Chapter 10 - Sales and Operations Planning (Aggregate Planning)

Constraint

A quantifiable condition that places limitations on the set of possible solutions. The solution to an optimization model is acceptable only if it does not break any of the constraints.

Objective Function

A quantitative function that an optimization model seeks to optimize (i.e., maximize or minimize).

Chase Production Plan

A sales and operations plan in which production is changed in each time period to match the sales forecast.

Mixed Production Plan

A sales and operations plan that varies both production and inventory levels in an effort to develop the most effective plan.

Level Production Plan

A sales and operations plans in which production is held constant and inventory is used to absorb differences between production and the sales forecast.

Offloading

A strategy for reducing and smoothing out workforce requirements that involves having customers perform part of the work themselves.

Tiered Workforce

A strategy used to vary workforce levels, in which additional full-time or part-time employees are hired during peak demand periods, while a smaller permanent staff is maintained year-round.

Yield Management

An approach that services commonly use with highly perishable "products," in which prices are regularly adjusted to maximize total profit.

Top-Down Planning

An approach to S&OP in which a single, aggregated sales forecast drives the planning process. For top-down planning to work, the mix of products or services must be essentially the same from one time period to the next or the products or services to be provided must have very similar resource requirements.

Bottom-Up Planning

An approach to S&OP that is used when the product/service mix is unstable and resource requirements vary greatly across the offerings. Under such conditions, managers will need to estimate the requirements for each set of products or services separately and then add them up to get an overall picture of the resource requirements.

Tactical Planning

Planning that covers a shorter period, usually 12 to 24 months out, although the planning horizon may be longer in industries with very long lead times (e.g., engineer-to-order firms).

Detailed Planning and Control

Planning that covers time periods ranging from weeks down to just a few hours out.

Strategic planning

Planning that takes place at the highest levels of the firm, addressing needs that might not arise for years into the future.

Net Cash Flow

The net flow of dollars into or out of business over some time period.

Planning Values

Values that decision makers use to translate a sales forecast into resource requirements and to determine the feasibility and cost of alternative sales and operations plans.

Optimization Model

A class of mathematical models used when the user seeks to optimize some objective function subject to some constraints.

Load Profile

A display of future capacity requirements based on released and/or planned orders over a given span of time.

Rolling Planning Horizon

A planning approach in which an organization updates its sales and operations plan regularly, such as on a monthly or quarterly basis.

Sales and Operations Planning (S&OP)

A process to develop tactical plans by integrating marketing plans for new and existing products with the management of the supply chain. The process brings together all the plans for the business into one integrated set of plans. Also called aggregate planning.