Please enable JavaScript.
Coggle requires JavaScript to display documents.
SALES AND OPERATIONS PLANNING - Coggle Diagram
SALES AND OPERATIONS PLANNING
MANAGING SUPPLY
Managing Capacity
Time Flexibility from Workforce
Adjust work hours
Using overtime or part-time workers
Seasonal Workforce
Hire temporary workers during peak seasons
Dual Facilities
(Specialized & Flexible)
Use stable, specialized facilities for efficiency and flexible facilities for fluctuating demand
Subcontracting
Outsource peak production to subcontractors
Product Flexibility in Production
Utilize flexible production lines and multiskilled workers
Managing Inventory
Common Components Across Multiple Products
Standardize parts to stabilize demand and reduce inventory.
Building Inventory for Predictable Demand Products
Stockpile high-demand, predictable products in the off-season
SALES AND OPERATIONS PLANNING
Concepts :
S&OP is a strategic planning process that reconciles conflicting business
objectives and plans future supply chain actions (CSCMP)
Objectives:
Utilize the company’s production capacity resources to meet customer demand.
Balance the needs and constraints of different supply chain stakeholders.
Serve as a coordination tool among supply chain partners.
Express business plans in a way that everyone can understand.
Benefits:
Improved forecast accuracy.
Higher customer service levels with lower finished goods inventory.
More stable supply rates, leading to increased productivity.
Faster and better-controlled new product introductions.
Enhanced collaboration between operational and executive teams.
Faster and more effective decision-making.
Better alignment of operational, marketing, and financial plans.
Increased accountability for business results.
Early identification of potential future problems.
Process:
Step 1: Generate quantitative sales forecast
▪ Step 2: Marketing adjusts the forecast
▪ Step 3: Operations checks forecast against existing capability
▪ Step 4: Marketing, operations, and finance jointly review forecast and resource issues
▪ Step 5: Executives meet to finalize forecast and capacity decisions
Successful S&OP Implementation:
Coordinate planning across the entire company and supply chain.
Consider predictable variability in strategic decision-making.
Ensure senior leadership owns the S&OP process.
Adjust plans based on actual conditions and revised forecasts.
MANAGING DEMAND
Factors Influencing Demand Increase Due to Promotions
Market Growth
Increase in product consumption from new or existing customers
Stealing Share
Customers switch from a competitor’s product to the firm’s product
Forward Buying
Customers move up their purchases rather than increasing actual demand
Does not increase long-term sales, only shifts future demand to the present.
Factors Influencing the Timing of Promotions
Impact of the promotion on demand
Cost of holding inventory
Cost of changing production capacity
Product margins
Effective Use of Promotions
If a promotion primarily results in forward buying, it should be used to reduce seasonal peaks.
If a promotion attracts new customers, it is better to offer discounts during peak demand periods.
Promotions during low-demand periods help reduce inventory costs and optimize capacity adjustments.
PREDICTABLE VARIABILITY
Definition
Changes in demand that can be forecasted
Problems of demand change
High stock-outs in peak demand
Excess inventory in low demand
Two board options
Manage supply
Manage demand