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Sales & Operations Planning. Chapter 3 MPC – 5 th 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.
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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 is • To assure that SOP plans are consistent with annual business plan • Establish 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
