Sales and operations planning and MPS Flashcards
Formula Forecast error?
F-D
Formula Mean error
1/n *sum(f(t)-d(t)), t =1 ->t=n,,,,,,,(Mean (F-D))
Mean absolute deviation
mean (abs(F-D))
Formula mean percentage erro
mean (F/D)*100
Formula mean absolute percentage error
mean(abs(F/D))*100
Inputs in S&OP?
- 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
Outputs from S&OP?
• 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”
S&OP VS Budgetting
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.
Design parameters for S&OP?
Object to be planned
capacity unit (factory level, line level etc)
Planning horizon
Frequency
Steps in S&OP?
- Forecastin
- Prepare preliminary delivery plan
- Prepare preliminary production plan
- Adjust the two plans
- establish both plans
What is important / what happens during step 1
• 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
What is important / what happens during step 2
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)
What is important / what happens during step 3
• 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
What is important / what happens during step 4
Meeting including representatives from: – Marketing / sales – Operations – Finance • Make adjustments: – Delivery plan – Production plan – Inventory levels / backlog
What is important / what happens during step 5
• 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
What will lack of S&OP lead to?
• Unstable planning conditions (too much/little
material & finished goods inventory, capacity,
buffers, flexibility)
• Poor customer service
• Conflicting goals (no cross functional discussions
and agreements
HOw to decide planning horizon s&OP?
• The horizon applied must be “long enough”:
– Sufficient for budgeting
– Seasonal variations and business outlook?
– Time to adapt capacity?
– Accumulated product lead-time?
What’s time fences?
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
What’s MPS?
• 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
SOP AND MPS DIFF
• 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)
WHat can MPS be based on ?
FOrecast for MTS
Customer orders (MTO with long lead times)
a mix of the above
MPS when MTO
• 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
MPS when MTS
• 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
Different time fences?
- 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
