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
What are the 6 steps in the forecasting process?
- Determine purpose of forecast
- Establish time horizon of forecast
- Select the right tools and techniques (qualitative/quantitative)
- Gather and analyze data
- prepare and share the forecast
- Monitor forecast accuracy
What are the two major categories of forecasting and when are they best used?
- Qualitative methods (bases forecasts on expert opinion) –> best used for new products with no past history
- Quantitative methods (numbers and technology) –> for products with historical data
T or F: Sales and operations planning is a part of long term planning.
False; short term planning
a cross-functional planning process which reconciles conflicting business plans, links strategic planning and operational planning and aligns company resources to create a single plan.
Sales and Operations Planning (S&OP)
What are the 3 things that S&OP promotes (why are companies using it)?
Promotes:
1. Focus
2. Alignment
3. Engagement
by all members of a company’s management team
Two primary inputs to S&OP include the _______ plan and the ________ plan.
demand; operating
Primary purpose: S&OP drives the optimal allocation of critical resources (5):
- people
- capacity
- materials
- time
- money
What is the 5 step process of S&OP?
- Forecast future sales
- Demand planning activity (Review and adjust sales forecast in light of product plans)
- Supply planning phase (Analyze the forecast in light of existing capacity)
- Pre S&OP meeting (review sales forecast and capacity;
- Executive S&OP meeting (finalize decisions)
What are the 4 must haves for an effective S&OP process?
- Integrate (data, process and people)
- Plan (translation of that plan and optimization)
- Align (get everyone on the same page)
- Execute the plan
a production planning and inventory control system used to manage manufacturing processes.
materials requirements planning (MRP)
T or F: MRP systems provide pro-active management of inventory levels, material flow, and production scheduling.
True
MRP pursues 3 objectives simultaneously:
1. Ensure the availability of _______ for production and finished products for customer delivery.
2. Maintain the lowest possible level of ________.
3. Plan ________, ________, and _______ activities.
- materials
- inventory
- purchasing, manufacturing, delivery
What are the three key inputs of MRP?
- Master productions schedule
- Bill of Materials
- Inventory Master File
What key input of MRP does this describe:
what “ingredients” are needed; a list of the raw materials, parts, subassemblies and components needed to make a product
bill of materials
What key input of MRP does this describe:
the on-hand materials you already have in stock. provides accurate status information about the availability of every item controlled by the MRP system including order lead-time.
inventory master file
What key input of MRP does this describe:
what your goal to make is and your deadline; tells us what needs to be made and when
master productions schedule
What are the 4 key outputs of MRP?
- Recommended production schedule
- Recommended purchase schedule
- Exception reports
- Performance reports
What key output of MRP does this describe:
tells us what orders and when they should be released to production to meet the master production schedule.
recommended production schedule
What key output of MRP does this describe:
provides metrics on how well production is working.
performance reports
What key output of MRP does this describe:
highlights problems and provides reschedule notices about order changes. We have to work these changes back into the MPS.
exception reports
What key output of MRP does this describe:
helps us create purchase orders that identify the quantities of material to be ordered and when they need to be delivered.
recommended purchase schedule
What is the goal of scheduling?
optimize performance within time schedule and constraints
focuses on the effective timing of operations, allocating resources over time to meet demand in a timely and cost effective manner, creating smooth flows
scheduling
Planning is (long/short) term, (aggregate/detailed) information, and our objective is (money/time).
long; aggregate; money
Scheduling is (long/short) term, (aggregate/detailed) information, and our objective is (money/time).
short; detailed; time
What are the 2 types of scheduling?
- Forward Scheduling
- Backward Scheduling
What type of scheduling does this describe?
scheduling starts as soon as we know the requirements; produces a feasible schedule but may miss dates; may result in excessive work-in process inventory.
forward scheduling
What type of scheduling does this describe?
schedule starts with due date; resources may not be available to accomplish schedule
backward scheduling
The priority of sequencing is to maximize _______ ________ while minimizing ________ _______ time.
resource utilization; product completion time
select order in which jobs will be done
sequencing
Sequencing can be done in what 4 methods?
- First come, first served (ex: restaurants)
- Earliest Due Date
- Shortest Process Time
- Longest Process Time
Scheduling and sequencing MUST maximize _______ to minimize bottlenecks that constrain flows.
throughput
moving more units through the system with less idle time
throughput
Why is supply chain planning such an important activity?
a. it provides “just-in-case” inventory and excess capacity
b. it makes the supply chain reactive and unstable
c. it guarantees forecasting and inventory accuracy
d. helps managers improve flows and control costs
d. helps managers improve flows and control costs
Put these in order from shortest range to longest range:
- Sales and Operations Planning
- Capacity Planning
- Production Planning
- Demand Planning
- Production Planning
- Sales and Operations Planning
- Demand Planning
- Capacity Planning
Short term solutions for improving capacity performance include:
a. modify product design to make assembly easier
b. build new facilities or expand existing ones
c. use labor overtime and maximize work on key tasks
c. use labor overtime and maximize work on key tasks
The goal of ________ is for a company to profitably match its production capacity with customer demand
a. capacity planning
b. demand planning
c. materials resource planning
d. sales and operations planning
a. capacity planning
Which part of the organization is NOT normally involved in the Sales and Operations Planning?
a. finance
b. human resources
c. manufacturing
d. supply chain management
b. human resources
Key questions answered by an MRP system include each of the following, except:
a. How much is needed?
b. How much should it cost?
c. What is needed?
d. When is it needed by?
b. How much should it cost?
