Chapter 2: Long and Short Range Planning Flashcards
Why do companies spend so much time and effort on supply chain planning?
planning is needed to balance supply and demand
the establishment of goals, policies, and procedures for a social or economic unit.
planning
the forward-looking process of coordinating assets to optimize the delivery of goods, services and information from supplier to customer, balancing out supply and demand.
supply chain planning
Why should we focus on supply chain planning? –> Being proactive helps build what 3 things?
- Systems capabilities
- Capacity
- Control
in advance of needs
Supply chain professionals work in what 3 planning horizons?
- Short range (hourly, daily, weekly)
- Mid-range (3-18 months)
- Long range (2+ years)
What planning horizon does this describe:
- Sometimes called “aggregate planning”
- demand forecasting, and sales and operations planning.
mid-range
What planning horizon does this describe:
- scheduling people, sequencing production, developing delivery routes, and other operational focused tasks.
short range
What planning horizon does this describe:
- how the supply chain will be structured, who will own the assets, capital budgets
long range
What are the 5 types of supply chain planning?
- Capacity Planning
- Demand Planning and Forecasting
- Sales and Operations Planning
- Production Planning
- Scheduling and Sequencing
What type of supply chain planning does this describe:
These activities seek to accurately predict sales and inventory requirements.
demand planning and forecasting
What type of supply chain planning does this describe:
Establishes the assembly schedule; it answers on a week-to-week basis: what do we need to make to satisfy demand?
production planning
What type of supply chain planning does this describe:
Scheduling people, equipment, and deliveries; properly sequencing all activities to make sure we produce the right product at the right time.
scheduling and sequencing
What type of supply chain planning does this describe:
addresses the rate at which output can be produced. (longer-range issues)
capacity planning
What type of supply chain planning does this describe:
Where we match day-to-day operating capabilities with the organization’s selling plans.
sales and operations planning
the process of establishing the output rate that can be achieved.
capacity planning (ex: short-term, we’re figuring out how many people we can get on each plane. Long-term, it involves how many flights we will offer to and from a city to satisfy demand.)
T or F: Capacity planning is the foundation of a successful supply chain.
True
Why do companies engage in capacity planning?
- impacts our ability to meet demand, and influences operating costs. Combined, this affects the companies competitiveness.
the theoretical level of capacity available or what is possible if everything goes according to plan.
design capacity
What is this example an example of:
what is the REALISTIC number of cars that can be produced per ship?
effective capacity
To compare the actual output created vs. the available capacity, we can evaluate our _______ _______ by calculating the ratio of product produced to production capacity available.
capacity utilization
In setting up a supply chain, there are long-term capacity planning issues. How much capacity we create should be based on our prediction of long-term _______. Another factor is ______ _______: if great demand exists, we could build giant facilities to produce a lot of products. Although, if we don’t have the money to do that, we should develop more realistic plans.
demand; capital availability
When dealing with strategic capacity planning decisions, we must consider 3 issues (3-step process):
- Identify Capacity Requirements (based on demand)
- Develop capacity alternatives (what’s the best way to respond to that demand)
- Evaluate alternatives (which way is most effective)
What are the 3 strategic approaches to capacity planning? Describe them a little.
- Proactive (risk: excess capacity)
- Concurrent (flexibility; attempts to shift capacity up and down based on demand)
- Conservative/lagging (risk: save money but won’t be able to initially serve all demand)
What is the 1st activity in demand planning and forecasting?
predict the total market place requirements for a product
What are the 4 effective forecasting principles?
- Be realistic
- Reduce errors
- Use technology
- Don’t forget human knowledge base
What are the 4 risks in forecasting?
- Conflicting Goals
- Commitment Phobia
- Limited or Flawed Data
- Inexperience