Optimal production planning: tools and methodology

• The optimal planning of production answers a different question from batch optimisation: how do you spread the entire factory workload over time, with limited resources?
• The benchmark methodology is based on S&OP (Sales & Operations Planning), a monthly process that aligns sales, production and finance.
• The capacity constraints (machines, labour, materials) must be built into the planning from the outset, not discovered during execution.
• The APS (Advanced Planning and Scheduling) tools become necessary as soon as complexity exceeds what a spreadsheet can handle.
• This article deals with the planning and scheduling method – not with the technical optimisation of a production run already under way.

Planning production is not about filling in an Excel schedule. It means deciding, every week or every month, between what customers are asking for, what the factory can genuinely produce, and what the company can finance. Here is the methodology and the tools that underpin genuinely optimal production planning.

Planning and scheduling: two levels not to be confused

Many companies confuse planning with scheduling, which produces schedules that cannot be held.

• The planning defines, in the medium term (weeks to months), the volumes to be produced by product family, taking account of overall capacity and forecast demand.
• Thescheduling defines, in the short term (days to hours), the exact order in which production orders pass through each machine or workstation.

Poor planning upstream makes scheduling impossible downstream: if the planned volume exceeds real capacity, no scheduling, however sophisticated, will absorb the gap.

The S&OP : the benchmark methodology for steering planning

The Sales and Operations Planning (S&OP) is a monthly process that aligns commercial demand, production capacity and financial objectives. It is the benchmark methodological framework for robust planning.

The 5 classic steps of an S&OP cycle:

1. Collect the data : sales history, commercial forecasts, field feedback on trends.
2. Demand planning : building a statistical forecast, adjusted by the sales and marketing teams.
3. Supply planning : matching the forecast against real capacity – machines, labour, raw materials, subcontracting.
4. Reconciliation meeting : arbitration between demand and capacity when a gap appears, with simulation of alternative scenarios.
5. Validation and roll-out of the plan : the plan approved by management becomes the reference for the coming month, until the next cycle.

S&OP operates on a monthly cycle with a rolling planning horizon of 18 to 36 months depending on the sector – well beyond the classic shop-floor schedule.

What makes the difference between an S&OP that works and an S&OP for show:

• The genuine participation of the sales, production, procurement and finance functions in the reconciliation meeting – not a remote sign-off.
• The scénarios “what-if” simulated before the meeting, so as to arrive with concrete options rather than sterile debate.
• A monitoring of variances between the approved plan and the actual result, month after month, to refine the reliability of the forecast.

Building capacity constraints into the planning from the start

Most unrealistic production schedules come from the same cause: capacity was estimated in theory, not measured in reality.

The capacity constraints to integrate systematically:

• Real machine capacity, taking account of planned stoppages, preventive maintenance and actual overall equipment effectiveness (OEE) – not the manufacturer's nominal capacity.
• Availability of skilled labour, particularly on positions requiring rare skills or in teams that are chronically understaffed.
• Material supply, with real supplier lead times rather than contractual ones.
• Identified bottlenecks : a single undersized workstation can cap the capacity of the entire line, whatever the performance of the other stations.

Goldratt's theory of constraints remains a useful lens here: identify the bottleneck, exploit it to the full, subordinate the rest of the flow to its rhythm, and only then seek to widen it.

APS tools: when a spreadsheet is no longer enough

The Advanced Planning and Scheduling (APS) systems are specialised software packages that calculate feasible production plans by integrating all capacity constraints simultaneously – something a spreadsheet, or even a standard ERP planning module, does not always do well.

When an APS becomes necessary:

• When the number of references, resources and cross-cutting constraints exceeds what a planner can arbitrate manually.
• When changeover times, mandatory sequences or skill constraints make manual scheduling too slow to recalculate.
• When the company needs to simulate several load scenarios before committing to a delivery date with a customer.

What an APS delivers in practice:

• A automatic recalculation of the plan as soon as a disruption occurs (machine breakdown, supplier delay, urgent order), in a few minutes instead of several hours.
• A multi-site view or multi-line view for allocating a workload across several workshops.
• The feasibility indicators in real time, which prevent an untenable customer deadline from being promised.

Warning: an APS that is badly configured, on false capacity data, produces plans just as unrealistic as a poorly kept spreadsheet. The tool never replaces the reliability of the underlying data.

Step-by-step methodology for an industrial SME

For an SME with neither a formalised S&OP nor an APS, here is a realistic trajectory:

• Step 1: make capacity data reliable. Measure the real OEE of your critical lines before anything else.
• Step 2: introduce a simple monthly cycle. A monthly meeting between sales, production and procurement, even without a sophisticated tool, already structures 80 % of the value of S&OP.
• Step 3: identify your 2-3 bottlenecks. Concentrate detailed planning effort on these critical resources.
• Step 4: introduce an advanced planning tool only when manual complexity becomes unmanageable – not before.
• Step 5: measure plan/actual variances every month, to progressively refine the reliability of your forecasts.

FAQ – Optimal production planning

What is the difference between planning and scheduling? Planning defines the volumes to be produced in the medium term according to overall capacity. Scheduling defines the precise order of operations in the short term at each workstation.

What is S&OP in one sentence? A monthly process that aligns sales forecasts, production capacity and financial objectives to produce a realistic plan approved by management.

Do you need APS software to plan production well? Not necessarily at the outset. A simple S&OP cycle and reliable capacity data are often enough in an SME. APS becomes useful when complexity exceeds what can be calculated manually.

How do you manage a bottleneck in planning? Identify it precisely, maximise its utilisation, and subordinate the rest of the flow to its rhythm before seeking to invest in widening it.

How long does it take to set up S&OP in an SME? A simple monthly cycle can start within 4 to 6 weeks. Full maturity, with reliable forecasts and what-if scenarios, generally takes 12 to 18 months.

Sources

• ASCM – Sales and Operations Planning
• Oracle – Sales & Operations Planning
• Wikipedia – Sales and operations planning
• Kaizen Institute – Production planning guide

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Author

Xavier Schuster

Consultant at SXE Consulting. Industrial consulting firm based in Luxembourg, 25 years of experience in operational excellence.

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