Sales and Operations Planning

Sales and Operations Planning

Learning Objectives

• Understand sales and operations planning (S&OP) and its coordination of manufacturing, logistics, service, and marketing plans.

• Construct Linear Programming (LP) and determine an optimal aggregate plan.

What Is Sales and Operations Planning?

• Sales and operations planning (S&OP) is a process that helps firms:

  • Provide better customer service.

  • Lower inventory.

  • Shorten customer lead times.

  • Stabilize production rates.

  • Give top management a handle on the business.

• The process involves a series of meetings, culminating in a high-level meeting for key intermediate-term decisions.

• Occurs at:

  • An aggregate level (major groups of products).

  • A detailed individual product level.

Major Sales and Operations Planning Activities

The following planning activities categorized by time horizon:

• Long range

  • Supply network planning

  • Strategic capacity planning

  • Process planning

• Medium Range

  • Sales and operations (aggregate) planning

    • Aggregate sales plan

    • Operations plan

  • Forecasting and demand management

  • Manufacturing

  • Logistics

  • Services

• Short Range

  • Master scheduling

  • Material requirements planning

  • Order scheduling

  • Vehicle dispatching

  • Vehicle capacity planning

  • Vehicle loading

  • Weekly workforce scheduling

  • Daily workforce scheduling

  • Warehouse receipt planning

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 the previous period.

• Deals with a product group or broad category (aggregation).

• Covers an intermediate-range planning period of 3 to 18 months.

Aggregate Planning Techniques

• Involves costing out various production planning alternatives and selecting the best one.

• Techniques include:

  • Cut-and-try approach: Elaborate spreadsheets are developed to facilitate the decision process.

  • Linear programming: Use of mathematical analysis to determine an optimal plan.

  • Simulation: What-if analysis using simulated demand to evaluate the effectiveness of alternative plans.

The Good and Gooey Candy Company Example

• Please see word and excel file (external reference).