Module 2 - Section B: Aggregate Demand & Supply Plans Flashcards
Aggregate Forecast
-estimate of sales, often time-phased, for a grouping of products or product families produced by a facilit or firm
-stated in terms of units, dollars, or both the aggregate forecast is used for sales and production planning/S&OP purposes
Product Group Forecast
-a forecast for a number of similar products
Product Portfolio
-set of product classifications, families, products, and services that the org. offers
-must be reviewed early in demand management to determin whether products/services are still appropriate for market and org.
-product and brand management involves a series of verification steps that help ensure the product portfolio is aligned with market and marketing strategy
Product Classification
1. broadest categories are durable goods & non-durable goods (physical substance), and services (intangible and non-inventoriable)
2. industrial vs. consumer goods
Product Life Cycle
1. important to conduct review to determine whether the product has shifted to a new life cycle stage and, if so, to determine how manufacturing supply chain, and marketing strategies will need to change
Services Review
1. needs to determine whether customer perceptions have been changing relative to the service (e.g. warranties, technical support, repairs, user training, etc.); could review whether customers perceive service to be value-added
Brand Strategy
1. successful new product introduction (NPI) attempts to produce entirely new demand in unexpected areas or build upon previous demand by focusing on the competitive attribute of new product features to enable product-service package to be differentiated from similar past models or competition’s offerings
2. NPI that is entirely new will require significant marketing –> no guarantee of how well sales pitch will convert to actual sales / no data for forecasting / need to rely of qualitative forecasting methods and determine level of demand that fits within the org’s risk tolerance levels
3. during growth: brand strategy competitive attributes are availability and quality
4. maturity: focus is on competitive price and dependability
5. decline: need to find innovative ways to provide availability at low cost
Interplant Demand
-one plant’s need for a part or product that is produced by another plant or division within the same org.
Production & Inventory Planning Process
Production Strategy
1. starts with inputs to the production plan e.g. aggregate sales plan at product family level over extended planning horizon, aggregate product family inventory on-hand balances, product family load profiles
2. involves selecting or determining continued appropriateness of production strategy: elvel, chase, outsourced/subcontracted, hybrid
Financial Plan
1. determines cost of resources used to create desired level of capacity per period and cost of changes to capacity
2. determines whether these investment will produce reasonable ROI and meet other financial criteria
3. cost of transportation, ordering, relationship management, and inspections need to be included
Production Rates
1. reviewed to determine if there is sufficient aggregate capacity to meed production plan’s load requirements
Production Performance Review
1. regular review of planned to actual production enables supply plan to be proactive to variances
Level Production Planning
-method that maintains a stable production rate while varying inventory levels to meet demand
-inventory buffer of built-up inventory used to meet demand when demand excess production level
-cost of this strategy is cost of holding inventory
-prioritizes production stability
-forecast accuracy can be an issue and many orgs use safety stock baed on expected level of forecast error to mitigate risk of understated forecast
Level Schedule
-in traditional management , production schedule or master production schedule that generates material and labor requirements that are as evely spread over time as possible; finished goods inventories buffer the production system against seasonal demand
-in just-in-time (JIT), a level schedule in which each day’s customer demand is scheduled to be built on the day it will be shipped
-sets production (supply) at a fixed rate (usually to meet average demand) and uses inventory to absorb the variations in demand
Chase Production Method
-method that maintains a stable inventory level while varying production to meet demand
-companies may combine chase and level production schedule methods
-avoid need for inventory holding, but at cost of high production variability
-absorbs variations in demand by hiring (high demand) and laying off (low demand) workers
-might be used with lead production to produce units only as acual demand signals are received
-would not work for industries in which workers skills are scared or competition for labor is intense
-advantageous during periods of high unemployment or for industries with low-skilled workers
Capacity-Related Costs
-costs generally related to increasing capacity in medium to long-range horizon (personnel and equipment costs considered)
-costs relate to decreasing capacity include layoffs, fixed overhead spread over fewer units, impact of low morale, and inefficiencies of lower production levels
Hybrid Production Method
-combines aspects of both chase and level production planning methods
-production levels run at or close to full capacity during part of planning period and at lower level during the other part
Average Inventory
-average can be calculated as an average of several inventory observations taken over several history time periods
-used in carrying costs calculation
Resource Planning
-capacity planning conducted at the business plan level
-process of establishing, measuring, and adjusting limits or levels of long-range capacity
-normally based on production plan but may be driven by higher-level plans beyond the time horizong of the production plan (e.g. business plan)
-addresses those resources that take long periods of time to acquire
-always require top management approval
-part of supply chain that determines how to develop the capacity the production plan calls for
Bill of Resources
-a list of required capacity and key resources needed to manufacture one unit of a selected item or family
-rought-cut capacity planning uses these bills to calculate the approximate capacity requirements of the master production chedule
-resource planning may use a form of this bill
-connects resources with the product families that need them in the production process
-may take 2 forms, at diff. levels of aggregation:
- bill of resources for one or more related product families - high-level bill will list critical resources needed to make one avg. unit of each product family
- bill of resources for one product family - more detailed will list avg. time to make each individual unit in product family
