MPR Chapter 5: Sales and Operations Planning
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. What would you like to do?
True or False
S&OP is NOT a key MPC business process.
What are major attributes of S&OP?
- It connects business planning to tactical planning in MPR
- Balances supply and demand at the product family level
- Plans at the volume level, not individual product mix level
- Uses aggregate time buckets: monthly review cycle
- Involves sales, marketing, manufacturing, logistics, finance, and others
How does S&OP rely on strategic and business planning?
S&OP gets Direction setting inputs from Strategic and business planning
What role does demand management play in S&OP?
Demand management inputs from sales planning: forecast and customer order information
What role does resource planning play in S&OP?
resource planning to check on capacity and resource availability required by the production plan in the S&OP planning horizon
What role does Distribution planning play in S&OP?
distribution planning for distribution inventory demand and logistics resource planning at the product family level
True or False:
S&OP translates strategic planning (strategic and business plans) into several tactical plans that provide input to master scheduling
S&OP translates strategic planning (strategic and business plans) into several tactical plans that provide input to master scheduling - What are they?
What 2 fundamental issues are addressed by S&OP?
- supply and demand balancing
- product family level planning
What is the key to MPC?
maintaining a balance between supply and demand - This role is played by S&OP.
What happens when demand exceeds supply?
- Customer service levels fall
- Costs increase
- Quality suffers
- profit margins decrease
What happens when supply exceeds demand?
- inventories increase
- Product rate reductions lead to job layoffs and reduction in plant efficiency
- Profit margins suffer from price cuts and discounting
How does S&OP maintain proper balance of supply and demand?
- early identification of supply and demand imbalances and resource shortages and surpluses
- effective coordination of the functions and tactical plans involved in S&OP
True or False
S&OP plans and balances supply and demand at the product family volume level.
What is the objective of resource planning?
to make sure resources are available to meet volume and rate of production requirements before the start of production and the before the final product mix is known
True or False
The planning of the end item mix is most appropriately deferred to the master scheduling process
True or False
Rough Cut Capacity planning (RCCP) assesses in more detail the adequacy of resources to accommodate product mix requirements shown in the MPS
How does S&OP balance different interests among sales and marketing, operations, and finance?
- evaluating alternative plans and their financial implications
- adherence to management principles
- monitoring and controlling performance
What do decisions in S&OP do?
are instrumental in developing tactical plans for sales and marketing, production and finance.
- The decisions represent trade offs among alternative plans considered
- Are consistent with the overall sales and operations plan and are based on one set of numbers
Operations is responsible for achieving the _________?
Sales and marketing is responsible for achieving the __________________ and the ________________.
- product family sales plan
- product mix plan (in the MPS)
In terms of changes to the production plan, what 2 principles are important?
- significant changes in the plan to increase supply require a formal change in the production plan
- Impacts on the financial plan require evaluation
What is critical to an effective S&OP?
The monitoring and control of performance against the plan
Delivery performance should be tracked how often?
Conformity of the MPS to the production plan should be tracked how often?
How often should actual production compared to MPS be tracked?
How often should capacity utilization be tracked?
How often should Inventory or backlog performance versus plan be tracked?
What is key to monitoring and control of S&OP?
- 1. linkages to key data
- 2. Timely analysis and communication of problems identified in the reporting process
What is the role and responsibility of the executive champion or sponsor?
- Set clear performance expectations for top management
- authorize necessary resources
- Clear obstacles to effective process performance
What is the role and responsibility of the S&OP process owner?
The leader of the monthly S&OP planning process. The process owner has strong leadership skills and is capable of presenting issues to decision makers and facilitating conflict resolution
What is the role of the demand planning team?
reviewing the sales forecasting reports and ensuring that price changes, promotions, market conditions, and competitor activity are properly accounted for in the forecasts
What is the role of the supply planning team?
review the preliminary production plan and recommend changes as necessary to meet the demand plan
What is the role of the Pre-S&OP team?
make decisions on the demand and supply balance, resolves problems, identifies issues needing resolution, and develops alternatives for consideration by the Executive S&OP team
What is the role of the Executive S&OP team?
Decide on the sales and operations plan for product families, authorize spending for production and procurement rate changes, relate the impact of the monetized version of the sales and operations plan to the business plan, resolve issues from the Pre-S&OP meeting, and review customer service and business performance.
All the customer orders received but not yet shipped. Sometimes referred to as open orders or the order board
Bill of resources
a listing of the required capacity and key resources needed to manufacture one unit of a selected item or family
Chase production method
a production planning method that maintains a stable inventory level while varying production to meet demand
Hybrid production method
a production planning method that combines the aspects of both the chase and level production planning methods
make to order
production environment where a good or service can be made after receipt of a customer's order
make to stock
a production environment where products can be and usually are finished before receipt of a customer order
planning time fence
a point in time denoted in the planning horizon of the master scheduling process that marks a boundary inside of which changes to the schedule may adversely affect component schedules, capacity plans, customer deliveries, and cost
The agreed upon plan that comes from the production planning or S&OP process - specifically the overall level of manufacturing output planned to be produced, which is usually stated as a monthly rate for each product family (group of products, items, options, features, and so on)
Capacity planning conducted at the business plan level
A time phased statement of expected customer orders anticipated to be received - which include incoming sales, not outgoing shipments - for each major product family or item
unit of measure
The unit in which the quantity of an item is managed;for example, pounds, each, box of 12, etc
An MTO company would like to cut a product's backlog from 6 to 4 months. If annual demand is 360 units, the production plan this year should be how many units?
Which team has the responsibility for preparing the preliminary production plan?
supply planning team
When defining product families, which of the following is most important?
A) how the product is made
B) package size
C) product load profile
D) the market strategy
D) the market strategy
(this multiple choice question has been scrambled)
During the S&OP process, performing a financial evaluation of alternative strategies includes which of the following:
I. The number of and productivity of the workers
II. cost of changing work levels
III. Inventory costs
IV. The priority sequence of the load
I, II, and III
S&OP typically is done at which level?
The production planning method that usually creates a buildup of inventory is:
An MTS company would like to cut its inventory from 4 months to 2 months. If annual demand is 360,000 units, the production plan this year should be how many units?
The process used to validate that adequate resources and capacity exist for the S&OP production plan is
S&OP fundamentals include:
I supply and demand planning
II. disaggregating volume into a master schedule
III. product family planning
IV. mix planning
I and III
In an MTO manufacturing environment, a key management issue to consider is:
determining the lead time to customers by managing the size of the backlog
What are 3 key planning factors that are instrumental to the S&OP process?
- 1. product family definition
- 2. unit of measure (UOM)
- 3. planning horizon
What are the objectives and characteristics of product family definition?
Defined based on how you go to market or define by use of common resources used in production
What is non aligned resources?
If product groupings do not line up with resources
What are the objectives and characteristics of UOM?
Use a UOM that is consistent with the way the company goes to market
What are the objectives and characteristics of the planning horizon?
- One major principle of S&OP is that it needs to be consistent with and support the annual business plan. It needs to bee at least as long in periods, usually months, as the annual business plan
- needs to include additional months to cover the period between the start of the business planning cycle in the last half of the current fiscal year and the start of the next fiscal year
What 3 planning factors are important in achieving balance to supply and demand in the intermediate to long term?
- Customer service level - designed to meet customer expectations
- Inventory level - MTS finished goods inventory levels, ATO modular components
- Backlog level - order received but not yet shipped in a MTO environment. orders are received before the product is made.
What are planning outcomes of S&OP?
- change in the sales plan
- change in the operations plan
- change in the inventory or backlog plan
- change in the strategy regarding volume
- No change in current plans
What are the business outcomes and benefits of S&OP?
- MTS - higher customer service, lower finished goods inventories
- MTO - higher customer service, smaller customer backlogs and shorter lead times
- ATO - higher customer service, faster response, lower component inventories
What are the 5 steps of the S&OP process?
- Step 1: Data gathering
- Step 2: Demand planning
- Step 3: Supply Planning
- Step 4: Pre- S&OP meeting
- Step 5: Executive meeting
What are 3 methods for developing a production plan?
- Level production method - The rate of production is level though demand may vary
- Chase production method - the rate of production matches the rate of demand
- Hybrid production method - the is a compromise method in which production levels run at or close to full capacity during part of the planning period and at a lower level during the other part.
What are the elements of the conventional MTS grid?
- Rows - 3 sections: sales plan, production plan, inventory plan
- Sales Plan - sales plan, actual sales over 3 months, period and cumulative variances between planned and actual sales
- Production Plan - production plan by S&OP, actual receipts into inventory by period of actual quantities from production or suppliers, period and cumulative variances between planned and actual
- Inventory plan - calculated field, planned inventory levels based on sales, production, and inventory plan data. 2nd row shows actual inventory levels, 3rd row shows difference between the planned and actual inventory
- Planning time fence
- History - past period data
What is the minimum recommended planning horizon?
What is the standard period?
High levels of customer service and profitability require what?
- 1. Meet customer lead time requirements
- 2. prepare accurate forecasts
- 3. Ensure resources and customer orders are in balance
- 4. Avoid unacceptable backlogs
What is the MTO grid?
- Planning horizon and time fence - same
- History - MTO history shows backlog and not inventory
- Sales plan - shows expected bookings.
- Production plan - based on orders and backlog planning vs forecasts and inventory planning in MTC
- Backlog plan - MTO has inventory plan - includes orders waiting to be processed, in production and waiting to be shipped
What are the objectives of resource planning?
- Evaluate the feasibility of the production plan
- Address the adequacy of resources with long acquisition lead times
What are the 2 important characteristics of resources?
- the ability to support production and service delivery
- the ability to constrain them
What is the Bill of Resources?
includes information that is critical to resource planning at the product family level.
True or False
The bill of resources connects resources with the product families that need them in the production process.
What are the 6 steps of the resource planning process?
- 1. Determine bill of key resources for each product family in the production plan
- 2. Determine the UOM for each key resource
- 3. Determine key resource capacity availability for each resource by period
- 4. Calculate the load on each key resource by time period
- 5. Compare load to available capacity in each time period for each resource
- 6. Revise the production plan or adjust capacity as necessary.
What are significant changes in resources?
- facility startup and shutdown
- hiring, layoffs, and shift changes
- Adding and removing tooling and equipment
- outsourcing and subcontracting
- education and training
What would you like to do?
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