Operation management 6e by russel and taylor ch14

Chapter 14 Sales and Operations Planning Operations Operations Management Management 66thth Edition Edition Roberta Russell & Bernard W Taylor, III Copyright 2009 John Wiley & Sons, Inc Beni Asllani University of Tennessee at Chattanooga Lecture Outline  The Sales and Operations Planning Process  Strategies for Adjusting Capacity  Strategies for Managing Demand  Quantitative Techniques for Aggregate Planning  Hierarchical Nature of Planning  Aggregate Planning for Services Copyright 2009 John Wiley & Sons, Inc 14-2 Sales and Operations Planning  Determines the resource capacity needed to meet demand over an intermediate time horizon   Aggregate refers to sales and operations planning for product lines or families Sales and Operations planning (S&OP) matches supply and demand  Objectives   Establish a company wide game plan for allocating resources Develop an economic strategy for meeting demand Copyright 2009 John Wiley & Sons, Inc 14-3 Sales and Operations Planning Process Copyright 2009 John Wiley & Sons, Inc 14-4 The Monthly S&OP Planning Process Copyright 2009 John Wiley & Sons, Inc 14-5 Meeting Demand Strategies  Adjusting capacity   Resources necessary to meet demand are acquired and maintained over the time horizon of the plan Minor variations in demand are handled with overtime or under-time  Managing demand  Proactive demand management Copyright 2009 John Wiley & Sons, Inc 14-6 Strategies for Adjusting Capacity  Level production  Producing at a constant rate and using inventory to absorb fluctuations in demand  Overtime and under-time   Subcontracting   Chase demand  Hiring and firing workers to match demand Maintaining resources for high-demand levels Let outside companies complete the work  Part-time workers   Peak demand  Increasing or decreasing working hours Hiring part time workers to complete the work  Backordering Copyright 2009 John Wiley & Sons, Inc  Providing the service or product at a later time period 14-7 Level Production Demand Units Production Time Copyright 2009 John Wiley & Sons, Inc 14-8 Chase Demand Demand Units Production Time Copyright 2009 John Wiley & Sons, Inc 14-9 Strategies for Managing Demand  Shifting demand into other time periods    Incentives Sales promotions Advertising campaigns  Offering products or services with countercyclical demand patterns  Partnering with suppliers to reduce information distortion along the supply chain Copyright 2009 John Wiley & Sons, Inc 14-10 Burruss’ Production Plan ENDING PERIOD CONTRACT REGULAR DEMAND PRODUCTION INVENTORY 900 1000 500 1500 1200 600 1600 1300 1000 3000 1300 Total 7000 4800 Copyright 2009 John Wiley & Sons, Inc SUB- 100 OVERTIME 150 250 200 500 200 500 650 14-26 1250 Using Excel for the Transportation Method of Aggregate Planning Copyright 2009 John Wiley & Sons, Inc 14-27 Other Quantitative Techniques  Linear decision rule (LDR)  Search decision rule (SDR)  Management coefficients model Copyright 2009 John Wiley & Sons, Inc 14-28 Hierarchical Nature of Planning Items Production Planning Capacity Planning Resource Level Product lines or families Sales and Operations Plan Resource requirements plan Plants Individual products Master production schedule Rough-cut capacity plan Critical work centers Components Material requirements plan Capacity requirements plan All work centers Manufacturing operations Shop floor schedule Input/ output control Individual machines  Disaggregation: process of breaking an aggregate plan into more detailed plans Copyright 2009 John Wiley & Sons, Inc 14-29 Collaborative Planning  Sharing information and synchronizing production across supply chain  Part of CPFR (collaborative planning, forecasting, and replenishment)  involves selecting products to be jointly managed, creating a single forecast of customer demand, and synchronizing production across supply chain Copyright 2009 John Wiley & Sons, Inc 14-30 Available-to-Promise (ATP)  Quantity of items that can be promised to customer  Difference between planned production and customer orders already received AT in period = (On-hand quantity + MPS in period 1) – (CO until the next period of planned production) ATP in period n = (MPS in period n) – (CO until the next period of planned production)  Capable-to-promise  quantity of items that can be produced and mad available at a later date Copyright 2009 John Wiley & Sons, Inc 14-31 ATP: Example Copyright 2009 John Wiley & Sons, Inc 14-32 ATP: Example (cont.) Copyright 2009 John Wiley & Sons, Inc 14-33 ATP: Example (cont.) Take excess units from April ATP in April = (10+100) – 70 = 40 = 30 ATP in May = 100 – 110 = -10 =0 ATP in June = 100 – 50 = 50 Copyright 2009 John Wiley & Sons, Inc 14-34 Rule Based ATP Product Request Yes Is the product available at this location? No Availableto-promise Yes Is an alternative product available at this location? No Allocate inventory Yes Is this product available at a different location? No Copyright 2009 John Wiley & Sons, Inc Is an alternative product available at an alternate location? Yes Availableto-promise No Allocate inventory Capable-topromise date Is the customer willing to wait for the product? No Yes Revise master schedule Trigger production Lose sale 14-35 Aggregate Planning for Services Most services cannot be inventoried Demand for services is difficult to predict Capacity is also difficult to predict Service capacity must be provided at the appropriate place and time Labor is usually the most constraining resource for services Copyright 2009 John Wiley & Sons, Inc 14-36 Yield Management Copyright 2009 John Wiley & Sons, Inc 14-37 Yield Management (cont.) Copyright 2009 John Wiley & Sons, Inc 14-38 Yield Management: Example NO-SHOWS PROBABILITY P(N < X) 15 00 25 15 30 40 30 70 Optimal probability of no-shows P(n < x) ≤ Cu Cu + Co = 75 = 517 75 + 70 Hotel should be overbooked by two rooms Copyright 2009 John Wiley & Sons, Inc 14-39 517 Copyright 2009 J ohn Wiley & Sons, Inc All rights reserved Reproduction or translation of this work beyond that permitted in section 117 of the 1976 United States Copyright Act without express permission of the copyright owner is unlawful Request for further information should be addressed to the Permission Department, J ohn Wiley & Sons, Inc The purchaser may make back-up copies for his/her own use only and not for distribution or resale The Publisher assumes no responsibility for errors, omissions, or damages caused by the use of these programs or from the use of the information Copyright 2009herein John Wiley & Sons, Inc 14-40 ... to meet demand are acquired and maintained over the time horizon of the plan Minor variations in demand are handled with overtime or under-time  Managing demand  Proactive demand management. .. at a constant rate and using inventory to absorb fluctuations in demand  Overtime and under-time   Subcontracting   Chase demand  Hiring and firing workers to match demand Maintaining resources... Sons, Inc 14-2 Sales and Operations Planning  Determines the resource capacity needed to meet demand over an intermediate time horizon   Aggregate refers to sales and operations planning for