The production plan is a statement of the resources needed to meet the aggregate demand plan over

a medium-term horizon. The production plan is the output of the supply planning step in the sales

and operations planning (S&OP) process. The production plan relates to a firm’s financial planning

because it is used to identify future cash needs. Cash needs are the amount of money that a firm

requires to operate and grow its business. Cash needs can be influenced by various factors, such as

sales revenue, cost of goods sold, operating expenses, capital expenditures, inventory levels,

accounts receivable, accounts payable, and taxes. The production plan can help to estimate the cash

inflows and outflows associated with these factors, and to determine the optimal balance between

them. The production plan can also help to identify the potential sources and uses of cash, such as

borrowing, investing, or paying dividends. By identifying future cash needs, the production plan can

help to improve the firm’s liquidity, profitability, and solvency.

Reference: CPIM Exam Content Manual Version 7.0, Domain 4: Plan and Manage Supply, Section 4.1:

Develop Supply Plans, Subsection 4.1.2: Describe how to develop a production plan (page 36).