Once you have information as to the quantities that are to be sold, you will have to foresee the quantities that will be produced and the level of stocks of raw materials and finished products. Broadly, the production plan describes how the company is going to produce its products or services and all critical decisions required by the process. Here you also predict production costs as well as the costs by each sold unit.
Basically, the production plan may be translated into the following chart:
The production plan also gives relevant information for the reader of the business plan since it identifies the production costs (which, when compared with the sales forecasts, allows you to assess profitability) and allows you to know which are the areas of possible cost reduction.
To list all production costs is essential in this plan because it will allow you to define the stocks policies (the relevant resources which must be ensured, even if it is necessary to "buy" in advance), the installed capacity (what should be produced at internal level and what should be contracted) and the price of each product (of course, according to the price policy, defined in the marketing mix).
The production plan should also identify the capacity threshold, that is, as from what quantities it is required to increase the capacity, that is, as from what point it is necessary to make new investments.
Finally, you should make a reflection on the possible constraints to production and to prepare contingency plans in order to face them (for instance, if a supplier does not deliver the raw-material in the agreed deadline, who can I contact in order not to delay the delivery to a client).
Once the production plan is finished, you should be able to fill in the following table, per product:
Sales Costs Product A Product B Product C
Cost of raw materials
Man's hours x hourly average wage
Other direct costs
Unit cost price
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