Module 5 Chapter 10 Sales and Operations Planning S OP o Sometimes called aggregate planning o A process to develop tactical plans by integrating marketing plans for new and existing products with the management of the supply chain The process brings together all the plans for the business into one integrated set of plans o Strategic Planning planning that takes place at the highest levels of the firm addressing needs that might not arise for years into the future o Tactical Planning planning that covers a shorter period usually 12 to 24 moths out although the planning horizon may be longer in industries with very long lead times Typically more detailed but it is constrained by the longer term strategic decisions o Detailed planning and control planning that covers time periods ranging from weeks down to just a few hours out o S OP is aimed squarely at helping businesses develop superior tactical plans specifically S OP indicated how the organization will use its tactical capacity resources to meet expected customer demand Examples size of the workforce inventory number of shifts and even availability of subcontractors S OP strikes a balance between the various needs and constraints of the supply chain partners The result is a plan that is not only feasible but balances costs delivery quantity and flexibility S OP serves as a coordinating mechanism for the carious supply chain partners Good S OP makes is very clear what everyone should and should not do S OP expresses the business s plans in terms that everyone can understand Major approaches to S OP o Top Down Planning an approach in which a single aggregated sales forecast drives the planning processes For top down planning to work the mix of products or services must be essentially the same from one time period to the next or the products or services to be provided must have very similar resource requirements Process of generating a top down plan 1 Develop the aggregate sales forecast and planning 2 Translate the sales forecast into resource values requirements 3 Generate alternative production plans o Level Production Plan production is held constant and inventory is used to absorb differences between production and the sales forecast Best suited in an environment in which changing the production level is impossible or extremely costly and the cost of holding inventory is relatively low o Chase Production Plan production is changed in each time period to match the sales forecast in each time period The result is that production chases demand Best suited to environments in which holding inventory is extremely expensive and impossible or the costs of changing production levels are relatively low o Mixed Production Plan varied both production and inventory levels in an effort to develop the most effective plan Organizing for and Implementing S OP o Bottom up planning used when the product service mix is unstable and resource requirements very greatly across the offerings Under such conditions managers will need to estimate the requirements for each set of products or services separately and then add them up to get an overall picture of the resource requirements o Planning Values values that decision makers use to translate a sales forecast into resource requirements and to determine the feasibility and the costs of alternative sales and operations plans o Cash Flow Analysis New Cash Flow the net flow of dollars into or out of a business over some time period Net cash flow cash inflows cash outflows o Choosing between alternative plans in choosing a plan managers must consider all aspects of a plan not just costs What impact will it have on supply chain partners such as key suppliers and transportation providers What are cash flows like Do the supply chain partners and the firm itself have the space needed to hold and planned inventories How flexible is the plan o Rolling planning horizon a planning approach in which and organization updates its sales and operations plan regularly such as on a monthly or quarterly basis o Implementing S OP in an Organization 3 phase process Developing the foundation Companies build the managerial support and infrastructure needed to make S OP a success This phase typically takes six to nine months Key steps educating all participants about the benefits of S OP identifying an appropriate product or service families to plan around and establishing information systems needed to provide accurate planning values Integrating and streamlining the process S OP becomes part of the organization s normal planning activities The S OP becomes a focal point for cross functional coordination Gaining a competitive advantage A few companies reach the point where their S OP process actually becomes a source of competitive advantage Companies know they have reached this stage when o There is a well integrated demand planning process including the use of forecasting models o Continuous improvement is planned and monitored as an integral part of the S OP process o Capital equipment planning can be triggered at any time o What if analyses are a way of life and the S OP database is networked to provide ready access to S OP data Service Considerations o Making sales match capacity o Making capacity match sales Yield Management an approach that services commonly use with highly perishable products in which process are regularly adjusted to maximize total profit examples airline seats and hotel rooms The goal of yield management is to maximize total profit Total profit average profit per service unit sold number or service units sold Tiered Workforce a strategy used to vary workforce levels in which additional full time or part time employees are hired during peak demand period while and smaller permanent staff is maintained year round Example common in retailing hospitality and agricultural industries Offloading a strategy for reducing and smoothing out work force requirements that involves having customers perform part of the work themselves Examples IKEA Fidelity investments Module 6 Chapter 12 Planning and Control Master Scheduling o A set of tactical and execution level business activities that includes master scheduling material requirements planning and some form of production activity control and vendor order agreement o Planning and control begins where S OP ends o First step in planning and control o Detailed planning process that tracks production out put and matches this output to actual customers o