For efficient, effective and economical operation in a manufacturing unit of an organization, it is essential to integrate the production planning and control system. Production planning and subsequent production control follow adaption of product design and finalization of a production process.
Production planning and control address a fundamental problem of low productivity, inventory management and resource utilization.
Production planning is required for scheduling, dispatch, inspection, quality management, inventory management, supply management and equipment management. Production control ensures that production team can achieve required production target, optimum utilization of resources, quality management and cost savings.
Planning and control are an essential ingredient for success of an operation unit. The benefits of production planning and control are as follows:
Production Planning
Production planning is one part of production planning and control dealing with basic concepts of what to produce, when to produce, how much to produce, etc. It involves taking a long-term view at overall production planning. Therefore, objectives of production planning are as follows:
A well thought production planning ensures that overall production process is streamlined providing following benefits:
Production planning takes care of two basic strategies’ product planning and process planning. Production planning is done at three different time dependent levels i.e. long-range planning dealing with facility planning, capital investment, location planning, etc.; medium-range planning deals with demand forecast and capacity planning and lastly short term planning dealing with day to day operations.
Production Control
Production control looks to utilize different type of control techniques to achieve optimum performance out of the production system as to achieve overall production planning targets. Therefore, objectives of production control are as follows:
The advantages of robust production control are as follows:
Production control cannot be same across all the organization. Production control is dependent upon the following factors:
Production planning and control are essential for customer delight and overall success of an organization.
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To successfully move from outdated spreadsheet workflows to using integrated financial planning, there are important steps and decisions to consider. In this guide, we will discuss how the Office of Finance can embark on the path to successful integrated planning.
The integrated planning approach describes a cross-functional process. It ensures that the subplans of all business areas of a company are brought together and coordinated. The results are a higher transparency within the company, higher relevance and quality of the planning results as well as increased efficiency across the organization.
The classical planning approach in comparison
The classic planning approach is functionally controlled and linear. From finance to sales planning to sales – different functions flow into the planning process. These functions form separate groups with their own processes, which are usually not linked to each other. Each business unit creates internal plans with its own KPIs. In some cases, completely different systems and data sources are even used to create them. Consequently, there is no single, centralized data source (Single Source of Truth).
Several planning versions and long planning cycles are the result, as the different business areas plan in isolation from each other. As a result, a lot of time is spent reconciling the figures and putting the pieces of “the big picture” together.
Advantages of integrated planning in comparison to classical planning
In contrast to classical planning, integrated planning is:
- Iterative and not linear: Instead of waiting for the handover between the teams, the different views of decision-makers in the company flow together in order to continuously develop and refine the plan.
- Collaborative and not isolated: Instead of isolating the different parts of the plan, cross-functional groups come together to exchange information and make important decisions together.
- The process is coordinated and not inconsistent: There is no need to prepare the figures provided by one group for another because key metrics based on common definitions and a common data source are aligned across all planning groups.
- Strategic and non-reactional: Plans and decisions are made based on the overall picture and support the mid- and long-term business strategy, including information from across the enterprise.
Integrated planning brings all business areas together in the planning model and process and identifies drivers and dependencies of the planning outcome. It also enables the analysis of “what if” scenarios and a faster response to changing market conditions and customer needs. It enables all business units to work together towards a strategy that is aligned with the company’s objectives, while flexibly addressing new opportunities and risks.
Increasing need for better reconciliation calls for integrated planning
With the increasing complexity of the market environment and increasing competition, a decentralized planning system is becoming an ever-increasing problem. A coordinated approach by all parties involved is one of the greatest challenges facing controlling today. After all, finance teams create budgets – and planning teams use this information as the basis for their work. Design teams identify new trends and sales teams strive to meet the evolving needs of their customers and partners.
In many companies, important information is often stored in data silos and the different business units operate independently of each other. As a result, growth targets can only be tackled vaguely, and new opportunities and possible risks remain unrecognized or untapped.
Integrated planning: Better alignment with goals
Integrated business planning ensures alignment with a company’s most important goals. It ensures that all functions are coordinated and can work as quickly and efficiently as possible. This requires good forward planning, clear roles and responsibilities, and a coordinated schedule.
For example, an integrated planning approach can be aligned with the following business objectives:
- Planning growth categories
- The direction of innovation development
- Use of digital channels
- Achievement of liquidity targets
- Achievement of margin targets
Find a business partner, not just a service provider
A service provider needs to be able to do more than just provide service to support your path to integrated planning. They must not only deliver technology, but also offer added value creation in innovation and best practice. After all, the solution should not only replace old technology with new but should also secure a long-term advantage for the organization.
Accordingly, IT should be strategically involved at an early stage. If your company already works in the cloud, then planning without the cloud is futile. If your company has a private cloud or internal databases, a local approach or a hybrid solution may be a better fit. Therefore, the provider must be able to react flexibly to your company’s requirements and plan together with you how existing systems will be integrated into the new solution, how data protection and data security will be ensured and how customization options and autonomy for your team will be built in.
A simple Request for Proposal (RFP) cannot address these issues, because it’s not just about what a product does, but also how it is delivered. Shortlisted providers should be able to clarify basic company-specific questions. Instead of focusing on just a software demonstration, check whether the solution meets the requirements of your company. Are they willing to setup a feasibility workshop with you?
Instead of simply building a solution for integrated planning, when your organization focuses on strategy and the path forward with a business partner and not just a service provider, it will pay off in the long term. Uncertainty comes in so many forms in business, and a defined path to integrated planning supports reducing those uncertainties.
This proof of value creation acts as a catalyst to engage other stakeholders in the business, because even if it is the Office of Finance that ultimately makes the decision, it is still important that other departments in the organization are convinced.
Define “must-have” and “nice-to-have”
“What do you need?” does seem like a simple question. But when weighing the needs of your organization, it gets much more complex. Therefore, before getting entangled in high-tech presentations from different service providers, it is important to clarify what are the most important “must have” features and what would be “nice to have.”
Features, for example, are important, but ease of use is always more important. Modern, simple, scalable solutions are the best choice for ease of use: A tool with highly complex computational capabilities misses the mark entirely if your team doesn’t ever use 90% of the tool’s capacity. This is why circling back to “What do you really need?” is crucial when considering your company-specific requirements.
It is also essential to support team members in their daily tasks, because although there are challenges with spreadsheet-based planning, it is at still firmly anchored in finance.
On the other hand, Finance loses its autonomy when a company moves to an integrated planning solution that is too IT-intensive. Finance would still be responsible for the budgeting process within the company but would no longer be able to manage this process independently because IT would no longer be able to keep up or external consultants would be required. So, what needs to be done is no less important than who does it. Can your finance team become both budget administrators and business users of the tool?
The key is balance between the autonomy and flexibility that spreadsheets bring and the control and consistency of a modern integrated business planning solution with unrivalled flexibility.
Involve other departments early on
When implementation of a modern solution begins with finance, it provides the opportunity for them to become the experts. A quick start with key users supports efficiently building competency and capacity. Realistic goals can be set and achieved within short periods of time.
This is also where slow “new start” approaches pose significant obstacles and challenges. When the path to integrated planning takes six months or longer, team members can change, and you lose sight of the original goals. Efficient implementation of integrated business planning should happen in several quick phases, which in turn supports greater progress on your Digital Transformation journey. As mentioned above, it starts with finance.
This is also where the difference between a planning solution and ERP becomes evident. An ERP system takes significant time and remains relatively unchanged because it maps everyday processes. Instead, the goal of an integrated planning solution is to better support overall performance of the company. Get better data and better insight to support better decisions. To keep pace with these changing business and compliance requirements, the flexibility of integrated planning is needed.
Transform more than just your planning
When your organization is standardizing processes for the first time in some instances, being pragmatic can be helpful on the path to integrated planning. This means that “ready” is sometimes going to be better than “perfect” for the sake of keeping long term goals in sight and on track. But this doesn’t mean the needs of other departments such as HR, marketing, or sales shouldn’t be considered. The long-term vision for integrating planning requires your organization to embrace a holistic approach to integrated planning to also see the positive influence on your Digital Transformation journey.
To fully utilize the potential of integrated planning and the correlating influence on Digital Transformation, all relevant departments must be involved in the process. So instead of presenting a “done deal” that must be accepted by all, create a cross-functional team who can become solution experts, to guide the rest of your organization.
It is common in many organizations for departments to operate completely independently with regard to budget and actual. To encourage integrated planning, stakeholders must first be introduced to uniform methods and approaches.
This is why a structured, phased, and cross-departmental approach lends itself well to transforming more than just your planning. Build team competencies, drive the project forward, provide motivation with successful results, and continually improve for the future. All of which supports integrated planning paving the way to your organization advancing its Digital Transformation journey.
5 keys to successful integrated planning
As we learned, the implementation of integrated business planning is a not a small undertaking and often brings significant changes for people, processes, and technologies.
Here are five factors which will help you to successfully master the changeover:
1. Develop a plan with clearly defined goals
A clearly defined strategy is the be-all and end-all of your planning success. Make sure that you have a well-documented, strategic plan with very clear financial goals that is communicated throughout the organization.
Pay attention to meaningful financial goals that are tied to the company’s growth plan. The strategy should include how you can achieve your goal and which business areas and product categories you should focus on. The plan also includes which markets you want to target, and which customer segments will receive special attention. All this information helps the planning team to integrate the strategy into internal plans at an early stage.
2. Work closely between departments
Get the right skill sets sitting around the table. Planning decisions are most accurate when you have the most important information at your fingertips. Interdepartmental collaboration is the key to successful restructuring and the achievement of financial goals.
By involving different departments at an early stage, gaps and needs can be properly identified. It also makes sense to include customer and consumer feedback at this stage.
3. Incorporate current forecasts and prognoses
Predictive Forecasts give you a picture of future market developments. Place your planning on a solid foundation from a reliable forecast of the most important influencing variables of your organization’s plan. How is the procurement of materials, such as production and transport capacity, developing? Which product or service areas have the highest growth rates? These are just a few of the key drivers for your planning results that require a current forecast.
4. Establish common KPIs
Ensure transparent, measurable communication of the current situation and budget targets. Develop joint KPIs that can be used across departments. Also ensure that the definitions of these KPIs are aligned and understood by all stakeholders. This “good governance” enables you to align your actions with common goals. Confidence in the information is also improved and transparency is increased. By speaking the same language, you create “a single version of the truth” and thus ensure a much smoother planning process.
5. Use a professional planning tool
Support the planning process with a modern solution. Modern planning requires a planning tool integrated into your IT landscape that can support the individual steps in the planning process and guarantee that reliable plan values and real-time analysis can be called up at any time. Modern EPM software, which can be used by multiple departments, promotes collaboration, ensures transparency and ensures success.