SOP Flashcards
SOP
Sales and Operations
Planning
Sales
and operations planning (SOP)
develops
sales and operations plans at an aggregate
level.
The SOP process is used to develop
an overall
business plan that integrates and coordinates
the various planning efforts in a business.
SOP is top management’s handle on the business.
Outputs of SOP
Sales plans Production and inventory plans Plans on adjustable capacities • e.g.) Hiring and laying off workers, overtime, part-time workers
SOP provides the key communication
links for top
management to coordinate the various planning
activities in a business
The role of SOP is
to balance supply and demand
at the volume level
Values of SOP
The SOP process provides visibility of the
interactions between sales, marketing,
production, and finance
Critical trade-off decisions are documented
Manufacturing performance is controlled in a
clear fashion
This leads to better integration among
functional areas and better response to the
marketplace
Monthly SOP
Process
1. Run sales forecast reports 2. Demand planning phase 3. Supply planning phase 4. Pre-SOP meeting 5. Executive SOP Meeting
SOP Process – Key
Activities
Updating the sales forecast
Reviewing the impact of operations plan
changes
Identifying alternatives where problems exist Formulating recommendations for top management Communicating the information to top management
AOP
Aggregate operations planning develops an
operations plan at an aggregate level
To meet a
given sales plan
Outputs of aggregate operations planning
Production and inventory plans Plans on adjustable capacities • e.g.) Hiring and laying off workers, overtime, part-time workers
Strategies for Aggregate
Operations Planning
Chase strategy \: Production output is changed to match sales quantities Level strategy \: Production output is constant, resulting in inventory build-up and depletion over time Mixed strategy: Combination of chase and level strategies designed to result in acceptable levels of flexibility and inventory
The chase or level plan may not
not guarantee
the minimum possible cost
The aggregate operations planning problem
can be solved by using
linear programming
or mixed integer programming
Critical
Issues in SOP
Management obligations Functional roles Defining product families Integrated planning
Management Obligations
Commit to the SOP process Establish the SOP framework Put the right team together Set meetings Participate in the process
Modify performance measures and reward structures to align with the plan Force resolution of trade-offs between functions Lead the cultural change
Functional Roles
The primary obligation for all functions
involved is to
“hit the plan”
A cross-functional team approach is important
Executive champion/sponsor: Keep top
management focused on the process, clear
major obstacles, and acquire resources
SOP process owner: Provide leadership for the
SOP process and implementation
Demand planning team: sop
Provide demand data
and represent forecasting, marketing, and
sales functions
Supply planning team:
Provide supply system
information and represent manufacturing and
purchasing functions
Pre-SOP team:
Manage cross-functional
development of SOP
Integration among
sales, marketing, and production is key Sales and marketing need to sell what is planned • Overselling is just as bad as underselling • Opportunities need to be evaluated via changes to the SOP Manufacturing’s job is to achieve the plan–exactly • Overproduction and underproduction are equally bad The end result is good customer service with low costs Breakdowns in the plan must be quickly reported by the functional area responsible
