Many companies adopt a company process known as sales and businesses planning (S&OP) to strike a balance between the demand and offer so the costs of the resources is minimised. The program aids to solve the problems related to client satisfaction, inventories stock, timely shipments, finger pointing at others, cash-flow glitches, demand and supply etc. through execution of business plan. The sales and operations planning gives a better grip of the business enterprise to the very best management.
The sales and functions planning processes comprises of lots of meetings, finally ending with higher level meetings where intermediate-term decisions are finalised. An agreement between various departments on the near future actions is performed so that the balance between demand and offer can be attained. The goal is to put the business enterprise plans to real operational plans. It is difficult to estimate how much of the average person product would sell but the larger groups of products sale can be examined. The term aggregate refers to the group of products. With the help of this aggregate plan, the each week and daily individual products demand is managed.
Overview of Major Operations Planning Activities
Sales and functions planning assists the organisations to balance the demand and supply. This process is also called aggregate planning. This planning consists of functioning of all the activities of the organisation like sales, creation, operations, money etc. The marketing team evolves a sales arrange for the coming 3 to 1. 5 years. The plan is at items of aggregate product groupings. In addition they plan their marketing schemes and offers. The operations office develop the real operational arrange for the creation related activities. Remember the sales volume level, the programs to meet the demand are created. However this is a not a simple task, because the demand maintains on changing with times and market situation.
On the source side, the merchandise families include the aggregate whereas the sets of customers show up in the demand part of aggregate plan. Generally, the sales and operations planning is performed once in per month. It associates the business and the proper plan to the actual operational functions. The diagram below shows that for manufacturing techniques like master scheduling, material requirements planning and order scheduling are ready. The weekly/daily workforce and customer scheduling is also planned. .
Long-range planning is done for company's permanent activities i. e. several year
Medium-range planning is performed for the coming 3 to 18 months, with weekly, monthly or quarterly time increments.
Short-range planning is good for periods ranging from 1 day to six months, with daily or every week time increments.
Process planning is performed for accessing the new systems and improved procedures for developing products or services.
Strategic planning is performed to determine the long-term needs for the production like incre asing the number of factories.
Sales and businesses planning is performed by firmly taking the sales plan from marketing and then deploying it to build up the corresponding functional plan which can balance the demand and supply needs.
The aggregate functional plan is nearly the same for the assistance and manufacturing business. Really the only difference is based on the inventory control and development methods. However, the creation and service activities are different from one another.
The aggregate plans must be updated well-timed depending on specific industry needs.
In manufacturing, the look process involves following processes.
Master production program (MPS)
Rough-cut capacity planning
Material requirements planning (MRP)
Capacity requirements planning
Order scheduling
The MPS consists of the times and the levels of specific items required for each and every order. Tough capacity planning bank checks the production and warehouse systems. It also displays the equipment, labour and material availability. MRP uses the end product requirements from the MPS and realizes the part parts and subassemblies requirement for creating the materials plan. The program says when the production and purchase purchases are placed so that the products are made as per schedule. The Capacity requirement of the development is also done through the MRP. Order scheduling specifies the daily and weekly action plan for creation lines and work place.
In service industry, the aggregate manpower is set. Then your customer and the workforce scheduling throughout the day and the week is performed. Workforce schedules designate the amount of hours that the service is obtainable, the specific skill requirement needed at a particular period etc.
Overview of Major Functions Planning Activities
Process planning
Long Range
Strategy capacity planning
Sales and operations (aggregate) planning
Forecasting and demand management
Aggregate procedures paln
Sales plan
Medium Range
Master Scheduling
Material requirements planning
Order scheduling
Weekly workforce and customer scheduling
Short Range
Daily workforce and customer scheduling
The Aggregate Businesses Plan
The main purpose of the aggregate plan is to affect a balance among creation rate, labor force level and inventory on hand.
Production rate identifies the number of units produced throughout a period of time(per hour or per day)
Workforce level is the manpower necessary for the production
(Production = development rate X labor force level)
Inventory on hand is the un-used stock lying down in the reserves previously.
The data for the planning comes from the corporate annual plan. So with respect to the number of systems required in the foreseeable future or the amount of sales to be achieved, the aggregate plan is made. The other method of make the aggregate plan is by simulating the production schedule and evaluating the requirements of labour and instruments. The plan is further customized by cut-and-try or mathematical solutions to come to your final low-cost plan.
Fig: Required Inputs to the Development Planning System
Competitors' behaviour
Raw material availability
Market demand
External to firm
External capacity (like companies)
Economic conditions
Planning for production
Internal to firm
Acitvities required for production
Current physical capacity
Current workforce
Inventory levels
Production Planning Strategies
There are mainly three development planning strategies. These strategies are applied in various situations and offer in different ways with manpower, working hours, inventories etc.
Chase Strategy: Hiring and laying from employees takes location to match the order rate to the production rate. There should be lots of trained people available who can be employed. Also some employees may slow down their work due to the concern with being expelled following the work gets over.
Stable labor force- varying work time : The number of employees are maintained continuous and the working hours are increased or lowered as so when required. This strategy avoids the problems of employing and firing the employees.
Level Strategy : A continuous workforce works with a constant creation rate. The effects of shortage or excess products are borne by the business. The disadvantage of this strategy is the inventory items may become outdated after sometime.
When only 1 strategy is employed by the business to meet up with the demand, it is known as Pure Strategy. A Mixed Strategy is one when a combination of two or more strategies can be used.
Subcontracting : The task is outsourced by the company in case you can find a big change in demand. This can be used instead of hiring and firing employees. However, the grade of the merchandise may decrease if the provider is bad.
Relevant Costs
There are four costs to be dealt with by the aggregate plan
Basic development costs : They are the costs incurred in producing the product in a given time. This consists of both set and adjustable costs, direct and indirect labour costs. etc
Costs associated with the changes in the production rate : The costs involved in hiring, training and laying off people.
Inventory keeping costs : This cost includes the administrative centre invested in the inventory. In addition, it includes insurance, taxes, stocking costs.
Backordering costs : They are hard to judge and include cost of expediting, loss of goodwill, and reduction resulting anticipated to backordering.
Aggregate Planning Techniques
Companies use cut-and-try charting and visual methods to develop aggregate strategies. Cut-and-try involves calculating the costs in various creation planning alternatives and choosing one which is the greatest. Spreadsheets, simulation and linear coding are often included in such spreadsheets. The mathematical techniques are being used when the cost and variable interactions are linear and demand can be assumed to be deterministic.
Yield Management
The process of allocating the right kind of capacity to the right type of customer at the right price and time to maximize the earnings. It can even be used to make the demand more predictable. This technique was were only available in the mid-1980's by North american Airlines' computer reservation system (SABRE). The solution price on any way changed according to the demand forecast. This is also applied to hotels where the same room emerges at different prices in several seasons.
