Sales & Operations Planning

Chapter 3

MPC – 5th Edition

SOP provides the framework to:

Materials resources and plant capacities can be coordinated consistent with the strategic business objectives

Key input into the capital budgeting process.

1. SOP Fundamentals Balance between demand and supply

D>S customer service suffers because the customer will not be able to receive the products. Costs increase because of overtime and fast freight (lett.: trasporto, cioè qui: spedizione)

S>D Inventories increase because of the imbalance. Layoffs results from production rate cuts. Profit margin is reduced because of price cuts and discounting.

SOP should provide a strategy for how demand will be met over the business cycle.

SOP The operations portion of the SOP is a plan for

manufacturing that if followed will meet the strategic objectives of the firm from a manufacturing view.

The Sales & Operations Plan (SOP) is stated in terms commonly understood by upper level management: aggregate units of output per month (sometimes per week) while the MPS (Master Production Scheduling) will be in units per week (sometimes per day).

SOP Management (Cont.) The operations plan is not a forecast. It is the

planned production, stated on an aggregate basis, for which manufacturing management is to be held responsible (sulla base del sales forecast).

SOP Management

Links through the MPS to material planning and other MPC functions can provide the basis for what-if simulations of alternative plans.

The value of the MPS function is questionable if there is no monitoring of performance – for instance deviations of performance. Reconciliation of the MPS with the operations plan is a constant activity.

1. The monthly SOP process Run the sales forecast reports. Reviews the impact of changes & determine

whether there is enough material and capacity (supply).

Demand planning phase (override statistical forecasts when appropriate and bring mkt. in.)

Pre-SOP meeting (Formulate agreed-on recommendations for top management regarding changes in the plan).

Executive SOP meeting – Make decisions on the plans including spending for changes and break ties where there was no consensus.

2. SOP Planning Displays Forecasts – Bar chart of monthly forecasts Chase Strategy – Production output

changes every time period to match the value of forecasted sales.

Level Strategy – Production is at a constant rate of output with inventory buildups and depletions.

In either strategy the plan is to satisfy the forecasted demand.

Compugraphic

Figure 3.11 SOP committee is made up of the firms

top management group representing all functional areas.

Mission isTo assure that SOP plans are

consistent with annual business planEstablish performance measurements

for evaluating the SOP process

Compugraphic

To monitor actual results against plans and make adjustments as required

To manage the FGI with the targets established in the SOP

To provide direction to the development and execution of the master production schedule

Figure 3.13