Lecture Operations and supply chain management: The Core (3/e) – Chapter 8: Sales and operations planning

The main goals of this chapter are to: Understand what sales and operations planning is and how it coordinates manufacturing, logistics, service, and marketing plans; construct aggregate plans that employ different strategies for meeting demand; describe what yield management is and why it is an important strategy for leveling demand.

Sales and Operations Planning Chapter 08 McGraw­Hill/Irwin         Copyright © 2013 by The McGraw­Hill Companies, Inc. All rights reserved Learning Objectives   Understand what sales and operations planning is and how it coordinates manufacturing, logistics, service, and marketing plans Construct aggregate plans that employ different strategies for meeting demand Describe what yield management is and why it is an important strategy for leveling demand 8­2 What is Sales and Operations Planning?    Sales and operations planning is a process that helps firms provide better customer service, lower inventory, shorten customer lead times, stabilize production rates, and give top management a handle on the business The process consists of a series of meetings, finishing with a high-level meeting where key intermediate-term decisions are made This must occur at an aggregate level and also at the detailed individual product level  By aggregate we mean at the level of major groups of products 8­3 Sales and Operations Planning Activities - Overview 8­4 Types of Planning 8­5 Aggregate Operations Plans  Specifies the optimal combination of      Production rate (units completed per unit of time) Workforce level (number of workers needed in a period) Inventory on hand (inventory carried from previous period) Product group or broad category (aggregation) This planning is done over an intermediate-range planning period of to18 months Excel: Aggregate Pla 8­6 Production Planning Environment  In general, the external environment is outside the production planner’s direct control    In some firms, demand can be managed Complementary products work for firms facing cyclical demand fluctuations With services, cycles are more often measured in hours than months 8­7 Production Planning Strategies   Production planning strategies are the plans for meeting demand Tradeoffs involved include workers employed, work hours, inventory and shortages A pure strategy uses just one of these approaches, a mixed strategy uses two or more 8­8 Relevant Costs 8­9 Aggregate Planning Techniques 8­10 Evaluate Alternative Plans 8­11 Level Scheduling A level schedule holds production constant over a period of time  It is something of a combination of the strategies we have mentioned here  For each period, it keeps the workforce constant and inventory low, and depends on demand to pull products through  8­12 Level Scheduling Advantag e s     The entire system can be planned to minimize inventory and work-in-process Product modifications are upto-date because of the low amount of work-in-process There is a smooth flow throughout the production system Purchased items from vendors can be delivered when needed, often directly to the production line Re quire me nts        Production should be repetitive (assembly-line format) The system must contain excess capacity Output of the system must be fixed for a period of time There must be a smooth relationship among purchasing, marketing, and production The cost of carrying inventory must be high Equipment costs must be low The workforce must be multiskilled 8­13 Yield Management  Yield management - the process of allocating the right type of capacity to the right type of customer at the right price and time to maximize revenue or yield    Can be a powerful approach to making demand more predictable Has existed as long as there has been limited capacity for serving customers Its widespread scientific application began with American Airlines’ computerized reservation system (SABRE) 8­14 Yield Management Success Factors 8­15 ... for meeting demand Describe what yield management is and why it is an important strategy for leveling demand 8­2 What is Sales and Operations Planning?    Sales and operations planning is a... level and also at the detailed individual product level  By aggregate we mean at the level of major groups of products 8­3 Sales and Operations Planning Activities - Overview 8­4 Types of Planning. ..Learning Objectives   Understand what sales and operations planning is and how it coordinates manufacturing, logistics, service, and marketing plans Construct aggregate plans