Operations planning, also called “operations scheduling” or “operations management,” is an important consideration for any business. While rather broad in focus, operations planning can be simply defined as the planning of optimum resource use. Effectiveness in operations scheduling is necessary for a company to be successful, regardless of its industry.
Operations scheduling focuses on everything from the optimal inventory levels to detailed scheduling (both of machines and people) to meet customer demands of quantity, quality and delivery. The breadth of its focus may seem overwhelming, yet operations scheduling is really nothing more than managing the resources of a company to their optimum potential. This should not be equated with maximum potential. Neither machines nor people can operate at maximum output for very long before quality suffers.
Capacity planning involves the estimation of what that maximum output is and a formulation of what the optimal level of production is. This type of focus is on the efficient use of resources and, at its most basic, looks to match production to customer demand without incurring shortage costs or storage costs. Capacity planning, although useful as a framework, is based largely on assumptions of customer demand and delivery, assumptions that may not always be accurate. We will further discuss the capacity planning under an independent head.
Static plans, such as capacity planning, are based on assumptions that the process can be defined in its entirety and demand can be estimated accurately. An example of a static plan is a clothing manufacturer. Styles and demand are estimated up to one year in advance; production has already completed a full run before those assumptions of demand are found to be correct or not. Although necessary for certain industries, such as clothing manufacturers, this risk should be acknowledged.
By contrast, dynamic planning involves the assumption that demand will change, so little is produced until the orders are received. This approach, also called “just-in-time,” is extremely effective in environments where a high level of customization is required, such as a bakery or automobile company. Frequently, dynamic planning is used in tandem with static planning. This means that a small amount of product is produced based upon assumptions of customer demand and trends, but the plant is organised to quickly provide specialized products as requested.
Production planning encompasses the mixture of static and dynamic planning. Although highly related to operations planning, production planning is focused solely on production, not the overall operations. As a result, production planning produces specific plans that focus more on the capabilities of the plant rather than the demand. This mitigation of assumption is effective so long as a “rolling horizon” is used. A rolling horizon means that the production plan is implemented but adjusted periodically as customer demand and delivery fluctuate.