Business plan. Production plan. Part 1.
Briefly characterize the production plan, it is a plan of actions through which the enterprise plans to produce products in the required volume, of the required quality, within a certain time frame.
The main points of the plan that need to be reflected:
Description of the technological process;
Basic requirements for organizing the production process;
Product production program;
Composition of the necessary equipment;
Cost of fixed production assets;
The need for raw materials, materials, components;
Depreciation of fixed assets;
Suppliers of raw materials and approximate prices, terms of delivery;
Alternative sources of supply of material resources;
Cost of manufactured products;
Environmental safety of the project - activities, costs, efficiency.
Classification of production plans:
1. According to the breadth of coverage, they are distinguished: strategic, operational.
2. According to the time frame, they are distinguished: long-term, short-term.
3. By nature, they are distinguished: general, specific.
4. By method of use: permanent, temporary.
Any investor is interested in who he is dealing with: a newly created manufacturer of goods or an existing enterprise that has been operating on the market for a long time, so this issue should be clarified at the very beginning. Moreover, the situation here may look like this: the company that is the initiator of the project already has experience, but the project is being created for a newly created subsidiary, which will be engaged in the production of goods.
The composition and structure of production capacities in this section can be considered briefly, and their detailed characteristics can be included in the appendix of the business plan. Although this is not necessary - it all depends on the specifics of a particular project.
It is very important and carefully to approach the description of issues related to the supply of raw materials, materials and components - after all, the uninterrupted operation of the technological process largely depends on this. It should be indicated what reserves of raw materials and other material assets the enterprise has at the time of the start of production, and how supplies will be organized in the future. As noted above, if such an opportunity exists, it is advisable to characterize each prospective supplier, indicating approximately the following data: full name and location, experience in the market, experience of cooperation with this supplier to date (if any), business reputation of the supplier, which other well-known business entities worked with this supplier, etc. If the raw materials used in the production process require certain storage conditions (temperature conditions, certain humidity, etc.), the business plan should indicate how these conditions are ensured. Perhaps an investor who is not very knowledgeable about the intricacies of production will not pay attention to the absence of this information, but if it is available, firstly, it will be interesting for him to get acquainted with it, and secondly, it will give him reason to believe that the business plan has been drawn up carefully and it does not miss any important points.
The provision of an enterprise with equipment and fixed assets is the most important condition, without which it is, in principle, impossible to begin the production process. Therefore, special attention must be paid to this issue in the business plan. If at the moment the manufacturing enterprise does not have all the necessary equipment, then the reasons should be explained in detail (perhaps the problem is precisely the lack of funding) and indicate the ways and expected time frame for solving this problem.
One of the most interesting points in the section of the business plan under consideration will be the description of the technological process. Moreover, as noted above, this description should be accompanied by visual diagrams and illustrations. The reader of the business plan should clearly see where and how all types of raw materials, materials, components and other valuables necessary for the production of products will be supplied to the enterprise, and then to the workshops, in which workshops and how they will be processed into finished products (otherwise speaking, it is necessary to fully illustrate the routes of movement of raw materials and supplies), and where the finished products will be delivered from the enterprise.
It is recommended to pay special attention to quality control issues in the diagrams. To do this, you should mark those stages of the production process at which the quality of the manufactured products will be checked, indicating at the same time what standards the enterprise is guided by in quality control.
A more important place in the production plan should be given to energy supply issues, namely, requirements for energy sources and the availability of all necessary types of energy. Here it is worth mentioning how the enterprise is prepared for sudden interruptions in energy supply.
Project management
Today, many manufacturing firms operate on a project basis. A project is a series of interrelated works that has clear starting and ending points. Projects vary in significance and scope; This could range from a spaceship launch project to a local sporting event. Why are companies increasingly organizing and planning their activities on the basis of projects? The fact is that this approach best suits the dynamic external environment, which requires modern organizations to have increased flexibility and the ability to quickly respond to any changes in the situation. Modern companies implement unusual and even truly unique production projects related to solving a huge variety of complex interrelated tasks, the implementation of which requires specific skills and qualifications. All this absolutely does not fit into standard production planning procedures that a company can use in its routine, everyday activities. What are the features of project planning?
Project planning process
In a typical project, work is performed by a dedicated project team whose members are assigned to work on the project temporarily. They all report to a project manager, who coordinates their work in collaboration with other departments and divisions. However, since any project is a temporary undertaking, the project team exists only until the tasks assigned to it are completed. The group is then disbanded, and its members are transferred to work on other projects, either they return to the departments where they work permanently, or they leave the company.
The planning process for any project, including production, includes a number of stages. It starts with clearly defining the project's goals. This stage is mandatory because the manager and team members must clearly know what they must achieve by the time the project is completed. Then it is necessary to determine all the types of work to be performed within the project and the resources required for this. In other words, at this stage it is necessary to answer the following question: what labor and materials will be required to implement this project? This stage is often associated with certain difficulties and requires a considerable amount of time, especially if the project is fundamentally new or even unique, i.e. when the company does not have any experience in implementing projects of this type.
After determining the types of work, it is necessary to determine the sequence of their implementation and the relationships between them. What should you do first? What jobs can be done at the same time? In this case, the person planning the production project can use any of the production planning tools described earlier: create a Gantt chart, a workload distribution chart, or a PERT network diagram.
Next, you should create a schedule for the project. The first step is to preliminarily estimate the completion time of each work, and on the basis of this assessment, a general project schedule is drawn up and the exact completion date is determined. After this, the project schedule is compared with previously established goals and the necessary changes and adjustments are made. If a project turns out to be too long to complete—which is inconsistent with the company's goals for the project—the manager can allocate additional resources to the most critical activities to speed up the overall project completion time.
With the advent of many different computer programs running on the Internet, the procedure for planning and managing production projects has become significantly simplified. It should also be noted that often the company's suppliers and even its consumers take an active part in this activity.
Scenario planning
A scenario is a forecast of probable future developments of events, which is characterized by a certain sequence of these events. In this case, it is assessed how this or that development of events will affect the environment in which the company operates, the company itself, the actions of its competitors, etc. Different assumptions can lead to different conclusions. The purpose of such an analysis is not to try to predict the future, but to clarify the situation as much as possible and make it as definite as possible, “playing out” possible scenarios taking into account different initial conditions. Even the process of scenario writing forces company leaders to rethink and better understand the business environment because the activity forces them to view it from a perspective they may never otherwise have considered.
Although scenario planning is a very useful way to predict future events (which can be predicted in principle), it is clear that predicting random, arbitrary events is very difficult. For example, hardly anyone could have predicted such a rapid spread and incredible popularity of the Internet in recent decades. Similar events will undoubtedly occur in the future. And although they are extremely difficult to predict and respond to correctly, managers must strive to somehow protect their organizations from their consequences. Scenario planning serves this purpose, including in the production sector.
Production control
An important element of the production plan within any business plan is a description of how the firm intends to control its production system, particularly its elements such as costs, purchasing, maintenance and quality.
Cost control
It is believed that American managers often treat cost control as a kind of corporate "crusade", which is undertaken from time to time and carried out under the leadership of the company's accounting department. It is accountants who set cost standards per unit of production, and managers must find an explanation for any deviation. Have the company's material costs increased? Maybe the labor force is not being used effectively enough? Perhaps, in order to reduce the volume of defects and waste, it is necessary to improve the skills of workers? However, now most experts are convinced that cost control should play a major role already at the stage of development and planning of an organization's production system and that all managers of the company, without exception, should be constantly engaged in this activity.
Currently, many organizations are actively using an approach to cost control based on the so-called cost centers. These are responsibility centers for which separate cost accounting is maintained, but which are not directly related to making a profit; the efficiency of such departments is determined based on the compliance of actual costs with the planned or standard volume.
Since all costs must be controlled at some organizational level, the company needs to clearly define at what level certain costs are controlled and require company managers to report on those costs that fall within their area of responsibility.
Control over procurement
In order to efficiently and effectively produce certain goods and provide services, the company must be constantly provided with all the necessary resources, including materials. She needs to constantly monitor supply discipline, monitor the characteristics of goods, their quality, quantity, as well as prices offered by suppliers. Effective control over procurement not only ensures the availability of all the resources the company needs in the required volume, but their proper quality, as well as reliable, long-term and mutually beneficial relationships with suppliers. All these points should be reflected in the production section of the business plan.
So what can a company do to make it easier and more efficient to control its inputs? Firstly, collect the most complete and accurate information about the dates and conditions of deliveries. Secondly, collect data on the quality of supplies and how well they correspond to the company's production processes. And thirdly, obtain data on suppliers’ prices, in particular, on the correspondence of actual prices to the prices that were indicated by them when placing the order.
All this information is used to compile ratings and identify unreliable suppliers, which allows the firm to select the best partners in the future and monitor various trends. Thus, suppliers can be assessed, for example, by the speed of their response to changes in demand, the quality of service, the level of reliability and competitiveness. We'll talk more about relationships with suppliers in the next section.
Control over suppliers
Modern manufacturers strive to form strong partnerships with suppliers. Instead of dealing with dozens of sellers who will certainly compete with each other for the customer, manufacturing firms today often choose two or three suppliers and establish close relationships with them, ultimately increasing both the quality of the products supplied and the efficiency of this cooperation.
Some firms send their design engineers and other specialists to their suppliers to solve all sorts of technical problems; others regularly send teams of inspectors to suppliers' plants to evaluate various aspects of their operations, including delivery methods, manufacturing process features, statistical controls used by suppliers to identify defects and their causes, etc. In other words, today companies in all countries are doing what Japan has traditionally always done - they are striving to establish long-term relationships with their suppliers. Suppliers who partner with a manufacturing company are able to provide higher quality resources and reduce defect rates and costs. If any problems arise with suppliers, open and direct communication channels allow them to be resolved quickly and efficiently.
Inventory control
To effectively and efficiently achieve its goals, any company must control the replenishment of its inventory. For this purpose, a re-order system is used when a certain stock level is reached.
This type of reordering system is used to minimize the ongoing costs associated with holding inventory and ensure the appropriate level of customer service (since it reduces the likelihood that at some point the desired product will not be in stock).
Using various statistical procedures, companies typically set the reorder point at a level that ensures that they have enough inventory to last between reorder placement and fulfillment. At the same time, they usually retain some additional “safety” reserve, which allows them to avoid complete depletion of the reserve in unforeseen circumstances. This so-called “buffer” or reserve serves as a reliable protection for the company if, in the period between a re-order and its fulfillment, a greater than usual need for a product or material arises, or if replenishment of stock is delayed for unforeseen reasons.
One of the simplest but very effective ways to use a reorder system once a certain inventory level is reached is to store tracked inventory in two different containers. In this case, goods or materials are taken from one container until it is empty. At this point, a reorder is made, and until it is completed, the products are taken from the second container. If the company has correctly determined the demand, then the reordered goods will arrive before the second container is empty, and there will be no delay.
The second modern and already very common method of reordering upon reaching a certain stock level is based on computer control. In this case, all sales are automatically recorded by the central computer, which is programmed to initiate a new order procedure when the stock in the warehouse reaches a certain critical level. Currently, many retail stores actively use such systems. Another fairly common system is the re-order system after a certain time interval. In this case, inventory control is exercised solely on the basis of a clearly defined time factor.
Maintenance control
The production section of the business plan should also indicate how the firm will monitor the effectiveness of maintenance. In order to quickly and efficiently provide consumers with goods or services, a company must create a production system that guarantees the most efficient use of equipment and its minimum downtime. Therefore, managers, among other things, must constantly monitor the quality of maintenance. The significance and importance of this activity largely depends on the production technologies used by the company. For example, even a minor glitch on a standard assembly line can stop hundreds of workers from working.
There are three main types of maintenance in manufacturing organizations. Preventative repairs are carried out before an accident. Restorative repair requires complete or partial replacement of the mechanism or its repair on site immediately after a breakdown. Conditional repair is a major repair or replacement of parts based on the results of a previously conducted technical inspection.
It should be noted that the need for control over maintenance must be taken into account already at the design stage of the equipment. So, if a failure or downtime of equipment leads to serious problems in the production system or is too expensive for the company, then it can increase the reliability of mechanisms, machines and other tools by incorporating additional characteristics into the equipment design. In computer systems, for example, redundant, backup subsystems are often introduced for this purpose. In addition, equipment can be initially designed in such a way as to simplify and make its subsequent maintenance cheaper. It should be borne in mind that the fewer components included in the equipment, the less often breakdowns and malfunctions occur. In addition, it is advisable to place parts that often fail in an easily accessible place or even mount them in separate units, which can be quickly removed and replaced if they break down.
Quality control
Quality control is a comprehensive, consumer-oriented program designed to continually improve the quality of a company's production processes and the goods or services it produces. The production section of the business plan should indicate how the company will carry out quality control.
This activity involves constantly monitoring the quality of products to ensure that they consistently meet the established standard. Quality control must be performed several times, beginning with the initial entry of inputs into the firm's production system. And this activity must continue throughout the entire production process and end with the control of finished goods or services at the exit of the production system. This procedure also provides for quality assessment at intermediate stages of the transformation process; It is clear that the sooner you identify a defect, or an ineffective or unnecessary element of the production process, the lower your costs will be to correct the situation.
Before implementing quality control, managers must ask themselves whether 100% of the goods (or services) produced need to be inspected or whether samples can be done. The first test option is appropriate if the cost of ongoing assessment is very low or if the consequences of statistical error are extremely serious (for example, if the company produces complex medical equipment). Statistical sampling is less expensive and is sometimes the only cost-effective quality control option.
Sampling control during acceptance consists of evaluating materials or goods purchased or manufactured by the company; it is a form of feedforward or feedback control. In this case, a certain sample is made, after which the decision as to whether to accept or reject the entire batch is made based on the results of the analysis of this sample, based on a risk assessment.
Process control is a procedure in which sampling is carried out during the process of converting inputs into goods or services, thereby determining whether the production process itself is out of control. With this type of control, statistical tests are often used to determine at different stages of the production process the extent to which deviations have exceeded the acceptable level of quality. Since no production process can be considered perfect and some minor deviations are simply inevitable, such tests allow the company to identify serious problems in time, i.e. quality problems that the company should respond to immediately.
Production Control Tools
It is obvious that the success of any organization is largely determined by its ability to efficiently and effectively produce goods or provide services. This ability can be assessed using a number of production control methods.
Production control, as a rule, consists of monitoring the production activities of an organization or a separate department in order to ensure its compliance with a previously drawn up schedule. Production control is used to determine the ability of suppliers to provide the appropriate quality and quantity of supplies at the lowest cost, and to monitor the quality of products to ensure they meet established standards and check the condition of production equipment. We've already discussed the basic aspects of controlling manufacturing operations, but two of the most important manufacturing control tools—the TQM control schedule and the economic order quantity model—deserve a closer look.
Based on materials:
1. Business planning in an open economy: a textbook for students of higher educational institutions / V.P. Galenko, G.P. Samarina, O.A. Strakhov. - 2nd ed., erased. - M.: IC "Academy", 2007. - 288 p.
The product production plan consists of a production program drawn up on the basis of marketing analysis data. If the enterprise is just preparing to launch, then the production plan indicates everything that is necessary to organize the production of products in a given territory.
This is the rationale for choosing the location of the production site, the availability and need for roads, utilities, knowledge, structures, equipment, appropriately qualified labor force, and production technology.
Project location
Without the right choice of location, your project is doomed to failure or significant difficulties in implementation.
What is assessed when choosing a business location?
- Availability and proximity of transport routes - highways, railways, ports, airfields. Parking lots and access roads.
- Engineering networks – electrical networks, sewerage, communications, heating networks, water supply.
- Proximity to major suppliers and consumers.
Depending on the type of activity and planned production volumes, these factors may have different meanings. In one case, if you want to engage in production and deliveries are planned to different regions and areas, you need to more carefully analyze the likely costs of building the necessary roads. Your project may be located in a location that is difficult to access, and this may result in supply or supply disruptions.
Without the necessary engineering networks at the site, you will have to invest additionally in their creation. Perhaps these costs could have been avoided elsewhere, especially since for industrial facilities these are huge sums that could put an end to the entire project.
Proximity to the market and suppliers is also a priority factor when assessing the location of a project, especially for small businesses in the service sector. The further away you are from suppliers and consumers, the higher your shipping and supply costs.
Production areas and premises
Depending on the planned production volumes, production technology and equipment used, you may need:
- production premises and sites;
- warehouses;
- technological;
- office;
- auxiliary;
- garage.
It is necessary to identify the real need for each type of space and possible ways to provide them.
Production technology
Remember that a business plan is your tool in finding reserves for the growth and development of an enterprise. Therefore, all the points included in it must be analyzed in order to identify all the ways to develop and improve the enterprise.
When describing production technology in a business plan, think about whether there is another option for producing products? Perhaps an alternative option will help you reduce production costs by one and a half to two times, or produce a more innovative product with the same costs. This will give you an advantage in the market and help you beat your competitors, increase profits, and reduce costs.
Equipment
Determine equipment needs. Calculate what is more profitable - buy new, buy used, rent or lease?
Owning new equipment will not always give you an advantage. Leasing and rental will reduce investment costs at the first stage of project development, reduce the price of products and provide greater freedom in determining the pricing policy. All this will help you achieve a competitive advantage in the market.
Transport, communications, engineering support
It is necessary to determine the need for the listed resources.
If you need your own transport, you need to make a list and calculate the cost of purchase. Also take into account driver salaries and vehicle maintenance. Perhaps there is a need to create a repair and maintenance department.
Calculate how much it will cost, and wouldn’t it be easier to conclude a maintenance and repair agreement with specialized enterprises. Or maybe it will be cheaper to order transport services than to maintain your own transport, garages, and service personnel.
What means of communication will you use? How many telephones, faxes, modems, and other communications devices do you need? You need to see the complete organizational structure of the enterprise in front of you in order to determine the need for means and methods of communication and calculate the preliminary costs of providing them.
Engineering and energy support
These include:
- water supply;
- electricity;
- sewerage;
- heating.
When choosing a project location, you need to take into account the availability and need for the listed engineering support facilities and take into account the costs of construction and commissioning in the event of their absence.
Staff
Thanks to qualified personnel, a company can achieve significant success. Unprofessional actions of management personnel and production workers can cause irreparable harm to the company and bring it to the brink of bankruptcy.
The implementation of any project is impossible without employees and a management team of appropriate qualifications. Therefore, in the process of developing a business plan, it is necessary to determine the staffing structure and the need for professionals.
Can you find specialists of the required category in the place where you plan to implement the project? Isn’t it worth considering the possibility of attracting specialists from other regions or cities, providing them with living conditions and financial incentives?
When drawing up a production plan, it is important to know the production and management structure of the enterprise. All costs and capital expenditures that are necessary to implement the project are presented in tabular form.
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Which examines the main production indicators and product sales volumes, variable and fixed costs, personnel plan, depreciation costs of fixed production assets, requirements for the organization of the production process and the main technical and economic characteristics of production, specialized equipment and technologies used.
This section describes in detail the path by which it is planned to establish production and sales of products, indicating problem and bottlenecks that require special attention and means (methods) to overcome them. The production plan reflects the following characteristics of the organization of the technological process of production:
General technical and organizational requirements for production.
Here we consider general design requirements for the organization of a production site, a list of basic and auxiliary production equipment necessary for the acquisition, and requirements for the technologies used.
1. Total area, zoning and technical characteristics of the production site, reflection of design and estimate documentation for new industrial and engineering construction (if necessary).
2. A list of the main and auxiliary technological equipment required for purchase, indicating its name, series and brand, quantity, price per unit of equipment, supplier and his contact information, total costs for the acquisition of technological equipment.
3. The production technologies used (their availability, patent protection, reliability, productivity and other characteristics).
Description of the production process and costs.
This part of the production plan includes a calculation of the needs for raw materials and components, a plan for production and sales of products, a calculation of fixed and variable production costs and depreciation charges.
1. The need and conditions for the supply of raw materials, materials and components. The main characteristics of supplying the production process with raw materials are also reflected in tabular form, indicating the type of raw materials (components, semi-finished products), the price per unit of raw materials, the main suppliers and their contact details. In order to ensure uninterrupted production activities of the company, the volumes of purchased raw materials and components must exceed those volumes that are necessary directly for the production of a certain amount of products. This is done in order to ensure a carryover supply of raw materials. The size of the production inventory is justified by its norm, which represents the average stock of materials during the year in days of its average daily consumption, and is calculated at the end of the year as a carryover stock. The size of the carry-over stock depends on the amount of demand for various types of materials and the seasonality of their supplies in accordance with the Order of the Federal Administration on Insolvency (Bankruptcy) dated December 5, 1994 No. 98-r “On the standard form of a financial recovery plan for an enterprise (business plan)” determined by the formula:
where: T – size of carryover stock;
Q – the need for appropriate material, natural. units;
M – carryover stock norm, days;
D – number of days of the planning period.
The carrying stock rate is determined by the sum of average, current and safety stocks.
2. Reflection in tabular form of the volume of production and sales of products, indicating the sales price of products and proceeds from sales. A number of business planning methods also include Value Added Tax as part of total sales revenues in this tabular form of the Production Plan. This is the main table within this section of the business plan.
For a potential investor (strategic partner), the table reflecting the schedule of production and sales of products, as well as sales revenue, will be of particular interest in the production plan, therefore this tabular form must be detailed in sufficient detail.
The time horizon for reflecting the production plan and product sales plan is usually equal to the full payback period of the investment project. However, at the request of the investor, it can be slightly increased if the goal is to model the distribution and reinvestment of profits after the project has paid off.
3. Calculation of fixed and variable production costs. In the production plan, it is necessary to provide an estimate of costs for manufactured products, which is a calculation of costs for individual types of manufactured and sold products. Cost calculation for the production and sale of products can be carried out according to an enlarged scheme based on existing standards for the costs of raw materials, components and semi-finished products for the manufacture of a unit of product. The consolidated cost estimate for the production and sale of products includes cost items related to the cost of production, without breaking them down into fixed and direct costs, as well as the balance of non-sales operations.
The consolidated cost estimate is based on the production and sales plan and describes the total cost of all manufactured products, as well as the cost of each individual type of product. Thus, cost estimates can be detailed for individual types of products.
The composition of costs and their classification must comply with the Decree of the Government of the Russian Federation dated 05.08.1992 No. 552 “On approval of the regulations on the composition of costs for the production and sale of products (works, services) included in the cost price, and on the procedure for the formation of financial results taken into account for tax purposes. - the wife's profit." They are as follows:
SALES VOLUME, TOTAL
COST, TOTAL, including:
2. materials and components
3. fuel
4. electricity and thermal energy
5. payroll
6. accruals for personal wages
7. depreciation of OPF
9. other expenses
10. loan servicing (interest)
TOTAL NON-OPERATING OPERATIONS BALANCE, INCLUDING:
11. income according to the Central Bank
12. rental income
13. property tax
14. land tax
15. other income and expenses
BALANCE PROFIT
16. Income tax
17. Other taxes and payments from profit
NET PROFIT
When using business plan development software, the cost estimate is divided into two tabular forms - calculation of fixed (total) costs and calculation of variable (direct) costs for production and sales of products.
4. Calculation of depreciation charges for the restoration of fixed production assets is considered as part of the total (fixed) costs of production and sales of products. Project calculations can include various forms of depreciation of fixed assets:
Linear depreciation – the initial cost of fixed assets is paid evenly over the entire service life of the equipment;
Accelerated depreciation - the initial cost of fixed production assets is returned in a shorter period of time, and therefore depreciation rates are set higher (most often used in the leasing mechanism for lending and project financing).
Personnel plan.
The personnel plan is a mandatory and extremely important component of such a section as the “Production Plan”. The personnel plan displays quantitatively and qualitatively the structure of the company’s personnel involved in the implementation of a specific investment project, the level of personnel qualifications, personnel costs (payroll and deductions from it).
It is advisable to divide the personnel plan into 3 parts:
Administrative and management personnel;
Production personnel;
Marketing and support staff.
Within the framework of an investment project, two forms of wages can be used: in the form of a fixed salary and piecework wages. In the case of piecework wages, it is considered as one of the variable cost items for the production and sale of products and is taken into account in the consolidated cost estimate (Table 8). A fixed salary should be considered as one of the items of fixed (total) costs for production and sales of products.
Thus, the production plan within the business plan is considered as one of the key sections, the main task of which is to show the potential investor the reality of the company’s production (sales) program and the adequacy of the resources available for this (both material and labor). In addition, the production plan reflects all the requirements for the organization of production and sales of products, reflects the author of the business plan’s knowledge of the production technological scheme, the availability of appropriate personnel with the required level of competence, licenses, certificates and permits.
Another important task of the production plan is the modeling and analysis of existing and future material flows within the enterprise, indicating specific sources of raw materials and specific consumers.
Source - Business planning and development of investment projects / Educational manual, edited by Savelyeva Yu.V., Zhirnel E.V., Petrozavodsk, 2007.
6. Drawing up a production plan
You need to start the production plan with a brief explanation of where the goods will be manufactured - in an existing or newly created enterprise. Then you can emphasize the advantageous location of the enterprise (if this fact occurs) relative to sales markets, suppliers, labor, services, etc.
The next step in writing this section could be to describe the production process. To do this, indicate the type of production (single, serial, mass), the method of its organization, the structure of the production cycle, a technological process diagram can be provided that clearly shows where all types of raw materials and components will come from and where, in which workshops and how they will be processed into products. The production plan evaluates the existing technology in the following areas: compliance of the technology with modern requirements, level of automation of the production process, ensuring process flexibility, the ability to quickly increase or decrease production output.
This section outlines the main directions for improving technology development provided for in the business plan.
If there is a change in the future period production technology product, then the business plan notes how the proposed technology changes will affect the quality of the product, the level of production costs, and the price of the product.
If the production process involves the performance of part of the operations by subcontractors, this is also specifically noted in the business plan. The expediency of choosing specific partners is substantiated from the point of view of minimum costs for production, transportation, and incoming control of components and semi-finished products supplied by the subcontractor. When choosing partners, their reliability, production, financial, personnel capabilities, and prestige are assessed.
The business plan specifically examines the company’s product quality management system. It is reported at what stages and by what methods it will be carried out quality control, what standards product manufacturers will be guided by.
The production plan may also include information about environmental protection system, indicating the measures taken for waste disposal and the corresponding costs.
Manufacturing program(forecast of production volumes and sales of products), given in the business plan, is compiled on the basis of the results of marketing research of the sales market with their subsequent comparison with the production capabilities of the enterprise.
The production program determines the required volume of production in the planning period, corresponding in nomenclature, assortment and quality to the requirements of the sales plan. It determines the tasks for commissioning new production facilities, the need for material and raw materials, the number of personnel, and transport.
Enterprises formulate a production program based on government orders, consumer orders identified in the process of studying the consumer demand market.
The main indicators of the production program are:
1) nomenclature containing the name of the product indicating quantity, quality and delivery dates;
2) commercial products;
3) work in progress;
4) gross output.
The production activity of the enterprise, in turn, is characterized by a system of indicators:
1) demand for products;
2) production capacity;
3) volume of production;
4) costs and prices;
5) the need for resources and investments;
6) total and net income of the enterprise;
7) dividends on shares, etc.
The plan for production and sales of products contains, as a rule, a system of natural and cost indicators.
The advantages of natural indicators are clarity, objectivity in assessing the satisfaction of the need for a specific type of product, the contribution of each enterprise to solving this problem, the degree of use of capacities and production resources.
Disadvantage - it is difficult to determine the total volume of production and sales at enterprises with a multi-product output.
The main cost indicators of product output at an enterprise include gross turnover, intra-factory turnover, marketable products, gross output, volume of products sold, standard cost of processing (NSC), pure and conditionally pure products.
At different periods of development of the country's economy, preference was given to one or the other cost indicators characterizing the volume of output.
Gross turnover enterprise is the total cost of production of all main, auxiliary, and service departments. Products are included in gross turnover regardless of whether they are intended for distribution abroad or for further industrial processing at the same enterprise. Thus, this indicator allows for repeated counting of products within the enterprise. The calculation of gross turnover acquires a certain economic significance when analyzing the work of an enterprise, justifying planned indicators, when the production structure of the enterprise changes (new workshops are introduced, existing ones are expanded), when the structure of production changes due to a change (increase, decrease) in the volume of cooperative supplies to the enterprise.
Intra-factory turnover– the sum of the cost of products of own production consumed within the enterprise for production needs. Industrial consumption within an enterprise includes the processing of semi-finished products from its output for the production of finished products, the consumption of electricity, compressed air, steam from its production, the use of parts and products from its production for routine repairs of buildings, structures, and equipment.
Commodity, gross, sold products determined by the factory method, i.e., the cost of that part of the product that is used within the enterprise for its own industrial production needs is excluded from the cost of finished products and semi-finished products planned for production. The disadvantage of this method is that the value of commodity, gross, sold products may change as a result of changes in the organizational structure of enterprises. Thus, the merger of two or more enterprises into one (when combining production) leads to a decrease, and the division of enterprises (when specializing production) leads to an increase in the value of these indicators. The amount of marketable, gross, sold products does not depend on whether the enterprise itself extracts, produces raw materials, semi-finished products for the production of finished products or receives them from outside.
Commercial products of an enterprise are products produced in the reporting period and sold or intended for sale. The composition of commercial products (T pr) includes finished products (G from); semi-finished products intended for distribution to third-party consumers (Pf); works of an industrial nature, carried out according to orders from outside (R pr); all types of repair work carried out according to orders from outside (R slave); products of auxiliary workshops made for sale externally or for one’s own use (B). Thus, the volume of marketable products can be determined by the formula:
T pr = G from + P f + R pr + R slave + In c
Where A i– products of the i-th type;
C i - unit price of product of the i-th type;
Q y - cost of services provided.
The volume of marketable products is determined in the current (current) prices of the enterprise and is the basis for calculating taxes (VAT, excise taxes, etc.). Commercial products are always determined without taking into account VAT and other special taxes.
Gross refers to all products produced by the enterprise during the reporting period, regardless of the degree of their readiness and purpose for use. The volume of gross output (Vpr) can be determined by the formula:
In pr = T pr + (N to – N n),
Where N k - balance of work in progress at the end of the year, rub.;
N n - the same for the beginning of the year.
Work in progress balances are determined based on accounting or inventory data. The normal amount of work in progress at the end of the planning period must correspond to the production conditions of the subsequent period.
Products sold - These are finished products intended for sale, delivered to the finished goods warehouse and documented before 24:00 on the last day of the month or before 8:00 a.m. on the 1st day of the month following the reporting period.
The volume of products sold in the planning period (Q rp) can be determined using the formula:
Q pr = He + T pr – OK,
Where He, OK– balances of finished products in the warehouse at the beginning and end of the period under review (year, month, etc.);
T pr– commercial products according to plan.
In a market economy, special importance should be given to the indicator “volume of products sold” under supply contracts, which determines the efficiency and feasibility of the enterprise’s economic activities.
Products sold– these are finished products shipped to the buyer, for which funds are transferred to the suppliers’ bank account. Measured in current prices.
In accordance with the Regulations on Accounting and Reporting in the Russian Federation, revenue from sales of products can be determined in two ways.
1. As it is paid, funds are received in accounts at bank institutions, and when paying in cash, when funds are received at the cash desk.
2. Upon shipment of goods and presentation of payment documents to the buyer (customer).
When developing a reporting policy for a planning period, each enterprise accepts one of two options for accounting for revenue from sales of products, based on business conditions and concluded contracts. The first option for recognizing sales revenue is currently the most common in the Russian economy. However, it reduces the reliability when calculating the production result: expenses (materials, wages, etc.) are accrued in one reporting period, and revenue for shipped products very often arrives in another, which is explained by a general sharp decline in product sales volumes, in other words, the enterprise often works at a warehouse.
The second option for accounting for sales provides greater reliability in calculating the production result. However, the enterprise immediately becomes indebted for VAT and income tax due to the actual receipt of money, and it quickly becomes insolvent and financially bankrupt. Huge mutual debt, lack of financial discipline of customers, and a high level of monopolization lead to the fact that the level of use of the second option is insignificant. It is most often used in transport, communications, and construction enterprises.
The implementation process completes the circulation of the enterprise’s economic assets, which allows it to fulfill its obligations to the state budget, the bank for loans, workers and employees, suppliers and reimburse production costs. Failure to fulfill implementation tasks causes a slowdown in the movement of working capital, delays in payments, and worsens the financial position of the enterprise.
Indicators of gross, marketable and sold products do not fully characterize the final result of the enterprise. This is due to the fact that the volume of these products includes material costs, which have a large share. Therefore, to measure the enterprise’s own contribution to production, it is necessary to use the following indicators:
1) conditionally net products, which includes wage costs with accruals, depreciation and profit;
2) clean products. This is the part of gross output corresponding to the newly created value, i.e. it is conditionally pure production without depreciation;
3) normative pure products, which differ from pure ones in that they are formed on the basis of stable standards.
Important market indicators are indicators of product renewal. In accordance with its life cycle, each type of product reaches a certain period of maximum efficiency, and therefore periodic review of the range is necessary.
The product renewal coefficient characterizes the ratio of new and old products and is used in many enterprises as an approved target indicator in the total production volume. It is especially widely used in foreign practice.
The production program of the enterprise should be developed in the following sequence:
1) the company conducts market research, determines the position of the product on the market, possible demand and sales volume;
2) based on the possible sales volume, determine the volume of products sold:
N real = Q sales? C;
3) plan the volume of commercial products:
N tov = N real – (O n – O k);
4) determine the amount of gross output:
N shaft = N item + (N k – N n);
5) compare the possible volume of production with available material, financial and other resources.
The business plan provides data on the volume of output of each type of product in physical units, as well as the planned values of these indicators for the next 3 to 5 years.
For an existing business, they describe production capacity, including production and administrative premises, warehouses and sites, special equipment, mechanisms and other production assets available at the enterprise.
The production plan must correspond to the capacity of enterprises - the volume or number of units of products (services, works) that can be produced over a certain period.
Under production capacity of the enterprise is understood as the maximum possible output of products in the range and assortment provided for by the sales plan, with full use of production equipment, space and taking into account progressive technology, advanced organization of labor and production.
Calculation of the production capacity of an enterprise is the most important stage in justifying the production program. Based on calculations of production capacity, in-production reserves for production growth are identified, production volumes are established, and the need to increase production capacity through technical re-equipment, reconstruction and expansion of existing and construction of new facilities is determined.
Planning of production capacity is based on taking into account the factors on which its value depends. When calculating power, the following factors are taken into account:
1) structure and size of fixed production assets;
2) qualitative composition of equipment, level of physical and moral wear and tear;
3) advanced technical standards for equipment productivity, space use, labor intensity of products, product yield from raw materials;
4) progressiveness of the applied technological processes;
5) degree of specialization;
6) operating mode of the enterprise;
7) level of organization of production and labor;
8) equipment operating time fund;
9) quality of raw materials and rhythm of deliveries.
Production capacity is a variable quantity. Disposal of capacity occurs for the following reasons: wear and tear of equipment, an increase in the labor intensity of manufacturing products, changes in the nomenclature and range of products, a decrease in operating time, and the end of the equipment leasing period. These same factors also work in the opposite direction.
The production capacity of an enterprise is determined by the capacity of leading workshops, sections, production lines, machines (units), taking into account measures to eliminate bottlenecks and possible cooperation in production.
The calculation of production capacity includes all available equipment, including those that are inactive due to malfunctions, repairs, and modernization. Equipment being installed and in warehouses intended for commissioning in the planned period is taken into account. When calculating capacity, the equipment of auxiliary and service workshops is not considered.
Calculation of the production capacity of the enterprise should be carried out in the following sequence:
1) calculation of the production capacity of units and groups of technological equipment;
2) calculation of the production capacity of production sites;
3) calculation of the production capacity of workshops (buildings, production);
4) calculation of the production capacity of the enterprise as a whole.
To calculate production capacity, two methods are used:
1) in terms of equipment performance;
2) by the labor intensity of manufacturing products.
In continuous production, the capacity of units, sections and workshops is calculated, as a rule, by the productivity of the equipment, and in discrete production - by the labor intensity of manufacturing products.
Production capacity planning consists of performing a set of planned calculations to determine:
1) input power;
2) output power;
3) indicators of the degree of power utilization.
Input power determined by the available equipment installed at the beginning of the planning period.
output power is the capacity at the end of the planning period, calculated on the basis of input power, disposal and input of power during the planning period.
Product output planning is carried out based on the average annual capacity (MC), calculated using the formula:
where M n – production capacity at the beginning of the planning period;
M y – increase in power due to organizational and other measures that do not require capital investments;
Ch 1, …, Ch 4 – respectively, the number of months of power operation;
Мр – increase in capacity due to technical re-equipment, expansion and reconstruction of the enterprise;
Mun - increase or decrease in capacity due to changes in the nomenclature and range of products, receipt of industrial production assets from other enterprises and their transfer to other organizations, including leasing;
M in – reduction in power due to its disposal due to disrepair.
It is necessary to distinguish between actual and design power. Their compliance is characterized by the degree of mastery.
Degree of development of design capacities characterized by the following indicators:
1) duration (term) of development;
2) the level of development of the designed capacity;
3) utilization rate of commissioned capacities;
4) volume of production during the development period;
5) achieving project levels of cost, labor productivity and profitability.
Under period (term) of development The design capacity of an enterprise or its part (shop, site, unit) is understood as the time from the date of signing the acceptance certificate for operation until the sustainable production of products by the planned facility. The volume of production at facilities that are at the stage of developing design capacities should be determined taking into account this indicator. When planning this indicator, the time spent preparing production for the release of new products at the facility being put into operation, commissioning and comprehensive testing of equipment should not be taken into account. The level of development is the percentage (coefficient) of development of the design capacity that has been consistently achieved as of a certain date. It is calculated as the ratio of product output in a certain period (hour, day, month, year) to the corresponding (hourly, daily, monthly, annual) design capacity.
A balance of production capacities is being developed.
Based on the results of all calculations, a balance of production capacity is developed in order to more fully link the draft production program and the production capacity of the enterprise. It reflects input, output and average annual capacity, as well as input and output of capacity. Based on the balance of production capacity and during its development, the following is carried out:
1) clarifying the capabilities of the production program;
2) determining the extent to which the program of work for preparing the production of new products is provided with production capacity;
3) determination of the utilization rate of production capacity and fixed assets;
4) identification of intra-production imbalances and opportunities to eliminate them;
5) determining the need for investments to increase capacity and eliminate bottlenecks;
6) determining the need for equipment or identifying surplus equipment;
7) search for the most effective options for specialization and cooperation.
Balance of production capacity by type of product at the end of the planned year is calculated by summing the capacity at the beginning of the year and its increase minus disposal.
The balance of production capacity is calculated for each type of core product according to the following structure.
Section 1. Power at the beginning of the planning period:
1) name of the product;
2) unit of measurement;
3) product code;
4) capacity according to design or calculation;
5) capacity at the end of the base year.
Section 2. Increase in capacity in the planned year:
1) power increase, total;
2) including due to:
a) commissioning new ones and expanding existing ones;
b) reconstruction;
c) re-equipment and organizational and technical measures. Of them:
– by changing the operating mode, increasing the shift of working hours;
– by changing the product range and reducing labor intensity;
d) receiving leasing, rent from other business entities.
Section 3. Reduction in capacity in the planned year:
1) disposal of capacity, total;
2) including due to:
a) changes in product range or increase in labor intensity;
b) changing the operating mode, reducing shifts, working hours;
c) disposal due to disrepair, depletion of reserves;
d) leasing, renting to other business entities.
Section 4. Capacity at the end of the planned period:
1) capacity at the end of the year;
2) average annual capacity in the planned year;
3) production output or the amount of processed raw materials in the planned year;
4) utilization rate of average annual capacity in the planned year.
Based on information about the existing need for production capacity and production premises, the need for additional equipment and the general need for fixed assets and intangible assets are established. The calculation of the need for fixed assets is carried out by type of fixed assets based on productivity standards.
Also in the production plan, working capital standards are calculated using the direct counting method. The latter involves calculating the value of each element of working capital in the conditions of the achieved organizational and technical level of the enterprise, taking into account all the changes provided for in the development of technology, technology and production organization.
The calculation of the need for working capital is carried out not only for newly created enterprises, but also if it is necessary to radically revise existing working capital standards.
When rationing working capital, it is necessary to take into account the dependence of the norms on the following factors:
1) the duration of the production cycle for manufacturing products;
2) consistency and clarity in the work of procurement, processing and production shops;
3) supply conditions (duration of delivery intervals, sizes of supplied lots);
4) remoteness of suppliers from consumers;
5) speed of transportation, type and uninterrupted operation of transport;
6) time to prepare materials for launching them into production;
7) frequency of launching materials into production;
8) conditions for the sale of products;
9) systems and forms of payments, speed of document flow, possibility of using factoring.
The standards developed at the enterprise for each element of working capital are valid for a number of years, and in the event of significant changes in the conditions of production and sales of products, they are updated taking them into account.
The following elements of working capital are standardized:
1) production inventories;
2) unfinished construction;
3) deferred expenses;
4) finished products in the enterprise warehouse;
5) cash in the cash register for storage.
All of the listed working capital standards should take into account the enterprise’s need for funds not only for their core activities, but also for production infrastructure.
For existing enterprises, adjustments to the amount of working capital are made in the financial section of the business plan based on the use of the coefficient method of normalizing working capital (based on the growth rate of production volume and improving the use of working capital).
The section ends with calculations of production costs and the cost of manufactured products. The cost can be determined for all products, for their individual types, components, parts, production processes, and for the work of departments, sections, and workshops. All production costs are usually grouped according to certain individual characteristics. The main group of costs usually includes the following costs:
1) by economic elements. All costs are summarized in separate groups according to their economic homogeneity, regardless of the place of their expenditure and intended purpose. They are divided into:
a) material costs (cost of raw materials and all materials minus return costs);
b) salary;
c) contributions for social needs;
d) depreciation charges;
e) other costs (for repairs; payment of interest on loans, payments for environmental emissions, intangible assets, advertising costs, etc.);
2) by cost item. Costs that include one or more economic elements. Costing items take into account the purpose and place of their occurrence. It is called product costing.
Basic costs are associated directly with the production of products, and overhead costs are associated with the maintenance and management of departments or production as a whole. The article includes one simple element. If it includes several economic elements, then it is considered complex.
Costs in an enterprise are also divided into fixed and variable. Fixed costs do not depend on the volume of output (rent for premises, lighting energy, heating, insurance premiums, administration salaries). The size of variable costs is proportional to the volume of output (raw materials, materials, power energy, wages).
Costs can be fixed or variable only relative to their area of relevance. Area of relevance- This is an area in which costs follow a uniform pattern.
The “Production Plan” section is accompanied by a cost estimate of manufactured products and calculations for all items of the production cost estimate.
Section highlights:
1) the presence or absence of the need to organize a new enterprise for the production of the proposed product;
2) the location of the company based on proximity to the market, suppliers, availability of labor, transport, etc.;
3) production capacities that will be required and the planned dynamics of their commissioning in the future;
4) fixed assets necessary for organizing production, and the dynamics of their changes in the future;
5) the need for material resources and inventories;
6) possible difficulties in organizing production;
7) suppliers of raw materials, materials, semi-finished products and components. Terms of purchase;
8) planned production cooperation. Intended participants;
9) the presence of limitations on production volumes or supply of resources. Reasons for limitation and ways out of this situation;
10) the proposed production planning mechanism. Procedure for drawing up production plans and schedules;
11) production flow diagram;
12) stages, methods and standards of quality control;
13) system of environmental protection and waste disposal;
14) production costs. Dynamics of their changes;
15) availability of production space for expansion of production and transition to new technologies;
16) characteristics of unfinished construction;
17) new technologies planned for use in the production process;
18) organization of research and development work in the company;
19) the time required to switch to the production of a new type of goods;
20) features of production preparation, stages and costs of its implementation;
21) characteristics of the scientific and technical level of production;
22) degree of equipment wear;
23) policies and measures in the field of changing the production potential of the enterprise.
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