4-3 SOP Functions SOP provides the key communication links for top management to coordinate the various planning activities in a business Strategic Planning
Marketing Planning Financial
Sales & Operations Planning Planning (Volume) Resource Planning Sales Plan Operations Demand Plan Management MPC Boundary
Rough-Cut Master Front End
Capacity Production Planning Scheduling (Mix)
4-4 SOP Fundamentals Balance between supply and demand
The role of SOP is to balance supply and
demand at the volume level 4-5 SOP Communication
The plan must be expressed in terms
that are meaningful to non- manufacturing executives The operations portion of the plan must be stated in terms that MPC functions can use Aggregate units by product line, dollar value, etc.
4-6 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
4-7 SOP Process End of month
Statistical forecasts Field sales worksheets
Management forecast First-pass spreadsheets
Capacity constraints Second-pass spreadsheets
Recommendations and Decisions
agenda and game plan 4-8 SOP Process – Key Activities Updating the sales forecast Reviewing the impact of operations plan changes– can current capacity and materials support the changes? Identifying alternatives where problems exist
Formulating recommendations for top
management Communicating the information to top management
4-9 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 Senior executive involvement is a minimum requirement
4-10 Communicating SOP Information–Displays Information can be conveyed in several ways Charts (monthly forecast, cumulative production, alternative plans) Tabular displays (easily captured and communicated using spreadsheets)
4-11 SOP Tabular Display A planning The display factor is used includes both to convert history and the plan sales $ to units Using a chase strategy can lead to large variations in planned production
Financial results of the plan are calculated and displayed
Planning assumptions are clearly displayed 4-12 Production Strategies
Chase–production output is changed
to match sales quantities Level–production is constant, resulting in inventory build-up and depletion over time Mixed–combination of chase and level designed to result in acceptable levels of flexibility and inventory
4-13 Chase Strategy
A spreadsheet with these calculations
can be found here. 4-14 Level Strategy
A spreadsheet with these calculations
can be found here. 4-15 Management Obligations Commit to the SOP process Establish the SOP framework Put the right team together Set meetings Participate in the process
Modify performance measures and reward
structures to align with the plan Force resolution of trade-offs between functions
Lead the cultural change
4-16 Functional Roles
The primary obligation for all functions involved is to
“hit the plan” A cross-functional team approach is important Executive champion/sponsor–keep top management focused on the process, clear major obstacles, and acquire resources SOP process owner–provide leadership for the SOP process and implementation Demand planning team–provide demand data and represent forecasting, marketing, and sales functions Supply planning team–provide supply system information and represent manufacturing and purchasing functions Pre-SOP team–manage cross-functional development of SOP Executive SOP team–upper management representative of each functional area
4-17 Defining Product Families
4-18 Integrated Planning Integration among sales, marketing, and production is key 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 Manufacturing’s job is to achieve the plan–exactly (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
4-19 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
4-20 Operations Plan Control
The SOP process should be widely understood
Planned results for each functional area should be clearly communicated The seriousness of the plan must also be reinforced Key issues When and how to change the plan? How stable should the plan be from period to period?
4-21 Principles The operations plan isn’t 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.
4-22 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 what-if analysis at the SOP level. Reviews of performance against SOP are needed to prompt replanning when necessary.
4-23 Quiz–Chapter 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)
