In conditions when sales markets are limited and prices for products are dictated by the market, the key levers of influence on the financial result of the company are the elimination of production losses, optimization of unit costs and optimization of the composition of the product portfolio in order to maximize margins – that is, achieving the optimal ratio of the result obtained to resources spent.
Production planning: briefly
Production planning is a fundamental stage of the production cycle, responsible for ensuring the efficient use of resources, organizing and optimizing production processes, minimizing costs and setting goals.
Production planning types are traditionally classified by dates, goals, and levels. The most common is the division by terms and depth of calculation: strategic (medium-term and long-term), annual and operational (daily, weekly, monthly, quarterly) types of planning are distinguished.
Operational planning can be an independent process or the final stage of strategic planning. Its implementation allows synchronizing plans at all stages of the value chain, ensuring an even load on equipment and personnel, and significantly increasing operational efficiency by reducing losses.
Operational planning: realising ambition
As experts in the field of improving the efficiency of production companies, as part of the diagnosis of enterprises, we regularly identify problems associated with low efficiency of operational planning.
One of the projects implemented by the team was related to the introduction of an operational planning tool for the operation of equipment in a large coal holding. The company faced a number of challenges. Planned indicators (production and volumetric ones) were systematically not achieved: production was based on outdated, opaque production standards that did not reflect the real state of technology, conditions at the site and existing restrictions. Another problem was the lack of factor analysis of the reasons for non-fulfillment of the plan: a qualitative analysis of deviations and understanding of the root causes was possible only when planning from production levers – with the ability to compare the plan and the fact of individual factors. In addition, due to the incorrect distribution of equipment, organizational downtime arose, which, in turn, negatively affected production volumes.
In the course of work, the team created a cumulative model of operational planning of the loads of excavators and dump trucks, including planning the carrying capacity. The use of a unified approach enabled to calculate the loads on the excavator fleet with reference to the carrying capacity of dump trucks: a change in the planned volume of rock excavation by excavators in the operational planning model leads to an interconnected change in the required number of dump trucks. The formation of an operational production plan with a high level of detail of mining technical indicators enabled to form a cascade of reporting for plan-fact analysis.
To ensure the implementation of the plan-fact analysis of the equipment operation, a comprehensive automation of collection and reporting based on Power BI was carried out (analogues can be used). Planned indicators were extracted from the operational planning model, actual indicators were extracted from the dispatch system and the ERP system.
The introduction of an operational planning tool using production levers enabled to increase the efficiency of the enterprise by achieving the ambitions laid down in the plan.
The notion that planning is a redundant bureaucracy that limits business flexibility is outdated. Today, enterprises realize that poor-quality production planning leads to an increase in production costs. This is due to inefficient use of resources, increased costs for storage and personnel, as well as reduced production due to downtime, material shortages and low labor productivity. In the long term, such problems have a negative impact on the competitiveness of the company and its financial stability.
Understanding whether the planned indicators will be fulfilled or not, allows to mitigate timely some of the risks of non-fulfillment of the plan: rebuild internal processes, attract additional equipment, etc. Moreover, in conditions of limited investment, planning tools have a strong evidence base due to the high detail of production metrics to achieve the planned volumes and enable to justify the budget for attracting a contractor or purchasing additional equipment to investors, shareholders and company management.
To cope with the increasing complexity of production processes, enterprises are increasingly turning to digital tools. They allow not just to structure and automate planning, but also to make it more accurate, flexible and adaptive. The modern approach to digitalization of planning involves simultaneous automation of processes and training of personnel, which allows reducing the adaptation time, minimizing the risks of losing expert knowledge and ensuring a smoother transition to new technologies.
Digitalization of planning processes
As business processes become more complex and production volumes grow, manual or piecemeal (“patchwork”) planning becomes inefficient. In this case, enterprises implement information systems of ERP classes (Enterprise Resource Planning), APS (Advanced Planning and Scheduling) and MES (Manufacturing Execution System), which automate and integrate all planning levels, allowing not just to build short-term and long-term strategies, but also to adjust processes quickly in real time.
ERP systems are software solutions designed to integrate and manage key business processes of the enterprise, including production, procurement, inventory, personnel, marketing and sales. APS and MES are used to improve the accuracy of production planning and control. APS systems, also called synchronous production planning systems, allow enterprises to create and compare quickly different production plan scenarios using optimization algorithms. They can work as separate solutions or be embedded in ERP and MES systems.
Advanced Technology Solutions for Planning
Advanced solutions and advanced planning tools seek to incorporate in-depth parameters that provide efficiency and flexibility at all levels and horizons.
Among such options there are parametric planning and simulation, automated planning of equipment with individual goals, as well as automatic verification of plan execution using actual data from dispatch systems. These functions form the basis for more precise and adaptive medium-term planning. On the short-term horizon, attention is paid to such parameters as the use of production levers (KTG, CRO, transportation distance, loading time, average technical speed, etc.) in scenario planning, automatic distribution of mining equipment to objects based on their characteristics and limitations, as well as feedback from the work execution system and integration with the repair planning and management system, allowing to close the control loop and ensure high accuracy of execution.
The concept of simulation modeling is the basis of new economic and production models, allowing to help field specialists make the right decisions, ultimately increasing the speed and accuracy of reactions, which means it reduces costs and increases production efficiency. This approach makes production planning a dynamic process and provides a direct link between operational planning and production strategy.
By Victoria Shubochkina, founder and CEO of the consulting company Excellence Expert and the IT company Taiga, a developer of software for mining assets