Sales and Operations Planning
-coordination of demand forecasts with functional areas and the supply chain
- typically done by cross-functional teams
- determine which plans are feasable
- provides warnings when resources do not match expectations
- output is an aggregate plan
Sales and Opetations planning
- the effort to plan the coordination of demand forecasts with functional areas of the firm and its supply chain
- decisions must be tied to strategic planning and integrated with all areas of the firm over all planning horizons
S&OP is aimed at
1. coordination and integration or internal and external resources necessary for aggregate plan
2. communication of the plan to those charged with its execution
Aggregate Planning
-the objective is usually to meet forecast demand while minimizing cost over the planning period
Disaggregation
- breaks the plan down into greater detail
- results in master production schedule
Aggregate planning strategies
1. capacity options
2. demand options
3. mix options to develop a plan
Capacity option 1: Changing Inventory Levels
- increase inventory in low demand periods to meet high demand in future
Capacity option 2:varying workforce size by hiring or layoffs
- match production rate to demand
Capacity option 3: varying production rate through overtime or idle time
- allows constant workforce
Capacity option 4: Subcontracting
- Subcontracting
- temporary measure during periods of peak demand
Capacity option 5: Using Part Time workers
- using part- time workers
- useful for filling unskilled or low skilled positions, especially in services
Demand option 1: Influencing demand
- influencing demand
-use advertising or promotion to increase demand in low periods
- attempt to shift demand to slow periods
Demand option 2: Back ordering during high-demand periods
- Back ordering during high-demand periods
- requires customers to wait for an order without loss of goodwill or the order
- most effective when there are a few if any substitutes for the product or service
Demand option 3: Counterseasonal product and service mixing
- Counterseasonal product and service mixing
- develop a product mix of counterseasonal items
- may lead to products or services outside the companies areas of expertise
Mixed Strategies
best way to achieve minimum costs
- chase strategy
- level strategy
chase strategy
- match output rates to demand forecast for each period
- vary workforce levels or vary production rate
- favored by many service organizations
level strategy
- daily production is uniform
- use inventory or idle time as buffer
- stable production leads to better quality and productivity
Methods of aggregate planning- GRAPHICAL METHOD
- determine the demand for each period
- determine the capacity for regular time, overtime, and subcontracting each period
- find labor costs, hiring and layoff costs, and inventory holding costs
- consider company policy on workers and stock levels
- dev
Transportation Method of Linear programming
- produces an optimal plan
- works well for inventories, overtime, subcontracting
- does not work when nonlinear or negative factors are introduced
aggregate planning in services
- most services use combination strategies and mixed plans
controlling cost of labor is critical...
1. accurate scheduling of labor-hours to assure quizk response to demand
2. an on-call labor resource to cover unexpected demand
3. flexibility of individual workers
4. flexibility in rate of output on hours of work
Service Scenarios
1. restaurants
2. hospitals
3. national chains of small service firms
4. airline industry
Revenue Management
- allocating resources to customers at prices that will maximize revenue
4 things needed for aggregate planning
1. a logical overall unit for measuring sales and output
2. a method to determine the relevant costs
3. an aggregate demand forecast for an intermediate planning period
4.a model that combines forecasts and costs so that scheduling decisions can be made f
Inputs to S&OP
- capacity decision
- supply-chain support
- workforce
- inventory on hand