CH 8 - Sales and Operations Planning Flashcards
A process that helps firms provide better customer service, lower inventory, shorten customer lead times, stabilize production rates, and give top management a handle on the business. This is called?
Sales and Operations Planning process
What’s the end goal of a Sales and Operations planning process?
The end goal is an agreement between various departments on the best course of action to achieve the optimal balance between supply and demand.
The Supply and Demand balance must occur at an _____ level
Aggregate
What does aggregate mean?
It means at a level of major groups of products
What does Sales and Operations Planning refer to?
The process that helps firms keep supply and demand in balance
Who is involved in Sales and Operations planning?
Sales, distribution and logistics, operations, finance, and product development
Marketing develops a sales plan that extends through ?
The next 3 - 18 months
Aggregation on the supply side is done by ___ ___ and on the demand side, it is done by groups of ____
Product families, Customers
Generally done annually, focusing on a horizon greater than one year
Long Range Planning
Usually covers a period from 3 to 18 months, with time increments of weekly, monthly, and quarterly
Intermediate Range Planning
Covers a period from one day to six months, with daily or weekly time increments
Short Range Planning
What major areas does Long Range Planning activities occur?
- Design of manufacturing and service processes that produce the product
- Design of the logistics activities that deliver products to customers
What deals with determining the specific technologies and procedures required to produce a product/service?
Process Planning
What deals with determining the long-term capabilities (such as size and scope) of the production systems?
Strategic Capacity Planning
What are some intermediate-term activities?
Forecasting and demand management &
sales and operations planning
Designed to generate detailed schedules that indicate when parts are needed for manufacturing activities
Master scheduling and material requirements planning
Short term details are focused mostly on?
Scheduling production and shipment orders
What type of plan is concerned with setting production rates by product group or other broad categories for intermediate term (3 to 18 months)?
Aggregate Operations Plan
What’s the main purpose of the aggregate plan?
To get the optimal combination of production rate, workforce level, and inventory on hand.
Refers to the number of units completed per unit of time
Production rate
Number of workers needed for production
Workforce Level
Unused inventory carried over from the previous period
Inventory on hand
What are the three production planning strategies?
- Chase Strategy
- Stable workforce - variable work hours
- Level strategy
Match the production rate to the order rate by hiring and laying off employees as the order rate varies
Chase Strategy
What is the Chase Strategy?
Matching production rate to the order rate by hiring or laying off employees
Vary the output by varying the number of hours worked through flexible work schedules or overtime.
Stable Workforce - Variable Work Hours
Maintain a stable workforce working at a constant output rate
Level Strategy
A simple strategy that uses just one option, such as hiring or firing workers, for meeting demand
Pure Strategy
A more complex strategy that combines options for meeting demand, also more widely applied in industry.
Mixed Strategy
Similar to chase strategy but subcontracting and not subcontracting
Subcontracting
What are the four relevant costs in an aggregate production plan?
- Basic Production Costs
- Costs associated with changes in the production rate
- Inventory Holding Costs
- Backordering costs
Fixed and variable costs incurred in producing a given product type in a given time period are known as?
Basic Production Costs
Typical costs in hiring, training, and laying off individuals are known as?
Costs associated with changes in the production rate
A major component is the cost of capital tied up in inventory. This cost is known as?
Inventory holding costs
A cost that is hard to measure and usually results from costs of expediting, loss of customer goodwill, and loss of sales revenue
Backordering Costs
Accurate medium range planning increases the likelihood of?
- Receiving the requested budget
2. Operating within the limits of the budget
Involves costing out various production planning alternatives and selecting the best one
A Cut and Try Approach
Buffer inventory that is established to decrease the chances of stockouts
Safety Stock
Does the cut and try approach guarantee finding minimum cost solutions?
No it does not.
The process of allocating the right type of capacity to the right type of customer at the right price and time to maximize revenue or yield.
Yield Management
What approach is powerful in predicting demand?
Yield Management
From an operational perspective, yield management is most effective when…? (Name 5)
- Demand can be segmented by customer
- Fixed costs are high and variable costs are low
- Inventory is perishable
- Product can be sold in advanced
- Demand is highly variable
One issue in managing yield is?
Pricing structures must be seen as logical to the customer and can justify the different prices
Pricing structures must appear logical to the customer and justify the different prices. This justification is also known as?
Rate Fences
Rates Fences may have a ____ basis or a ____ basis
Physical, non physical
Second issue is handling variability in arrival or starting times, duration, and time between customers. This issue is related to?
Yield Management
The most critical issue is training workers and managers to work in an environment where overbooking and price changes are standard occurrences that directly impact the customer. This issue is related to?
Yield Management
