By Osmond Vitez, eHow Contributor
Production planning is an important management activity undertaken by manufacturing firms. Planning how a product will be financed, produced and distributed are all issues that must be carefully decided before a new project is moved into full-scale production.
1. The first stage of production planning is the estimating of future cash inflows against present cash outflows. Using a basic time value of money formula, management will estimate the amount of cash a product or service will produce in future years and discount it back to today's cash value. This method helps determine the profitability of the project before a company invests time and money into a project that may not be worth the effort.
2. Product planning is the process that businesses engage in when determining what products or services they wish to sell and how to accomplish goals with the highest profitability. Product planning may take weeks or months, depending on the type of product or production process. Management measures risk versus reward, raw materials to use, and the manufacturing process needed to produce its products or services.
The production process of a manufacturer can be a complex business operation. Most manufacturers have several management levels in place to help develop and maintain the process planning. How the product will be produced and the supply chain process are two important parts of the production process.
3. Production planning is the heart of the manufacturing process. Finding the proper production facility, materials suppliers and qualified labor are all important pieces of product planning. Because the product process is where the bulk of the costs occur, properly reviewing and planning for this process is important. Overpaying for facilities increases fixed overhead, which must be allocated to products. Fluctuating materials... [continues]
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