sales and operations planning Flashcards

1
Q

strategic business plan

A
  • long term focus
  • provides company’s direction and objectives for the next 2-10 years
  • starting point for sales and operations planning
  • states the company;s objectives for profitability, growth rate and return on investment
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2
Q

sales and operations planning

A
  • brings all the functional business plans (marketing, operations, engineering and finance) into one integrated plan
  • begins with the marketing plan
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3
Q

aggregate/production plan

A
  • identifies the resources needed:
  • aggregate productions rate, size of work force, budgeted levels of finished products, inventory, backlogs
  • to support the marketing plan
  • updated and reevaluated monthly
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4
Q

how to deal with demand fluctuations?

A
  1. demand based
    Reactive:
    using finished goods -> produce average demand levels throughout the year instead of changing every period. Extra units go into inventory
    back orders -> promises to deliver the product to customer at a later date. Dangerus because it leads to lost sale or customer loyalty -> works if your product is unique/ brand name/ lower price than competitor

Proactive:
shifting demand -> change consumer buying patterns through incentives (museum, off/on season, early bird)
works for company with high ixed cost and low variable cost
Ex: yield management (dynamically adapt prices knowing customers will pay more for resource thats limited)

  1. capacity based
    Overtime -> works only for short time, reduces productivity and quality of work
    Undertime -> result of reduced demand, no desire to build inventory
    Subcontracting -> letting another company do some of the work for you, help increase output in periods of high demand (medium - long term option)
    Hiring/ firing -> long-term option, high costs
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5
Q

types of aggregate plans

A
  1. Level
    - maintains a constant workforce
    - capacity of labor and equipment based on average demand
    - Pro: produces the same amount each period
    - Con: inventory and backorders used to absorb demand fluctuations
    - often used for make-to-stock products ( stereos, kitchen appliance)
  2. Chase
    - produce exactly what is needed to satisfy demand during each period
    - production rate changes in response to demand fluctuations
    - Pro: minimizes finished goods holding cost
    - Cons: constantly changing capacity needs and the need for enough equipment to meet peak demand
    - make to order products (custom cabinets, highly perishable)
  3. Hybrid
    - any combination of options based on the company’s current situations
    - Ex: maintain stable workforce supplemented by inventory buildup and some overtime production to meet demand
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6
Q

developing the aggregate plan

A
  1. choose the type of plan that matches the company’s objectives: level, chase or hybrid
  2. determine the aggregate production rate: average demand over all periods vs actual demand per period
  3. determine size of the workforce
  4. test aggregate plan: calculate inventory levels, shortages, employees hired and fired
  5. Evaluate the plan’s performance in terms of
    Cost: total cost, unit cost. inventory levels Customer service: number of backorders
    Human resources: effect on workforce, employment stability
    Operations: stability of schedule, labor use
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7
Q

aggregate planning in services

A

inventory is not an option for non-tangible products

  • back orders are still possible but not desirable
  • chase strategy: no impact
  • level strategy: capacity of labor and equipment must allow meeting peak demand to avoid lost sales
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8
Q

labor cost in aggregate planning in services

A

labor cost is often very critical and can be controlled by:
accurately scheduling laboring hours to respond to demand (appointments)
having an on-call labor pool to meet unexpected demand
having multi-skilled workers who can perform different tasks
having flexible work hours to meet changing demand

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