The Ins and Outs of Production Planning and Scheduling

What Is Production Planning and Scheduling 

Production planning and scheduling is the process of creating a detailed execution plan and manufacturing roadmap that shows the required resources and the milestones needed to complete a manufacturing order on time.  

Planning and scheduling are similar in nature, given that they go hand-in-hand with one another. However, there are differences that we will explore further. 

Production Planning vs Production Scheduling 

Before we can start explaining what exactly the differences are between production planning and scheduling, let’s first go through the definitions of each. 

Production Planning

Planning is the process of determining which products to produce, how much to produce, and when to produce them, from the procurement of raw materials to the delivery of finished products.  

The main objective of planning is to ensure that capacity and demand are aligned before production begins. Planning helps you and your teams stay organized to meet customer demand while minimizing costs to start and finish your production runs. 

To get started, you’ll need to figure out what’s needed: 

• Capacity — Forecasting demand for products to predict how much you’ll need to make, and if you have the necessary machinery, workers, and equipment available to meet that demand, as well as factoring in budget.  
• Materials — Using the same forecast, you can check if you have enough raw materials available, and if not, will they become available based on your plan. 
• Resources — If you now have the capacity and materials to meet demand, you can proceed to assign tasks and operations. 

Depending on the size of your business and the scale of your manufacturing, a production manager is typically responsible for developing and managing production plans and working closely with all necessary workers, contractors, and departments to implement them. Another factor that will dictate how your plan is created and ultimately looks is whether you make to order or make to stock. Once all information is determined, your plan will clarify for you and your collaborators exactly what is expected for a specific run. 

Production Scheduling 

Production or manufacturing scheduling is the process of determining the time and dates by which a plan must be executed to meet production goals or to deliver a product to a client at a pre-agreed point in time. 

Scheduling will help your organization identify the milestones they need to reach and when, helping teams understand who is doing what and when. At this stage, you’ll be deciding how the plan is being implemented and actively monitoring progress to ensure everything is running smoothly.   

To get started, you’ll need to figure out what’s needed: 

• Tasks — Assigning and prioritizing tasks based on customer demand, order size, and production deadlines helps you and your team complete critical tasks first.  
• Sequencing — Identifying and establishing dependencies to ensure your manufacturing route is followed correctly. 
• Timelines — Adjusting timelines after production begins in response to feedback from your team or production scheduling software to minimize downtime and maximize efficiency.  

If you’re creating a schedule for all your manufacturing orders, you can refer to it as a Master Production Schedule (MPS), as it is an entire overview of your production activities. 

With your schedule in hand, you can better track the progress of your tasks to ensure everything is on schedule. If something takes longer than initially anticipated, you can easily make adjustments to the schedule and start to investigate why a delay occurred to avoid the same issues in the future.

The Key Differences Between Production Planning and Scheduling  

The production plan comprises all the key components of manufacturing, and production scheduling is the mechanism that binds them into a clear, actionable document that your organization can use and follow. 

In production planning and scheduling, planning is the strategic focus of manufacturing, focused on long-term goals. Scheduling is the tactical aspect, focusing on short-term execution to achieve goals set in the plan. Here is how they differ when you’re formulating your production plan and scheduling: 

• Scope — Planning looks at your broader strategic goals and factors in long-term demand and resource availability. Scheduling looks at detailed, short-term operational steps. 
• Objectives — Planning ensures your production is aligned with business goals and demand. Scheduling ensures that the necessary tasks are being completed efficiently to reach that alignment. 
• Timeframe — Planning covers extended periods, typically weeks, months, or even years. Scheduling covers shorter periods, from days to weeks. 
• Level of detail — Planning considers the big picture, such as overall information, available resources, and general predictions. Scheduling is all about the details, such as specific tasks, exact times, and the people or tools needed. 

To take it away from manufacturing for a second, chess is a fantastic analogy for production planning and scheduling. In chess, you have strategy (the plan) and tactics (the schedule). A long-term goal is to develop your pawns and achieve control of the center of the board. But to achieve this goal, you will need to perform maneuvers and respond to threats.  

So, let’s say we have a woodworking manufacturer with a strategy to produce 1000 chessboards in one month. A tactic would be to produce 250 boards a week. Unfortunately, one week they fall short of their target by 123 units. 

Given their schedule, they can respond to this issue by outsourcing some production to another manufacturer, ensuring that the following week they can meet 377 and maintain their 1000 a month target. The bottom line of it all, production planning and scheduling, is the backbone of effective production management.

The Key Components of Production Planning and Scheduling 

Now that you know exactly what production planning and scheduling are, along with their nuances (and even a little bit of chess knowledge, too), the next part is to delve into the different components that come together to form your plans and schedules. 

1. Forecasting Demand 

Demand forecasting is the process of determining what the demand for products will be based on: 

• Market and manufacturing trends
• Historical data
• Customer insights
• Technological advancements

With your demand accurately forecasted, you’ll be able to understand how many products you need to produce over a given period, helping you mitigate the risks of under- and overproduction. Without this information, you will either increase customer dissatisfaction by being unable to sell products or clog your warehouse with excess inventory, both of which will reduce your revenue.  

2. Capacity Planning 

Capacity planning in manufacturing allows you to assess if your current setup is capable of delivering the necessary quantity of products with your currently available resources: 

• Labor
• Equipment
• Time

Having this information calculated will help you determine what output you can produce with existing resources, allowing you to determine whether to begin production or address constraints in your production lines, prevent bottlenecks, and meet your organization’s production goals.

3. Material and Procurement Planning

Without the right amount of items to help you complete an order, your production is doomed to fail. 

Material planning and procurement help you identify the quantities and raw materials needed to meet demand. If you’re currently understocked, procurement ensures the purchase of the required raw materials, and your planning and scheduling will account for the lead times for delivery. Having this done properly, preferably using MRP software, minimizes the risk of production delays from stockouts.

Some external factors to consider at this point are your suppliers. 

You’ll want to establish strong relationships with your suppliers to strengthen your supply chain while keeping your procurement costs low. This will mean: 

• Coordinating delivery schedules
• Negotiating pricing
• Maintaining consistent quality standards 

And it never hurts to have a Plan B in case there are delays with your supplies.  

4. Production Scheduling 

Now we’re getting to the nitty-gritty. 

We know the resources available to us and the constraints we face, and have developed a plan based on this information. Time to put it all into action with your scheduling. As already touched on heavily throughout the article, a thoroughly executed plan done right with great scheduling helps you: 

• Streamline manufacturing processes 
• Increase production efficiency 
• Fulfill manufacturing and sales orders on time  

5. Resource Allocation 

You know how and when you’re going to make it, so it’s time to make sure those who are responsible for delivering on a task know they have work to do. 

You can now assign your team members, machines, and workstations to specific tasks, in the order they must be completed. However, just because something is available doesn’t mean 100% of their focus should be dedicated to it. It’s not just a matter of assigning tasks — it’s making sure that your resources aren’t overworked. 

6. Master Production Schedule 

We briefly touched upon a master production schedule (MPS) earlier, but essentially, this is your comprehensive plan that details: 

• What products to produce
• Their quantities
• Timelines 

You will need to create this before starting any manufacturing, as it serves as a roadmap that integrates information on production goals, resources, timelines, and inventory into one source of truth. Having this ready will be essential for controlling and monitoring production progress, improving productivity, minimizing waste, and ensuring on-time completion.

7. Production Control and Monitoring 

Once everything is underway, it’s time to make sure everything stays on track, and this is where production control and monitoring come in.

It allows manufacturers to detect any deviations, inefficiencies, or issues in the workflow and address them as soon as possible. Regular real-time monitoring and control ensure the efficiency of production planning processes and contribute to timely product delivery. 

At this stage, you’re on the lookout for any issues, with the goal of addressing them before they spiral into a bigger problem, such as: 

• Product or manufacturing deviations 
• Inefficiencies along your routes 
• Issues in your manufacturing processes  

For this component to work properly in your production planning and scheduling, it relies heavily on real-time data collection and analysis. This could be in the form of line managers or workers self-reporting via offline methods or shop floor control software. However you collect this information, having it will help you take corrective action immediately when a problem arises. 

9 KPIs for Assessing Your Production Planning and Scheduling   

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Okay, you have all the information that you need to start seriously upping your planning and scheduling skills. 

But, how do you know if what you have schemed is actually moving the needle in the right direction? Here are some KPIs you can use to get you started on analysing if your planning and scheduling are all coming together. 

1. Inventory Turnover

Inventory turnover is the measurement of how quickly your inventory is sold and restocked within a specific time frame. 

If your inventory turnover is high, this is a good sign that your planning and management are on point. However, if it is low, this indicates a problem, such as overstocking or insufficient demand. Figuring out your turnover rate will provide you with valuable insights into how efficient your production planning is. To calculate it, you can use the following formula: 

Inventory Turnover = Cost of Goods Sold (COGS) / Average Inventory Value 

2. Lead Time

Lead time represents just how long it takes your business to complete a production cycle from start to finish. 

Ironically, you will need this information during your production planning and scheduling phase, but you’ll also need to monitor it after a production run. Tracking it will help you identify bottlenecks on your shop floor and enhance factory efficiency, thereby improving your order fulfillment rates. In its simplest form, you calculate your lead time by measuring the time from when production begins to when your final products are ready for delivery. 

However, for more accurate lead times, you should also include the tracking of: 

• Sourcing materials
• Quality control
• Packaging 

3. Cycle Time

Cycle time is similar to lead time, but it is more granular, focusing on a single unit rather than a batch or the output of a production or assembly line. 

With the cycle time, you will focus on the shop floor to identify productivity issues and optimize your production processes. Once again, another straightforward calculation, tracking the time production started and the time a specific unit is finalized. 

This is a fairly common feature in most manufacturing software, often referred to as planned production vs. actual hours. 

Software can help you track how long it took to produce a batch or a specific item, as long as it can pull from historical data, or you define the hours it will take to make something based on your plans. You’ll end up with one of three variations: 

• Positive: Actual hours < Planned hours 
• Negative: Actual hours > Planned hours 
• Neutral: Actual hours = Planned hours 

Positive means that everything is super efficient, or you’ve overestimated production times. A negative finding indicates underestimation, inefficiencies, or issues. Neutral, just like Goldilocks and Baby Bear's porridge, means everything is just right. 

Unless you want to scale your operations, your current set-up leaves no room to take on any more. 

4. Capacity Utilization

Capacity utilization monitors how much of your resources are being utilized as a percentage.  

Having this information in hand will help you understand the efficiency of your production lines and help you make adjustments to improve output. The higher your percentage, the more your current capacity is being utilized. If it’s lower, that indicates machines are idle, and workers have nothing to do. 

This can be done at the macro level by analyzing capacity utilization, or at the departmental or workstation level. You can use the following formula to calculate your percentage: 

Capacity Utilization = (Actual Output / Potential Output) * 100 

Rule of thumb: There is such a thing as too high. 100% capacity isn’t a good thing, and you should always leave some wiggle room in case you need to pivot priorities at any given point. Determine the best benchmark for your business. 

However, as a placeholder, anywhere between 80% and 90% is a reasonable target. 

5. Employee Utilization 

Similar to the previous KPI, employee utilization focuses on ensuring that you don’t overwork your workforce. 

Here you will be looking into: 

• Employees’ available work hours
• Billable hours 
• Non-billable  

It will help improve profitability, but you can consider this more of an HR KPI, since you’ll be using it to optimize staffing, forecast capacity, and prevent burnout by balancing workloads. 

6. On-Time Delivery

Similar to lead and cycle time, this KPI will help you determine whether you’re fulfilling orders within the promised timeframes for your clients and customers. 

It’s primarily concerned with your supply chain, monitoring the time required for a delivery from your warehouse to reach its final destination and the time required for a supplier to send a shipment to you. This will help you identify if delays are occurring during: 

• Shipping 
• Manufacturing 
• Delivery 

7. Stockout Rate

Stockout rates will help you fine-tune your inventory levels to ensure that your warehouses or bin locations aren’t bare when it comes time to make or sell something. 

You can calculate your stockout rate by dividing the number of stockout events by the total number of sales orders within a given timeframe, then multiplying by 100 to obtain the rate as a percentage. Here it is as a formula: 

Stockout Rate = (Number of Stockouts / Total Sales Orders) * 100 

It probably goes without saying how important it is to track this, but ultimately, you could avoid stockouts altogether by implementing inventory management software in your business. 

8. Order Fulfillment Time

Your order fulfillment time tracks the points when an order is: 

• Processed
• Manufactured
• Delivered

Starting as soon as an order is placed by a client or customer, knowing this time frame is important for meeting customer expectations and minimizing delays. To calculate it, you will begin by documenting the order’s receipt through delivery to the final destination. However, to accurately determine how long it takes, you will also need to time how long it takes to produce the product. 

The order fulfillment time formula: 

Order Fulfillment Time = Order Processing Time + Manufacturing Time + Delivery Time.

9. Work-in-Progress (WIP) 

Let’s say expectations aren’t aligning with your production planning and scheduling, and investigating your WIP orders could help you identify areas for improvement and ensure a smooth workflow. 

Looking into your WIP will help you understand how much of your stock is currently committed to production, and determine inefficiencies, potential waste, or bottlenecks in your production process that need to be addressed. To make this calculation, you will need to check the value of all the raw materials, semi-finished goods, and unfinished products that are somewhere on the shop floor.

Work-in-progress formula: 

WIP = Beginning WIP + Manufacturing Costs – Cost of Goods Manufactured (COGM)

Taking Production Planning and Scheduling to the Next Level

When your business is just starting out, you can probably manage with whiteboards, clipboards, and spreadsheets. 

For micro-manufacturers or businesses with fewer than 10 stakeholders, this will likely be an optimal solution. However, as more orders come in and the complexity of your operations increases, manual production planning and scheduling processes fall apart: 

• Orders pile up 
• Delivery windows shrink 
• Paperwork becomes guesswork 

This is the time to consider implementing production planning and scheduling software (PPS) in your business. 

This will allow your teams to move away from reactive firefighting and figure out ways to make production even leaner as you’re free from trying to fix the problems caused by following incorrect data. 

PPS software works by pulling all your production data into one place in real time, such as: 

• Sales demand
• Manufacturing orders
• Available capacity 

Enabling you to identify bottlenecks early and make realistic trade-offs. For example, tools such as Digit can align incoming demand with capacity and sequence work based on due dates and any resource constraints, automatically setting target dates on manufacturing orders. And, should plans change, you can easily reprioritize orders and routes. 

PPS helps you and your team know the progress of WIP orders, what’s next, and what’s left to finish to make sure that production finishes on time and customers get their deliveries when expected. 

Using a PPS tool also gives you insights into equipment and tool usage on the shop floor, as well as how long it takes someone to complete a task along your route. This helps you fine-tune your production planning and scheduling, identify issues on your production lines, and address them as soon as possible. Some tools, such as Digit, track yields, helping users quantify and reduce waste, leading to leaner manufacturing processes. 

Ultimately, PPS software will replace the uncertainty that’s created by manually updating your plans and schedules, saving time, reducing errors, and improving your profit margins. 

Want to try one for yourself? Try Digit for free and see how easy it is to automate production planning and scheduling.