consistently high quality.

Reduction of inventories

As we have already said, a very significant part of the assets of most companies is its inventory. Firms that manage to significantly reduce their inventory levels—i.e. raw materials, semi-finished products and finished goods in the warehouse - can significantly reduce the cost of storing them and thus increase their productivity. How the company intends to solve this problem should also be reflected in the production section of the business plan.

Modern companies take this problem very seriously. In recent years, managers in all countries have been actively looking for ways to improve the efficiency of inventory management. Thus, during the input phase, they seek to improve the communication between internal production schedules and forecast consumer demand. Marketing managers are increasingly being asked to provide accurate and timely information about future sales volumes, which is then combined with specific data about the company's production systems to determine the optimal production volume to meet existing demand. Production resource planning systems are ideally suited to perform this function.

Today, companies around the world are actively experimenting with another technique, which has been successfully used in Japan for a long time and is called the Just-In-Time (JIT) system. Under this system, goods and materials arrive at the manufacturer exactly when they are needed in the production process, rather than being stored in a warehouse. The ultimate goal of implementing a JIT system is to completely eliminate raw material warehouses through precise coordination of the production and delivery processes. If such a system works effectively, it provides considerable benefits to the manufacturer: its inventory is reduced, equipment set-up time is reduced, the cycle of product transformation processes is accelerated, production time is reduced, production space is freed up and often even the quality of the products is improved. Of course, in order to achieve all this, it is necessary to find suppliers who will deliver quality materials on time.

However, it should be taken into account that not every manufacturer can use the JIT system. Thus, for its implementation it is necessary that suppliers are located close to the buyer’s enterprises and supply materials without defects. This system also requires reliable transport links between suppliers and the manufacturer, efficient methods of receiving, processing and distribution of materials, and careful planning of the production process. If all these conditions are met, JIT will help to significantly reduce the company's warehouse costs.

Outsourcing and other types of partnerships with suppliers

The production section of the business plan should also indicate how the company intends to work with suppliers and improve the efficiency of this process. As already mentioned, one of the most important trends in the manufacturing sector recently has been a strong trend towards the formation of partnerships between manufacturers and suppliers. It should be noted that, among other things, this often involves outsourcing some of the work, where manufacturers, in an effort to reduce high labor costs, outsource the production of some parts and components to their suppliers, who can produce them at a lower cost. This relationship is called outsourcing.

Today, alliances between manufacturers and suppliers have become much closer and stronger. Suppliers are becoming increasingly involved in the product manufacturer's production process. Many operations that were previously the sole responsibility of manufacturers are now carried out by their main suppliers, i.e. Some of the work is transferred to third-party contractors. At the same time, manufacturers are increasingly playing the role of “conductors” and limit themselves to only coordinating the activities of different suppliers. According to experts, the trend towards strong and close partnerships between suppliers and manufacturers will continue in the future, as the latter are constantly looking for new sources of competitive advantage in the global market, and one of such sources is close relationships with suppliers.

Flexibility as a competitive advantage

In today's fast-paced business world, companies that cannot quickly adapt to change are doomed to failure. Because this capability comes from flexibility in the manufacturing process, many organizations are actively developing and implementing flexible manufacturing systems.

Modern factories often resemble scenes from a science fiction movie, in which remote-controlled carts transport workpieces to computerized machining centers. Robots automatically change the position of the workpieces, and the machine, manipulating hundreds of tools, turns the workpiece into a finished part. Every minute and a half, a finished product comes off the assembly line, slightly different from the previous ones. There are no workers or usual machines in the workshop. No costly downtime required to replace dies or tooling. One modern machine is capable of producing dozens and even hundreds of very different parts, producing them in any programmed order.

A unique feature of flexible manufacturing systems is the integration of computer-aided design, engineering design and manufacturing processes, allowing factories to produce small, custom runs at prices previously only possible with mass production.

As a result of the use of flexible production systems, economies of scale are being replaced by economies of breadth. Organizations no longer need to produce thousands of identical products to reduce their unit costs. To move on to the release of a new product, they do not need to change machines and equipment, but only make changes to the computer program.

Speed as a competitive advantage

It is known that a company that is able to quickly develop and bring new products and services to the market provides itself with a significant competitive advantage. Consumers prefer a particular company not only because its products or services are cheaper, have an original design or are of high quality, but often because they highly value the opportunity to receive them as quickly as possible. There are many examples of companies that have achieved significant success in reducing the design and production time of goods and services. To speed up the production process and increase competitive pressure, many organizations around the world are looking to reduce bureaucratic constraints and simplify their organizational structures; They create complex work groups, rebuild the sales structure, use JIT methods, CIM systems, flexible manufacturing systems, etc. And all this must be reflected in the production plan, indicating what opportunities are at your disposal to speed up the cycle of introducing new products or services to the market.