Module 2 – Production Planning

Introduction

Production planning is the act of developing a guide for the design and production of a given product or service. Production planning
helps organizations make the production process as efficient as possible. Production planning originated to optimize the manufacturing
process, and today its general logic is applied in various forms to design, production and delivery of software as well.

Objectives

At the end of this module, students are expected to:

1. Know the importance of the different types of production planning.

Concept / Abstraction

I. Importance of Production Planning

Production planning is important because it creates an efficient process for production according to customer and organizational
needs. It optimizes both customer-dependent processes -- such as on-time delivery -- and customer-independent processes, such as
production cycle time.

A good production plan minimizes lead time, which is the amount of time that passes between the placing of an order and the
completion and delivery of that order. Depending on the company and the type of production planning necessary, the definition of lead time
varies slightly. In supply chain management, for example, lead time includes the amount of time it takes for parts to ship from a supplier.
This is included because the manufacturing business needs to know when the parts will arrive to properly execute material requirements
planning (MRP). This is especially important with tight manufacturing constraints or just-in-time (JIT) manufacturing.

Types of Production Planning

1. Master production schedule (MPS) -- These are schedules for individual, specific commodities to be produced in a given time
period. They are often generated by software, and then adjusted by users.
2. Material requirements planning (MRP) -- MRP is a system used for production planning, scheduling and inventory control. MRP
ensures the availability of raw materials, maintains the lowest possible material and product levels in-house, and plans
manufacturing and purchasing activities. It is often automated to some extent by software, but can be performed completely
manually as well.
3. Capacity planning -- This is the process of determining what capacity an organization has, to meet changing demands.
4. Workflow planning -- This is the planning of a sequence of operations performed by an employee or group of employees.

II. Production Planning Process

5 Step Production Planning Process

1. Estimate product demand -- This will a give a rough outline of how many products should be produced in a given time period. This
estimate is generated by combining analysis of historical production trends with new potentially relevant trends in the market.
2. Weigh production options -- This involves accounting for the resources on hand and exploring ways to most effectively use them
based on projected demand estimates.
3. Choose the most efficient option -- The use of resources that is the least costly and most time-efficient should be chosen.
4. Monitoring and evaluation -- As the plan is carried out, companies monitor what is happening compared to what should be
happening according to the plan, and evaluate how well those two match up.
5. Adjust plan -- This involves altering the plan so that future production plans meet customer goals more efficiently and are more
successful in their execution.

III. Product and Service Designing

Reasons for Product and Service Design or Redesign

Product and service design has typically had strategic implications for the success and prosperity of an organization. Furthermore,
it has an impact on future activities. Consequently, decisions in this area are some of the most fundamental that managers must make.
Organizations become involved in product and service design or redesign for a variety of reasons. The main forces that initiate design
or redesign are market opportunities and threats. The factors that give rise to market opportunities and threats can be one or more
changes:

1. Economic (e.g., low demand, excessive warranty claims, the need to reduce costs).
2. Social and demographic (e.g., aging baby boomers, population shifts).
3. Political, liability, or legal (e.g., government changes, safety issues, new regulations).
4. Competitive (e.g., new or changed products or services, new advertising/promotions).
5. Cost or availability (e.g., of raw materials, components, labor, water, energy).
6. Technological (e.g., in product components, processes).

Factors to be considered in Product Design

1. Idea Generation
a. Reverse Engineering - Dismantling and inspecting a competitor’s product to discover product improvements.
b. Research and Development - Organized efforts to increase scientific knowledge or product innovation.
i. Basic research has the objective of advancing the state of knowledge about a subject, without any near-term expectation
of commercial applications.
ii. Applied research has the objective of achieving commercial applications.
iii. Development converts the results of applied research into useful commercial applications.
2. Legal and Ethical Considerations
a. Product liability - The responsibility of a manufacturer for any injuries or damages caused by a faulty product.
b. Uniform Commercial Code - Products carry an implication of merchantability and fitness.
3. Human Factor – Ease of Use
4. Cultural Factor – Universality of Products
5. Global Product and Service Design – Using virtual teams to promote excellence in the process.
6. Environmental Factor – The quest for sustainability
a. Cradle to Grave
b. End of Life Program
c. 3 Rs (Reduce, Recycle and Re-use)

Quality Factor Deployment

Obtaining input from customers is essential to assure that they will want what is offered for sale. Although obtaining input can be
informal through discussions with customers, there is a formal way to document customer wants. Quality function deployment (QFD) is
a structured approach for integrating the “voice of the customer” into both the product and service development process. The purpose
is to ensure that customer requirements are factored into every aspect of the process. Listening to and understanding the customer is
the central feature of QFD.

The structure of QFD is based on a set of matrices. The main matrix relates customer requirements (what) and their corresponding
technical requirements (how). The matrix provides a structure for data collection. (Refer to Figure 4)

Kano Model

The Kano model is a theory of product and service design developed by Dr. Noriaki Kano, a Japanese professor, who offered a
perspective on customer perceptions of quality different from the traditional view that “more is better.” Instead, he proposed different
categories of quality and posited that understanding them would better position designers to assess and address quality needs. His
model provides insights into the attributes that are perceived to be important to customers. The model employs three definitions of
quality: basic, performance, and excitement.

Basic quality refers to customer requirements that have only a limited effect on customer satisfaction if present, but lead to
dissatisfaction if not present. Performance quality refers to customer requirements that generate satisfaction or dissatisfaction in
proportion to their level of functionality and appeal. Excitement quality refers to a feature or attribute that was unexpecte d by the
customer and causes excitement (the “wow” factor).

As time passes, excitement factors become performance factors, and performance factors become basic factors. (See figure 5)
Figure 1 Example of Extended QFD Matrix

Figure 2. Kano Model

1. Feasibility analysis.
Feasibility analysis entails market analysis (demand), economic analysis (development cost and production cost, profit
potential), and technical analysis (capacity requirements and availability, and the skills needed). Also, it is necessary to answer
the question, Does it fit with the mission? It requires collaboration among marketing, finance, accounting, engineering, and
operations.
2. Product specifications.
This involves detailed descriptions of what is needed to meet (or exceed) customer wants, and requires collaboration between
legal, marketing, and operations.
3. Process specifications.
Once product specifications have been set, attention turns to specifications for the process that will be needed to produce the
product. Alternatives must be weighed in terms of cost, availability of resources, profit potential, and quality. This involves
collaboration between accounting and operations.
4. Prototype development.
With product and process specifications complete, one (or a few) units are made to see if there are any problems with the
product or process specifications.
5. Design review.
At this stage, any necessary changes are made or the project is abandoned. Marketing, finance, engineering, design, and
operations collaborate to determine whether to proceed or abandon.
6. Market test.
A market test is used to determine the extent of consumer acceptance. If unsuccessful, the product returns to the design
review phase. This phase is handled by marketing.
7. Product introduction.
The new product is promoted. This phase is handled by marketing.
8. Follow-up evaluation.
Based on user feedback, changes may be made or forecasts refined. This phase is handled by marketing.

Service Design

There are many similarities between product and service design. However, there are some important differences as well, owing to
the nature of services. One major difference is that unlike manufacturing, where production and delivery are usually separated in time,
services are usually created and delivered simultaneously.

Service refers to an act, something that is done to or for a customer (client, patient, etc.). It is provided by a service delivery system,
which includes the facilities, processes, and skills needed to provide the service. Many services are not pure services, but part of a
product bundle —the combination of goods and services provided to a customer. The service component in products is increasing. The
ability to create and deliver reliable customer-oriented service is often a key competitive differentiator. Successful companies combine
customer-oriented service with their products.

System design involves development or refinement of the overall service package:

1. The physical resources needed.

Service Blue Print (SBP)

SBP is a method for describing and analyzing a service process. A service blueprint is much like an architectural drawing, but
instead of showing building dimensions and other construction features, a service blueprint shows the basic customer and service
actions involved in a service operation, (See figure 6).
 Figure 3. Sample Service Blueprint for a Restaurant

Application

1. Form a group of 5 and use QFD and Kano Model to meet the quality needs of your selected agri-based
product.
2. Using your selected agri-based product, identify a service process and use service blueprint to design
the service.

Evaluation and grading will be the same with module 1.