Sales and operations planning and MPS

Question 1

Formula Forecast error?

Answer 1

F-D

Question 2

Formula Mean error

Answer 2

1/n *sum(f(t)-d(t)), t =1 ->t=n,,,,,,,(Mean (F-D))

Question 3

Mean absolute deviation

Answer 3

mean (abs(F-D))

Question 4

Formula mean percentage erro

Answer 4

mean (F/D)*100

Question 5

Formula mean absolute percentage error

Answer 5

mean(abs(F/D))*100

Question 6

Inputs in S&OP?

Answer 6

• Market and customer data to anticipate the future demand
• A forecastof aggregate demand covering the selected planning horizon (often 12-24 months)
• The current status of the system in terms of workforce level, inventory level, production rate, supplier capabilities, etc.
• The options available to adjust capacity
• The options available to adjust demand

Question 7

Outputs from S&OP?

Answer 7

• A sales plan, a delivery plan, and a production plan:
decisions for each planning period within the planning horizon about issues like
– workforce and capacity levels
– inventory level, or customer lead-time and order backlog
– production rate
• Projected costs and cash flow if the production plan was implemented –i.e. an economic evaluation
• “One set of numbers”

Question 8

S&OP VS Budgetting

Answer 8

Budgetting gives a financial statement
S&OP gives a long term plan for sales and production.
SOP can be constrained by the budget but it can also be an input for the budget.

Question 9

Design parameters for S&OP?

Answer 9

Object to be planned
capacity unit (factory level, line level etc)
Planning horizon
Frequency

Question 10

Steps in S&OP?

Answer 10

1. Forecastin
2. Prepare preliminary delivery plan
3. Prepare preliminary production plan
4. Adjust the two plans
5. establish both plans

Question 11

What is important / what happens during step 1

Answer 11

• Forecast – often from marketing / sales department: expected demand
in coming period
• Should be as realistic and accurate as possible
• Does not consider potential capacity restrictions

Question 12

What is important / what happens during step 2

Answer 12

Compare previous delivery plan with volumes actually delivered
• Adjustments can be made compared to the forecast
– Plan to deliver less, e.g. to phase out product
– Plan to deliver more, by use of e.g. price reductions or marketing
campaigns
• Establish goals for finished goods inventory or order backlog
(MTS vs MTO)

Question 13

What is important / what happens during step 3

Answer 13

• Compare previous production plan with volumes actually produced
• Takes the preliminary delivery plan as a point of departure
• Considers the balance between delivered volumes, produced volumes,
and inventory/backlog
• Considers available capacity and start-up materials

Question 14

What is important / what happens during step 4

Answer 14

Meeting including representatives from:
– Marketing / sales
– Operations
– Finance
•  Make adjustments:
– Delivery plan
– Production plan
– Inventory levels / backlog

Question 15

What is important / what happens during step 5

Answer 15

• Delivery plan and production plan are put forward to top management
• Signifies an agreement within the company:
– Marketing department undertakes to sell agreed volumes
– Production and purchasing undertake to produce agreed volumes

Question 16

What will lack of S&OP lead to?

Answer 16

• Unstable planning conditions (too much/little
material & finished goods inventory, capacity,
buffers, flexibility)
• Poor customer service
• Conflicting goals (no cross functional discussions
and agreements

Question 17

HOw to decide planning horizon s&OP?

Answer 17

• The horizon applied must be “long enough”:
– Sufficient for budgeting
– Seasonal variations and business outlook?
– Time to adapt capacity?
– Accumulated product lead-time?

Question 18

What’s time fences?

Answer 18

They define whihc changes can be mmade in which time horizon, sincen changes can’t be made directly

In MPS they also state specific reactions to requests

Question 19

What’s MPS?

Answer 19

• Plan that defines the specific goods that specific shops will produce in definite quantities at definite
times over a shorter term horizon compared to S&OP, in accordance with the aggregate plan (from S&OP).
• Typically stated in product specification terms
(end product numbers).
• The basis for promising deliveries to customers.
– Available-to-Promise, ATP
• The Master production schedule does not present an executable manufacturing plan
– further details are needed

Question 20

SOP AND MPS DIFF

Answer 20

• MPS tends to be more of a calculation compared to S&OP
• MPS must consider incoming customer orders, or cancellations, and
sometimes deduct orders from forecast (orders consume the forecast)

Question 21

WHat can MPS be based on ?

Answer 21

FOrecast for MTS
Customer orders (MTO with long lead times)
a mix of the above

Question 22

MPS when MTO

Answer 22

• Generation of the preliminary delivery plan
– Forecasts relate to product models whereas customer orders relate to product variants.
• Generation of the preliminary MPS
– The basis for MPS is the delivery plan

Question 23

MPS when MTS

Answer 23

• Generation of the preliminary delivery plan
– The fusion of forecast and order does not cause a problem
• Generation of the preliminary MPS
– The basis for MPS is the delivery plan and the current and targeted stock levels

Question 24

Different time fences?

Answer 24

• Release time fence: Time in advance in which manufacturing orders are released
• Demand time fence: Normally applied lead time to customers. No order normally received within the demand time fence
• Planning time fence: Distinction between planned ordersand firm planned orders
• Forecast time fence: The point in time beyond which order backlog is negligible compared to forecast