Production Planning and Execution
Once all the configurations are completed, it is now time to plan for Production and Material Planning. This Material Planning is often referred to as Material Requirement Planning (MRP).

This video explains the step-by-step process of Production Planning and Execution in ERPNext.

Types of Production Planning
Broadly there are three types of Production Planning

1. Made-to-Order: In this type, Planning and Manufacturing is based on Orders received from Customers. The idea here is to manufacture only what is required to fulfill the orders to reduce the investment. In ERPNext this can be achieved by creating your Production Plan based on Sales Orders that are received from the Customers.
2. Made-to-Stock: In this type, Production and Manufacturing is based on an Internal Forecast. This method is used when the Item being manufactured is a fast-moving product. In ERPNext this can be achieved by creating Material Request based on Forecast and then using this as an Input in Production Plan.
3. Engineer-to-Order: This method is similar to Made to Order. The only difference is that each product is unique and needs to be designed and engineered. In this case, Production Plan can be used along with the Project Module in ERPNext.

The goal of Production Plan
The Goal of the Production Plan is to plan everything that is required to Manufacture Finished Good(s), which is two-fold

1. Material Planning: Production Plan enables you to plan for the Materials (Raw Material or Sub-Assemblies) required to Manufacture Goods based on Sales Order Items or Material Request Items. ERPNext enables this with a click of a button on Production Plan. Click on Create>Material Request on a Submitted Production Plan.
2. Production Planning: The production Plan also creates Draft Work Orders of the Sub-Assemblies and Finished Goods. Production Planners can then add the Source Warehouse from where Raw Material will be issued, Work-in-Progress warehouse where the Production will take place, and Target Warehouse where Finished Goods will be stored. This process of finalizing the Work Orders enables you to assign these Work Orders to relevant Personnel and complete the Production Process. ERPNext enables this with a click of a button on Production Plan. Click on Create>Work Order on a Submitted Production Plan. Make sure you select Make Work Order for Sub-Assemblies in the Work Order Items table if you want to create Work Orders for Sub-Assemblies.

Production Process
Once you have completed the Production Planning Process, it is now time to Execute the Production Process and produce the Sub-Assemblies and Finished Goods.

Following is the process for Production of Goods

1. Procurement of Materials: Once you have figured out what is the Raw Material Requirement from the Production Plan, you need to procure these Raw Materials. ERPNext provides a full-fledged Purchase Management Module to help you manage the Purchasing Process including Request for Quotation (RFQ) to multiple Suppliers, Supplier Quotation (including Easy Comparison of Quotes through built-in reports), Purchase Order, and Purchase Receipt. You can create the required document (RFQ or Purchase Order) easily with a click of a Button from the Material Request generated from the Production Plan.
2. Issue Raw Materials: Once you have Procured the Raw Materials and Planned the Work Orders, you need to Issue Raw Materials to Shop Floor for Production. You can do this easily by clicking the Start button on Work Order. This will create a Stock Entry of type Material Transfer for Manufacturing and deduct the Stock from the Warehouse and add it to Work In Progress Warehouse.
3. Production Process: Once you have issued the Raw Materials, the production process can begin on the Shop Floor. If you want to record the time of Operations, you can use a Job Card and record the time of various operations.
4. Backflush: Once the Production Process is over its completion can be recorded on the system using the Finish button on Work Order. At this point, the Raw Materials or Sub-Assemblies from Work in Progress Warehouse are consumed and Finished Goods are added (Backflushed) to the Target Warehouse set on Work Order.

Repeat Steps 2 to 4 for Sub-Assemblies first and then finally for the Finished Goods. This completes the Production Process.