• Planning Systems

    Planning is carried out after finalizing the demand forecasting. This planning is mainly a strategic function which deals with the future course of action based on the demand forecasting and current planning. Main types of planning are discussed below

    Capacity planning

    The objective of the capacity planning is to ensure the future production capacity matches with the forecast demand. This also includes shorter term adjustments to reduce the variations in demand or any mismatches with the current capacity

    Capacity Planning follows the following approaches

    • Examine forecast demand and finalize the capacity requirement in future
    • Calculate the current production capacity
    • Calculate deviations between available and needed capacity requirement in future
    • Generate alternative plans to reduce the differences in the gap
    • Compare the alternative plans and chose the best amongst them
    • Implement the best plan
    • Review and modify the plan continuously to achieve the best result.

    Locational Planning

    Location planning takes care of the planning of the manufacturing plant locations which plays in important role in effective supply chain management. Proper plant location is important to distribute the end products to all the customers through distribution network. The main points Location Planning looks at

    • Proximity to the clients and the suppliers/vendors gives huge advantage in procuring and delivering the end products
    • Tax laws governing in the location which includes all the regional taxes. For global companies, country specific taxes play an important role in deciding the plant location
    • Availability of resources i.e. raw material, labor/employees in a particular location
    • General Infrastructure and the proper communication system for movement of goods and materials
    • Political stability of the location
    • Cost of living which attracts labors from other locations as well
    • Infrastructure and labor cost of the location. Cheap labor cost helps to improve the profit margin by lowering production cost without compromising the quality

    Aggregate production planning

    Aggregate production planning is mainly done for a medium range time horizon. The aggregate plan takes into consideration the production rate, employment, inventory, and economic cycle to devise the long term plan for an organization.

    The Aggregate production plan lays the foundation for long term growth story and all the capacity planning and locational planning are short term planning on top of the same to achieve short term growth objectives.

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