Professional Documents
Culture Documents
Chap 004
Chap 004
Chap 004
McGraw-Hill/Irwin
Agenda
What is SOP? SOP links with MPC
SOP activities and techniques Critical SOP issues State-of-the-art SOP Principles
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SOP Functions
SOP provides the key communication links for top management to coordinate the various planning activities in a business
Strategic Planning Sales & Operations Planning (Volume) Sales Plan Plan Operations MPC Boundary Rough-Cut Capacity Planning Master Production Scheduling (Mix) Front End Financial Planning Demand Management
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SOP Fundamentals
Balance between supply and demand
Demand
Sales and Operations Planning
Supply
Volume
Mix
The role of SOP is to balance supply and demand at the volume level
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SOP Communication
The plan must be expressed in terms that are meaningful to nonmanufacturing executives The operations portion of the plan must be stated in terms that MPC functions can use
Value of SOP
The SOP process provides visibility of the interactions between sales, marketing, production, and finance Critical trade-off decisions are documented Manufacturing performance is controlled in a clear fashion This leads to better integration among functional areas and better response to the marketplace
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SOP Process
End of month
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SOP Discipline
For the SOP process to be routine and effective, replanning must occur when conditions indicate the need Mechanisms for maintaining support for the plans are important
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Financial results of the plan are calculated and displayed Planning assumptions are clearly displayed
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Production Strategies
Chaseproduction output is changed to match sales quantities Levelproduction is constant, resulting in inventory build-up and depletion over time Mixedcombination of chase and level designed to result in acceptable levels of flexibility and inventory
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Chase Strategy
Calculate end-of-month inventory targets
Inventoryt = Target days x Expected Demandt+1/Working dayst+1
Level Strategy
Calculate the number of employees needed
InventoryT = Expected DemandT+1/Working daysT+1 Total production required = Total forecast demand Beginning inventory + Ending inventoryT Planned production each period = Total production required/Number of periods Employees required each period = Planned production each period/Employee productivity per day
Management Obligations
Modify performance measures and reward structures to align with the plan Force resolution of trade-offs between functions Lead the cultural change
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Functional Roles
The primary obligation for all functions involved is to hit the plan
A cross-functional team approach is important
Executive champion/sponsorkeep top management focused on the process, clear major obstacles, and acquire resources SOP process ownerprovide leadership for the SOP process and implementation Demand planning teamprovide demand data and represent forecasting, marketing, and sales functions Supply planning teamprovide supply system information and represent manufacturing and purchasing functions Pre-SOP teammanage cross-functional development of SOP Executive SOP teamupper management representative of each functional area
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SOP is best performed at an aggregate level Product family groupings that are consistent with sales and marketings view of the market are generally best Select appropriate unit of measure for each family (units, pounds, cases, etc.)
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Integrated Planning
Sales and marketing need to sell what is planned (overselling is just as bad as underselling)
Opportunities need to be evaluated via changes to the SOP
Manufacturings job is to achieve the planexactly (overproduction and underproduction are equally bad) The end result is good customer service Breakdowns in the plan must be quickly reported by the functional area responsible
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Strategic Planning
A direction-setting activity
Can be an extension of budgeting More recently, plan is based on products and markets rather than organizational units SOP must support strategic plans
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Key issues
When and how to change the plan? How stable should the plan be from period to period?
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Principles
The operations plan isnt a forecast. It is a statement of desired production output. The operations plan is included in the SOP process to maintain agreement with other functional plans. Trade-offs required to frame the operations plan must be made prior to final approval Top management involvement is imperative in the SOP process. The SOP process should relate directly to the strategic plan.
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Principles
The MPC system should be used to perform routine activities and provide routine data, allowing management time to be devoted to important tasks. The MPC system should facilitate whatif analysis at the SOP level. Reviews of performance against SOP are needed to prompt replanning when necessary.
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QuizChapter 4
The four fundamental issues in Sales and Operations Planning are __________. Sales and Operations Planning balances supply and demand at the ______ level. Many key Sales and Operations Planning linkages are outside the Manufacturing Planning and Control (MPC) system. (True/False) A strategy which matches monthly supply to forecasted demand is ________. A strategy which maintains a consistent monthly output is _________. The primary obligation for any functional area is to hit the plan. (True/False)
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