Sales and Operations Planning

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Chapter 16

Sales and Operations Planning

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OBJECTIVES

Sales and Operations Planning Aggregate Operations Planning Examples: Chase and Level strategies Yield Management

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Sales and Operations Planning

Sales and Operations Planning (SOP) is a medium-range planning process in which the marketing and operations functions together develop plans f how d t th d l l for h demand will d ill be met over the next 3 to 18 months at an aggregate level

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Process Planning

Long range

Forecasting & Demand Management

Strategic Capacity Planning

Medium range

Sales and Operations Planning

Sales Plan

Aggregate Operations Plan Services

Weekly Workforce Scheduling

Manufacturing

Master Scheduling Material Requirements Planning

Short range

Order Scheduling

Daily Workforce Scheduling

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Balancing Aggregate Demand and Aggregate Production Capacity

10000 10000

Suppose the first figure represents aggregate demand Now suppose the pp second figure represents the aggregate capacity of the company What we want to do is make these two figures match up at the lowest costs

8000 8000 6000 4000 2000 0 Jan Feb Mar 9000 8000 6000 6000 4000 2000 0 Jan Feb Mar Apr May Jun 4500 4000 4000 Apr May Jun 5500 4500 7000 6000

10000 8000

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Aggregate Operations Planning

The purpose of aggregate operations planning is to develop

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A production and inventory plan at an aggregate level t l l A plan on adjustable capacity (e.g., workforce level, overtime, subcontracting)

Two Simple Strategies for Aggregate Operations Planning

Chase strategy

– Produce to demand

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Level strategy gy

– Maintain the same production rate

Aggregate Operations Planning Example: Unit Demand and Cost Data

Demand/mon Days/mon Jan 4500 22 Feb 5500 19 Mar 7000 21 Apr 10000 21 May 8000 22 Jun 6000 20

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Material costs Inventory-holding costs I t h ldi t Marginal cost of stockout Hiring and training cost Layoff costs Labor hours required...