APICS - Sales and Operations Planning
S&OP Supply Chain Flow
S&OP success factors include - Involving the executive level well-constructed meeting agendas regularly scheduled S&OP meetings participation from across the organization using a collaboration process empowering individuals at all levels to make decisions measuring and monitoring throughout the process support and integration of technology
Strategic buffers
an element in TOC reduce the risk of critical capacity shortfalls. this is considered strategic when it protects total throughput. This exploits the constraint by - maintaining a minimum amount of buffer inventory prior to the constraint so it never runs out of input pad lead time for ordering (resource available earlier)
Bill of resources
connects resources with the product families that need them in the production process. Includes information that is critical to resource planning at the product family level
Product Classification
is the method marketers use to segment the product market on the basis of durability, tangibility, and use (consumer or industrial) to assist with marketing mix decisions.
Stock out duration
the amount of time an item is stocked out and is not available for sales. This directly impacts the number of orders that are shipped on time
Product portfolio
the mix of product classifications, families, products, and services that the organization offers. Verification steps are required in order to ensure the product portfolio is aligned with the market and the marketing strategy Product classifications - durable goods (expected to last for an extended time period) , non-durable goods (deteriorate quickly and may nee to be consumed quickly) , and services Product Life Cycle review - no product is immune to changes in customer demand over time. Product life cycle analysis help determine if products have shifted to a new life cycle stage Service review - needs to determine whether customer perceptions have been changing relative to the service. a review of warranties, technical support, trade-ins, etc. may reveal whether customer perceive the service to be value added Brand Strategy - the above steps are used to determine how to invest the org limited marketing resources. During growth, the brand strategy competitive attributes are availability and quality so that customers are able to acquire to good and provide testimonials Mature products typically focus on a competitive price and dependability to minimize defections. Products in decline need to find innovative ways to provide availability at low cost Marketing strategy is developed once all above steps are OK
Customer service level
the probability of being able to service the customers demand from inventory without facing any backorders or lost sales. 100% may be desirable but is usually not feasible 'this' represents a tradeoff between the cost of inventory and the cost of stockouts MTS - Customer does not accept long lead times MTO - Customer expect to wait to receive exactly what they ordered. Customer expectations need to be managed through quoted lead times ATO - Customers expect to wait to receive exactly what they ordered. Customer expectations need to be managed through quoted lead times. Quoted lead times are driven by the size of the backlog of customer orders ETO - customer request a product that has not been designed, so they may not have expectations of delivery.
Safety Stock
1) In general, a quantity of stock planned to be in inventory to protect against fluctuations in demand or supply. 2) In the context of master production scheduling, the additional inventory and capacity planned as protection against forecast errors and short-term changes in the backlog. Over planning can be used to create [this] Volume of 'this' depends on the desired customer service level
Demand management
1) The function of recognizing all demands for goods and services to support the marketplace. It involves prioritizing demand when supply is lacking. [This] facilitates the planning and use of resources for profitable business results. 2) In marketing, the process of planning, executing, controlling, and monitoring the design, pricing, promotion, and distribution of products and services to bring about transactions that meet organizational and individual needs.
Finishing lead time
1) The time that is necessary to finish manufacturing a good after receipt of a customer order. 2) The time allowed for completing the good based on the final assembly schedule.
Set Up
1) The work required to change a specific machine, resource, work center, or line from making the last good piece of item A to making the first good piece of item B. 2) The refitting of equipment to neutralize the effects of the last lot produced (e.g., teardown of the just-completed production, preparation of the equipment for production of the next scheduled item).
Monthly S&OP Process (4 step process)
1.) Review Performance - completed within 1 - 2 days after the end of the month. Key Activities - - Update data from prior month result - generate data needed for current planning cycle - Output - The sales analysis reports are generated and sales forecasts are updated 2.) Evaluating demand levels - demand planning can begin. This step results in the creation of the management forecast. important activity - overriding the statistical forecast when appropriate. This is the first step where orgs may see tradeoffs Key Activities - - Review performance data from step one - Create statistical forecasts for make-to-stock products - Modify the statistical forecast to create the management forecast based on - Additional data from field sales, new products, input from marketing on promotions pricing, forecast error in the previous month - create the first pass plan for the new month - convert the unit sales forecast data into monetary units submit forecast to operations 3.) Evaluating supply - preparation of preliminary production plans validated by resource planning as to sufficiency of resources. Resource planning also takes place Key Activities - - review management forecasts - modify existing production plans to account for changes - test new production plans for sufficiency of aligned and non-aligned production and logistics resources - develop list of issues that require resolution at the pre-SIOP or executive meeting - prepare a financial analysis of the sales and operations plan 4.) Reconciling demand, supply, and financial plans - this is a decision making step with 3 subsets: the financial review meeting, the pre-SIOP meeting, the executive meeting. The goal of the financial and pre-siop meeting are to save only a few decisions for the executive meeting Executive meeting - purpose is to improve the processes of each division and achieve optimal performance Financial meeting activities - - Analyze demand plan in $ - finalize projections on the revenue, profits, cash flow or need for capital investments for each alternative Pre-S&OP - - reach an agreement & make decisions regarding balancing supply and demand - develop alternatives for decision referring to the executive meeting - Develop recommendations for each product family - Develop recommendations around resources - set demand priorities when resources are constrained - Approve updated financial view of plans: matching dollar value of the latest forecast for all product families to annual business plan revenue goals Executive meeting activities - - review accept or modify pre-siop team decisions - make decision on product family issues that were not resolved in the pre-siop meeting - authorize significant changes - the role of top management in the SIOP process is to commit and support the process and the results
New Product Introductions (NPI)
requires market analysis, research and development, marketing and product phase in/phase out plans. This attempts to produce entirely new demand in unexpected areas or to build upon previous demand product service package to be differentiated from similar past models or the competition's offering
Manufacturing planning and control system (MPC)
A closed-loop information system that includes the planning functions of: production planning (sales and operations planning), master production scheduling, material requirements planning, capacity requirements planning. Once the plan has been accepted as realistic, execution begins. The execution functions include input-output control, detailed scheduling, dispatching, anticipated delay reports (department and supplier), and supplier scheduling. A example is a closed-loop MRP system
Product group forecast
A forecast for a number of similar products. similar to aggregate forecast
Work in Process (WIP)
A good or goods in various stages of completion throughout the plant, including all material from raw material that has been released for initial processing up to completely processed material awaiting final inspection and acceptance as finished goods inventory. Many accounting systems also include the value of semifinished stock and components in this category.
Product Line
A group of products associated by function, consumer group, distribution channel, manufacturing characteristics, or price range. Typically reflects the marketing and sales aspects of a product or service (similar in customer needs) and used in aggregate planning, marketing, costing, and sales
Product family
A group of products or services that pass through similar processing steps, have similar characteristics, and share common equipment prior to shipment or delivery to the customer. Can be from different overlapping product lines that are produced in one factory and often used in production planning (or sales and operations planning).
Master planning of resources
A grouping of business processes that includes the following activities: demand management (the forecasting of sales, the planning of distribution, and the servicing of customer orders) sales and operations planning (sales planning, production planning, inventory planning, backlog planning, and resource planning); master scheduling (the preparation of the master production schedule and the rough-cut capacity plan). The objective of [this] is to match manufacturing plans and capacity
Stockout
A lack of materials, components, or finished goods that are needed causing organizations to be unable to fulfill a customer order. Increasing the lot size or order quantity will decrease the frequency of ordering, which will lessen the number of exposures to [this]
Order backlog
A past due order or open order yet to be fulfilled. Organizations manage customer expectations through planning inventory and backlog levels The volume of inventory/backlog will depend on the production planning method selected
Sales and operations planning
A process to develop tactical plans that provide management the ability to strategically direct its businesses to achieve competitive advantage on a continuous basis by integrating customer-focused marketing plans for new and existing products with the management of the supply chain. The process brings together all the plans for the business (sales, marketing, development, manufacturing, sourcing, and financial) into one integrated set of plans. [This] is performed at least once a month and is reviewed by management at an aggregate (product family) level. The process must reconcile all supply, demand, and new product plans at both the detail and aggregate levels and tie to the business plan. It is the definitive statement of the company's plans for the near to intermediate term, covering a horizon sufficient to plan for resources and to support the annual business planning process. Executed properly, [this] process links the strategic plans for the business with its execution and reviews performance measurements for continuous improvement. It is during 'this' that the overall supply levels are set, the inventory level is planned, and the projected backlog level is planned at the product family level within defined supply constraints. The focus of SIOP meetings is to review future months forecast, sales, production, and inventory levels
Hybrid (Mixed Model) production method
A production planning method that combines the aspects of both the chase and level production planning methods. Production levels run at or close to full capacity during part of the planning period and at a lower level during the other part Calculating this method id best done by trial and error
Chase production method
A production planning method that maintains a stable inventory level while varying production to meet demand. Companies may combine [this] and level production schedule methods. Matching the production plan to the demand pattern and absorbs variations in demand by hiring and laying off workers. In this method, inventory is often kept as low as it can be achieved while maintaining a stable amount For companies striving for lean production, this strategy would be chosen because 'this' matches production with true customer demand Method used in the service industry to match supply of persons and equipment to the demand
Level production method
A production planning method that maintains a stable production rate while varying inventory levels to meet demand. Sets production at a fixed rate (usually to meet average demand) and uses inventory to adsorb the variations in demand. During low periods of demand, overproduction is stored as inventory that will be depleted in period of high volume
Time period correction factor
Adjustments made to safety stock to account for the difference in demand data and production lead time. if lead time and demand data are not constant, then, in order to accurately predict safety stock, this additional calculation should be performed
Aggregate forecast
An estimate of sales, often time-phased, for a grouping of products or product families produced by a facility or firm. Stated in terms of units, dollars, or both, [this] is used for sales and production planning (or for sales and operations planning) purposes. The level of aggregation varies by entity - strategic and business planning: terms of total volume and sales S&OP: terms of product family, volume, sales master production scheduling: finished products or components (units)
Resource planning
Capacity planning conducted at the business plan level. The process of establishing, measuring, and adjusting limits or levels of long-range capacity. [This] is normally based on the production plan but may be driven by higher-level plans beyond the time horizon of the production plan (e.g., the business plan). It addresses those resources that take long periods of time to acquire. [Decisions based on this] always require top management approval. This activity is a manufacturing planning and control process that serves as a capacity check on the production plan two primary objectives - 1. evaluate the feasibility of the production plan generated in S&OP 2. to address the adequacy of resources that have long acquisition If resources need to be changes to accommodate the production plans, see options below - - Acquisitions - Facility start-ups and shutdowns - hiring, layoffs, and shift changes - adding and removing tooling and equipment - agility and flexibility - outsourcing and subcontracting - education and training
Capacity related costs
Costs generally related to increasing (or decreasing) capacity in the medium- to long-range time horizon. Personnel costs include hiring and training of direct laborers, supervisors, and support personnel in the areas related to the capacity increase. Equipment purchases to increase capacity are also considered. In contrast, costs related to decreasing capacity include layoffs, the fixed overhead spread over fewer units, the impact of low morale, and the inefficiencies of lower production levels.
Product/service hierarchy
In sales and operations planning, a general approach to dividing products or services into families, brands, and subfamilies for various planning levels. This ensures that a correct top-down or bottom-up approach is taken to grouping (or aggregating) demand at each subsequent level. Forecasts are more accurate the higher up the product hierarchy they are developed; consequently, forecasts should usually be driven down from the top.
Interplant Demand
One plant's need for a part or product that is produced by another plant or division within the same organization. Although it is not a customer order, it is usually handled by the master production scheduling system in a similar manner.
Production plan
The agreed-upon plan that comes from the S&OP process —specifically, the overall level of manufacturing output planned to be produced, usually stated as a monthly rate for each product family (group of products, items, options, features, and so on). Various units of measurement (e.g., units, tonnage, standard hours, number of workers) can be used to express the plan. Represents management's authorization for the master scheduler to convert it into a more detailed plan—that is, the master production schedule. There are three methods for developing this: chase, level, hybrid The objective of developing a 'this' is to minimize the cost of carrying inventory, changing production levels and stock outs Information needed to build 'this' - Forecast by period for the planning horizon Opening inventory Desired ending inventory Past due customer orders
Planning horizon
The amount of time a plan extends into the future. For a master schedule, this is normally set to cover a minimum of cumulative lead time plus time for lot sizing low-level components and time for capacity changes of primary work centers or of key suppliers. For longer-term plans, [this] must be long enough to permit any needed additions to capacity.
Aggregate Inventory
The inventory for any grouping of items or products involving multiple stockkeeping units. See: base inventory level.
Forecast Horizon
The period of time into the future for which a forecast is prepared. Forecasts must go out as far as the production planning horizon
Distribution Planning
The planning activities associated with transportation, warehousing, inventory levels, materials handling, order administration, site and location planning, industrial packaging, data processing, and communications networks to support distribution.
rough-cut capacity planning
The process of converting the master production schedule into requirements for key resources often including labor, machinery, warehouse space, suppliers' capabilities, and, in some cases, money. Comparison to available or demonstrated capacity is usually done for each key resource. This comparison assists the master scheduler in establishing a feasible master production schedule. Three approaches to performing [this] are: the bill of labor (resources, capacity) approach the capacity planning using overall factors approach the resource profile approach
Tactical planning
The process of developing a set of tactical plans (e.g., production plan, sales plan, marketing plan). Two approaches to [this] exist for linking tactical plans to strategic plans—production planning and sales and operations planning. a key tactical plan for planning inventory management professionals is the inventory plan or the backlog plan. This sets inventory/backlog levels
Master scheduling
The process where the master schedule is generated and reviewed and adjustments are made to the master production schedule to ensure consistency with the production plan. The master production schedule (the line on the grid) is the primary input to the material requirements plan. The sum of the master production schedules for the items within the product family must equal the production plan for that family.
Product mix
The proportion of individual products that make up the total production or sales volume. Changes in [this] can mean drastic changes in the manufacturing requirements for certain types of labor and material.
Production rate
The rate of production usually expressed in units, cases, or some other broad measure, expressed by a period of time (e.g., per hour, shift, day, or week).
Unit of measure
The unit in which the quantity of an item is managed (e.g., pounds, each, box of 12, package of 20, case of 144). 'this' in S&OP for manufacturing environments - ETO - engineering labor hours ATO - machine and labor hours MTO - order backlog MTS - material supply capacity
Substitution
The use of a nonprimary product or component, normally when the primary item is not available.
Aggregate Supply Plan
This must include the following subplans - - production plan - inventory plan - resource plan - distribution plan
