Overall Goal of Production Planning

The overall goal of production planning—and the use of planning strategies—is to better serve your customers by reducing:
  • Storage costs
  • Replenishment lead times
To reach that goal you should group your materials according to their individual needs. You should create as few groups as possible (for better transparency on the shop floor) and as many as necessary (for flexibility). The following examples may provide the criteria to group:
  • Cheap materials, which could be planned-consumption based.
It is more important to have these materials permanently available than to run out of them. The effort to plan these materials should be minimal.
  • Expensive materials, or those with long replenishment lead times, which need a more sophisticated planning approach.
Consider the following questions when grouping the materials:
  • Who is responsible for the production plan?
  • Are the materials produced before or after the arrival of sales orders?
  • How should the actual stock level affect production?
  • Do you need a consumption of planned quantities? When should this consumption take place?
Consumption of planned production quantities (planned independent requirements) allows for a permanent reevaluation of planned quantities based on actual sales orders.
  • On what level in the product structure does your planning take place (finished product vs. subassembly)
Production planning usually takes place only on one level of your product structure. For example, you either perform production planning (“forecast” of demand) on the finished product level or on the subassembly level.
Things to note:
All scheduling information in the sample scenarios (stock/requirements lists), including the screens, is subject to your scheduling settings. The actual results depend on your configuration and the setup of your master data.
To select the most appropriate planning strategies, answer the questions for each material group (remember to use different strategies for different purposes). To make this guidebook easier to use, we have structured similar strategy groups in such a way as to minimize the time you spend reading the entire document.
Planning Level
On which of the following levels do you want to plan component procurement:
  • Finished product level
  • Subassembly or component level
  • Characteristics or characteristics value level
Finished Product Level
Finished product level planning is used when there is a stable and predictable demand pattern at the finished product level (the material sold in sales orders).
Subassembly or Component Level
Planning on the component level is used when there is a stable and predictable demand pattern at component or subassembly level (the material used in production orders).
For the following reasons, it is often more convenient to plan at the component, rather than on the finished product, level:
  • The demand pattern at finished product may be unstable.
  • Many similar variants of finished products require the same component or subassembly.
  • Finished products may be consumption based.
Characteristics or Characteristics Value Level
Planning on the characteristics (value) level is used when, for each configurable product, you have a stable and predictable demand patterns at characteristics (value). The use of characteristics requires the use of the variant configurator (see chapter 5, Characteristics Planning). Characteristics selection is translated into component selection. Therefore, when planning at characteristics (value) level, you are planning, for example, the characteristic “blue” paint. This characteristic results in the selection of the component “blue paint.” A more complex example is to plan the characteristic “stick shift,” which results in the selection of components related to that characteristic’s value.
Production Level
Would you like to produce the planned product in stock before a sales order is entered?
  • If “Yes,” use a make-to-stock strategy (for example, 10, 11, 40).
  • If “No,” use either a make-to-order or a strategy without final assembly (for example, 30, 52, 63, 20, 25, 26, 54, 55, 56, 65, 89)
Procuring Components
Would you like to procure the components before the entry of sales orders?
  • To procure or produce the entire product (the part that you sell) in stock before sales orders can be placed, you should use a make-to-stock planning strategy (40, 10, 11). The components are automatically procured before the sales order entry.

  • To procure or produce only subassemblies—essentially planning on a finished product level—you will most likely use strategies without final assembly (for example, 50, 52, 55, 60, 63 or 65).
  • To procure or produce subassemblies based on plans, which are independent of finished products, you will most likely use strategies for the planning of components (70 or 59).
Responsibility for Production
Who is responsible for the production quantities?
If your production department is responsible for production quantities and the resulting stock levels (and they do not want to rely on sales forecast for the finished products), you can use strategies for planning components and de-couple the two departments.
Influence of Stock
Should the stock level influence the production quantities?
Strategy 11 allows for production that relies only on the planned quantities from Demand Management (without netting stock quantities). This strategy is particularly useful if you want to have a determined production plan (for example, if you have to deal with a seasonal demand pattern but want to have constant production).


See also
Production Resources Tools Self Review Questions and Answers

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