Overview of Planning Activities

Operations planning activities can be long-range, medium range or short range in nature. Long-range planning focuses on a time period of more than one year and is generally carried out annually. Process planning and strategic capacity planning are examples of long-range planning. Medium-range planning focuses on a time period of six to twelve months. Examples of medium range planning are aggregate planning, master production scheduling and materials requirement planning. Short-range planning focuses on a time period of less than six months. Order and workforce scheduling are examples of such planning.

Operations Planning

The business planning process coordinates the activities of each function or department such that all activities and resources are focused towards achieving the organization's objectives. The operations or production plan is a part of the business plan. It defines how an organization is planning to produce products or services and estimates the cost of production. A production plan contains information regarding the production process, manufacturing facilities, inventory requirements, suppliers, etc. Such a plan is usually made on the basis of sales estimates. Production output is expressed in terms of revenue earned, tons of output generated, or units of aggregate product that represent all the products in the product line of an organization. Operations plans should be aligned with the business plans and objectives of other functions like marketing, finance, human resources, etc. A production plan specifies

1. The quantity of items to be produced

2. The quantity and timing of production

3. Final schedule for the completion of the product.               

Business Planning

Production organizations use a formal process, which is referred to as the business planning process, to address concerns like new product development, sales levels to be achieved, new process requirements, capital investments, and new distribution strategies. Decisions regarding these issues are taken with the help of long-term and medium-term plans and are evaluated on the basis of their impact on the profitability of a business.

In long-term business planning, decisions are taken regarding setting capital budgets for acquiring new facilities, expanding plant capacity and purchasing high cost equipment. These decisions are based on long term business forecasts. But the accuracy of these forecasts is usually low due to possible changes in economic and competitive conditions in the future. For instance, long term planning decisions regarding the determination of production capacity are based on the estimated market demand for a product at the time of its introduction into a market. The forecast of demand for the product may become inaccurate in the future due to obsolescence of the product or changes in market characteristics like the availability of complementary products, increasing number of competitors, etc.

Long-term decisions often act as constraints by limiting the scope for change during the intervening time period. For instance, the final decision on facility design creates an upper limit on the organization's production capacity. Hence, long-term business decisions must be evaluated periodically for their effectiveness and suitability for achieving organizational goals.

Intermediate-term or medium-term planning involves developing specific objectives for various departments or functions such as manufacturing, marketing, finance, production, etc. These plans are subsets of long-term plans, and operate within the constraints set by long-term plans. Management conducts regular meetings to develop these plans and take suitable operating decisions. This type of business planning generally involves a committee consisting of various heads of departments so that all the medium-term plans are focused towards the achievement of the goals established by the long-term business plans of the organization.                  

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