To ensure that each planning level is aligned, tracking key metrics and assigning clear roles is crucial.
The following metrics also help to assess production & capacity utilization. Production planning is not just about meeting customers deadlines but it’s about balancing competing priorities: customer service, resource efficiency, and cost control (or service, cost, cash as Bram Desmet lays out with the Supply Chain Triangle concept).
Key metrics for production planning center around utilization of the different resources, how well actual operations match against the schedule, and material availability rate.
Out of these, you can see where you have under/overcapacity, whether your planning/scheduling approach is working, and whether your procurement can match your current schedules.
1. Capacity utilization rate: percentage of available capacity utilized during production – this can be done for different resources
Formula: Capacity utilization = (required capacity/available capacity)×100
Example (fiberglass production):
Monthly required capacity for fiberglass: 29,000 units×6 hours/unit=1,000 hours
Monthly available labor hours: 174,000 hours.
Capacity utilization = (174,000/180,000)×100=96.7%
2. Schedule adherence: percentage of scheduled production completed as planned. In some businesses, more disruptions might occur than in others, but this is an indication of how good your current scheduling is. If you have very low adherence, then perhaps you need to change your approach.
Formula: Schedule adherence = (Units produced/Units scheduled)×100
Example: fiberglass schedule for week 1: 7,250 units. Actual output: 6,737.5 units.
Schedule adherence=(6,738/7,250)×100=81.9%
3. Material availability rate: percentage of raw materials available when required. Indication of procurement or component manufacturing can keep up with demand & production plans.
Formula:
Material availability rate (total materials required/materials available on time)×100
Example:
Fiberglass required in week 1: 8,410 kg. Available on time: >8,410 kg.
Organizing production planning depends on company size and complexity, but there are 2 main approaches:
1. Functional setup: different planners specialize in distinct areas, such as demand planning, master scheduling, or detailed scheduling. While this promotes expertise, it may create handover gaps and inefficiencies.
2. End-to-end setup: a single planner manages the entire planning process for specific product portfolios. This ensures accountability and holistic oversight but may lack deep specialization in specific areas.
Most organizations benefit from a hybrid structure, combining functional expertise (e.g., raw material planning) with end-to-end responsibilities for other processes. Clearly defining handovers and accountability helps bridge gaps and maintain efficiency.
The future of planning is shifting towards exception-based planning, empowering planners to focus on strategic decision-making rather than routine tasks.
In this podcast episode, combining and separating demand and supply planning roles is discussed.
Here's how responsibilities typically align across planning levels:
The aggregate plan
Owner: S&OP process owner or based on the demand planner’s input
Responsibility: define long-term production and capacity targets, aligning with sales forecasts and business goals
Master production scheduling (MPS) and rough-cut capacity planning (RCCP)
Owner: master schedulers
Responsibility: translate high-level targets into SKU-level schedules, ensuring feasibility against key resources like machines and labor
Material requirements planning (MRP) and capacity requirements planning (CRP)
Owner: material planners
Responsibility: manage procurement and ensure material availability and labor alignment to support weekly production needs
Detailed scheduling and finite capacity planning
Owner: production schedulers
Responsibility: assign daily/hourly tasks, sequence resources for efficiency, and monitor execution on the shop floor