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APICS 1 > M1-C: S&OP fundamentals > Flashcards

M1-C: S&OP fundamentals Flashcards

1
Q

What is S&OP?

A

is a reviewing process used by firm management to develop TACTICAL PLANS that allow achieving sustained competitive advantage by “connecting the outcomes” of marketing plans for NPIs and existing products, all considering the existing supply chain capacity. S&OP is the bridge process between strategic industrial plan and its deployment.

In other words, S&OP merges and fits all the plants of different companies functions (marketing, sales, R&D, sourcing, manufacturing, financials) into a single, coherent tactical plan.

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2
Q

how often S&OP meeting are done?

A

S&OP must be conducted on a rolling basis, at least once-a-month, typically at end-of-month.

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3
Q

How S&OP meeting is handled?

A

Executive Management reviews all individual company plans at an aggregate product family level. To do so, the following preparing steps are required:

  1. Data gathering : all functions must collect their own performance data
  2. Demand planning : Creation of forecast based on Gathered data and marketing market expectations
  3. Supply planning : Demand forecasts are benchmarked against actual productive capacity in long-medium term. Limiting constrains to growth are highlighted
  4. Pre S&OP meeting : non-critical corrective actions to match demand and supply are agreed upon by middle-management. Remaining open points are passed to the S&OP executive agenda
  5. Executive S&OP meeting : Top management reviews overall S&OP plan, approves or modifies it, and overrule exceptional open items.
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4
Q

What is the final aim of S&OP?

A
  1. achieving consensus among all the company functions, breaking the typical silo approach.
  2. aligned execution to strategic path
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5
Q

What is the typical S&OP event horizon reach?

A

<= 18 months.

In general, it varies by product type and the dynamics of the targeted market. The further the horizon of forecast, the larger the error.

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6
Q

what are the likely expected benefits from proper S&OP?

A
  1. Improved inventory planning in terms of smaller inventory deviations from targeted inventory
  2. Inertia-less environment where reactive countermeasures takes into accounts “almost live” internal and external feedbacks
  3. Aligned set of priorities for each company function. Everyone knows how it is affecting the final performances and can think at what might make it better
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7
Q

What are the benefits of coordinating marketing with manufacturing?

A
  1. Manage bullwhip effect along the chain by transferring clear demand signals upstream.
  2. Correctly set manufacturing priorities based on upcoming demand interest for some products rather than others.
  3. Avoid stockpiling “likely to be dismissed” products thus avoiding obsolescent stock creation
  4. Manage inventory build-ups to sustained incoming promotional events or holiday seasons
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8
Q

What causes the Bullwhip effect?

A

Failing to transfer upstream the real customer demand data, to rather prefer releasing lumpy upstream orders following stockout/surplus inventory positions

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9
Q

What is the effect along the chain induced by lack of trust among the partners?

A

The bullwhip effect obliges far upstream nodes to instantiate larger and larger safety stocks to keep up with lumpy, amplified downstream orders.

The upstream you go, the more you are forecasting previous downstream forecasts of the bottom real customer demand, making the signal way out of sync with reality.

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10
Q

What is a Sales Plan?

A

a time-based statement of expected customer orders, grouped by each product family or item, remembering that forecast gets more accurate the larger number of products they consider. It sets the planned aggregate demand which the S&OP seeks to match in terms of inventory and order backlogs

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11
Q

How the Sales Plan is used in S&OP?

A
  1. As an input: setting the targeted aggregate demand to satisfy for the next period
  2. As an output: being benchmarked with real final demand outcomes so to reduce future forecasting error and increase the company trust in their forecasts
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12
Q

What is Demand Planning?

A

Is a process held by marketing and sales whose combine statistical forecasting methods and external judgments to construct the aggregate demand curve estimate for the next period. Forecasts are then segmented by product family, market location, lifecycle.

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13
Q

What is the major source for demand data estimates?

A

actual orders placed by internal (plants, subsidiaries, owned distribution centers) and external customers (distribution centers, wholesalers, retailers, customers, consignment stocks)

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14
Q

What deliverable Demand Planning outcome feeds into?

A

Updated forecast generated by Demand Planning are used to redact the updated Sales Plan

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15
Q

What is Production Planning?

A

A process to develop TACTICAL plans capable of delivering the aggregate estimate of demand stated in the updated Sales Plan while considering the current installed manufacturing capacity

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16
Q

What are the final deliverables of S&OP?

A
  1. Sales Plan, from Demand Planning
  2. Production plan, from Supply Planning
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17
Q

What is the reach of the Production Plan in terms of products?

A

Production plan sets overall manufacturing capacity at the product family level, not at the single product

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18
Q

What is the core purpose of Production Planning?

A

Setting the production rates to satisfy Sales Plan

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19
Q

How is called the amount needed of a resource?

A

load

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20
Q

What is the most appropriate way of grouping products into families for effective S&OP?

A

Products belongs to the same family if they use the same routings, materials, setups, tooling and cycle times within the same work centers. Thus the grouping logic is “resource capacity based@“

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21
Q

What are the available Production environments?

A
  1. MTS : Make to stock
  2. MTO : Make to order
  3. ATO : Assembled to order
  4. ETO > Engineer to order
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22
Q

What is the reasoning behind MTS production environment?

A

Goods are manufactured prior receipt of a qualified sales order, but they are made instead following sales forecasts. Actual customer orders get fulfilled by the stock built over time, while production orders are released to replenish the finished goods stock

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23
Q

What the logic behind ATO?

A

The good lacks only final assembling when the customer order is received. All semifinished “modular” components get managed using MTS logic. ATO is extremely useful when manufacturer wants to leave large customization options to the end customer, like Dell supply chain model.

24
Q

What is the logic behind MTO?

A

good gets manufactured only after receiving a customer order. Inventory is held in form of raw materials, highly effective when the customer tolerance waiting time is less than the total manufacturing lead time.

25
Q

What is the logic behind ETO?

A

Unique projects that present new design features and engineering challenges for each new customer order oblige manufacturer to start every-time from scratches from basic engineering task up to final assembly. ETO managed items are thus typically produced in very small volumes and long lead times

26
Q

What are the possible Production Strategies to match Aggregate Demand Forecasts?

A
  1. Chase : inventory tries to follow demand, at the cost of variable production rates and idle capacity risk.
  2. Level : stabilize production rate by leveling it with average demand, while using inventory to absorb excess demand and variability, running into the risk of stock-outs
  3. Subcontracting : produce internally up to the lowest demand volume in the period, delegate the rest by outsourcing to external suppliers the job remaining. While this smooths production and ensure full assets utilization, on the other hand it inflates transactional cost and CoQ, reducing profits margins.

4.Hybrid : a mix of the previous to offset each one weaknesses

27
Q

What is the purpose of developing the Production Plan?

A

Providing to the Master Production Scheduler the input volumes for the next relevant period, divided by month, for which to draw the detailed manufacturing execution plan also called “Master Production Schedule”

28
Q

What does the Production Plan defines?

A
  1. The required and projected production rate to satisfy Sales Plan
  2. Actual manufacturing performances against targeted ones
  3. Ending inventory targets for the relevant period
  4. Target ending carrying costs
  5. The current production environment applicable (MYS, MTO,..) and process layout
  6. The current selected production strategy deployed (chase, level, subcontracting, mixed)
29
Q

What are the inputs required to produce a Production Plan?

A
  1. Demand forecasts including backlog projections, detailed down at bucket relevant period (eg monthly)
  2. Initial inventory
  3. Target ending inventory
30
Q

what is Resource Planning?

A

The process of establishing, measuring and adjusting limits of long-range capacity requirements, using tactical plans like preliminary production plan as input. This process always require management supervision and is aimed at determining during the business plan definition phase whether the available resources sustain the production plan and what to do in case that is not.

31
Q

What is the effect of bottlenecking resources on strategic goals?

A

Insufficient resource > infeasible production schedule > supply non aligned with demand > lost sales > lost revenues . This causal chain directly link operational failures with strategic ones

32
Q

What is the scope of the pre-S&OP meeting?

A
  1. Decide on take actions emerged by comparing demand and supply planning
  2. Collect all recommended actions from “field management” of all involved areas and merge into a single responsive action
  3. Complete eventual pending analysis like financial forecast or filing resource requirements requests
  4. Identify open issues that cannot find agreement upon
  5. Draft alternative countermeasures to propose to executive management
  6. Define the executive S&OP meeting agenda
33
Q

What is the scope of the executive S&OP meeting?

A
  1. Solve the inevitable disagreement emerging from the pre-S&OP meeting
  2. Provide an opportunity to middle area managers to escalate key decisions to top management
  3. Authorize spending
  4. Review and approves current company performance KPIs and service levels
  5. Define a final single company-wide agreed-upon action plan for the next relevant period
34
Q

What is a Manufacturing Planning and Control (MPC) system?

A

Is a “closed-loop” information system tool used by companies to balance supply and demand. Therefore the system must include the following functions:
1. production planning
2. master production scheduling
3. material requirements planning
4. capacity (resource) requirements planning
5. execution management features
- detailed scheduling
- dispatching
- anticipated delay alerting system
- supplier management portal

Closed loop means that the available capacity actively constraints in the system planning and executing manufacturing

35
Q

What is the difference between Rough-cut Capacity Planning (RCCP) and Capacity Requirements Planning (CRP)?

A

RCCP happens before CP, thus it is held at an high-level of detail, focusing only on bottlenecking resources to meet demand requirements.

CRP instead goes into details of all resources deployed in execution to determine a detailed Material Requirements Plan

36
Q

Of how many layers the Capacity Planning process is made?

A

From the top to bottom, where moving downstream indicates an higher level of detail in the analysis :

  1. Resource Planning (RP)
  2. Rough-cut Capacity Planning (RCCP)
  3. Capacity Requirement Planning (CRP)
  4. Capacity Control (CC)
37
Q

What is the scope of Resource Planning?

A

To draw the long-term capacity boundaries by determining the overall needs for each input resource to deliver the demand requirements provided at the S&OP meeting. Thus, RP it is the place to decide whether any resource must be up/down graded (eg. build a new plant, lay-off some workers in a region, …)

38
Q

What is the scope of Capacity Control?

A

It sits at the bottom level of the control chain, thus fully into execution. Its purpose is to monitor and fine tune each work center operations to maximize capacity and utilization, considered the upstream incoming load

39
Q

What is the formula applied to production when adopting a Leveling production strategy?

A

Production(t) =
(
SUM(Forecast(t), 0, t)
+ Backlog(0)
+ Inv(T)
- Inv(0)
) / T

40
Q

How can the inventory carrying cost be estimated?

A
  1. Using each End-of-Period Ending Inventory : multiplying it with the appropriate bucket-relative cost rate and then summing all contributions up
  2. Using average inventory between 2 consecutive periods : provides insights on the intra-period variability
  3. Using average inventory between start and end of the period : it omits in the calculation the intra-period variabilities
41
Q

Can a study to identify the customer tolerance time be included in the Bill of Resources?

A

Yes, such items are a used resource as well as machinery, plants, man-work, warehouses, …

42
Q

Is Strategic Planning considered part of the Manufacturing Planning and Control (MPC) system?

A

No, Strategic Planning happens at executive level when the company Strategy, NPIs, Vision and Mission are set, thus is conventionally considered an input of the MPC.

43
Q

is S&OP part of the MPC?

A

Yes, S&OP uses demand, supply and financial gathered data to agree upon a plan to satisfy the largest portion of demand with current supply available, resulting in a Production Plan

44
Q

What is the output of S&OP?

A

Company-wide agreed upon Production Plan

45
Q

What is Master Planning?

A

The top-down process where Demand and Supply company requirements are compared so to derive a “work center focused” plan of production.

It is made of 3 layers, starting from the top:
1. S&OP
2. Master Scheduling
3. Material Requirement Planning

46
Q

What happens at the bottom of the the Manufacturing Planning and Control System?

A

Strategy Execution: the Material Requirement Plan, the final output of the Master Planning phase, is enforced and acted upon to organize Material Purchasing and the Production Activity Control (PAC)

47
Q

What is the scope of Production Activity Control?

A

to regulate, based upon the Material Requirements Plan, the flow of work throughout the production layout by detail scheduling each work center rate of production

48
Q

Is the Manufacturing Planningand Contorl System a fixed one?

A

No, the plans develops from a rough state to a revised detailed one each time part of the process is pushed down to field grade of precision

49
Q

What is an Advanced Planning and Scheduling (APS) system?

A

Any computer program that implements advanced mathematical algorithms to logic to perform finite resource scheduling optimization or scenario analysis under multiple concurrent business rules and constraints

50
Q

How do Advanced Planning and Scheduling Systems helps management performing S&OP?

A

APS usually produces multiple scenario analysis, under different demand forecast trend and supply availabilities. Management then is able to select the scenario they consider most appropriate as the “baseline official plan”

51
Q

Which are the main APS components?

A
  1. Demand Planning (Forecasting)
  2. Production Planning (Capacity requirement analysis)
  3. Production Scheduling (MRP)
  4. Distribution planning (DRP)
  5. Transportation planning (Internal and External Move orders, Full truckloads, …)
52
Q

Define each horizon for each process involved in Manufacturing Production and Control (MPC).

A
  1. Business Planning > Strategic (years)
  2. S&OP > Tactical (months)
  3. Master Planning > Tactical (months)
  4. Materials Requirements Planning > Operational (weeks)
  5. Production Activity Control > Operational (weeks)
53
Q

How frequent the PAC processes must be updated?

A

On every working shift

54
Q

How frequently the Master Scheduling processes must be updated?

A

On a weekly basis

55
Q

How often must MRP be re-run?

A

Daily

56
Q

which are some of the key enablers of globalization?

A
  1. Internet communications.
  2. Shipping containers
  3. Cheap sea transportation

APICS 1 (7 decks)

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