1. OPERATIONS MANAGEMENT: Creating Value Along the Supply Chain,
Canadian Edition
Robert S. Russell, Bernard W. Taylor III, Ignacio Castillo, Navneet Vidyarthi
CHAPTER 14
Sales and Capacity Planning

2. Learning Objectives The Sales and Operations Planning Process
Strategies for Adjusting Capacity
Strategies for Managing Demand
Quantitative Techniques for Aggregate Planning
Hierarchical Nature of Planning
Aggregate Planning for Services

3. Sales and Operations Planning
Determines resource capacity to meet demand over an intermediate time horizon
Aggregate refers to sales and operations planning for product lines or families
Sales and Operations planning (S&OP) matches supply and demand
Objectives
Establish a company wide plan for allocating resources
Develop an economic strategy for meeting demand

4. Sales and Operations Planning Process

5. Monthly S&OP Planning Process

6. Disaggregation Breaking an aggregate plan into more detailed plans
Create Master Production Schedule for Material Requirements Planning

7. Collaborative Planning
Sharing information and synchronizing production across supply chain
Part of CPFR (collaborative planning, forecasting, and replenishment)
involves selecting products to be jointly managed, creating a single forecast of customer demand, and synchronizing production across supply chain

8. Available-to-Promise (ATP)
Quantity of items that can be promised to customer
Difference between planned production and customer orders already received
Capable-to-promise
quantity of items that can be produced and mad available at a later date

9. ATP

10. ATP

11. ATP

12. Rule Based ATP

13. Meeting Demand Strategies
Adjusting capacity
Resources to meet demand are acquired and maintained over the time horizon of the plan
Minor variations in demand are handled with overtime or under-time
Managing demand
Proactive demand management

14. Strategies for Adjusting Capacity
Level production
Producing at a constant rate and using inventory to absorb fluctuations in demand
Chase demand
Hiring and firing workers to match demand
Peak demand
Maintaining resources for high-demand levels

15. Strategies for Adjusting Capacity
Overtime and under-time
Increase or decrease working hours
Subcontracting
Let outside companies complete the work
Part-time workers
Hire part-time workers to complete the work
Backordering
Provide the service or product at a later time period

16. Level Production
Demand
Units
Time
Production

17. Chase Demand
Demand
Units
Time
Production

18. Strategies for Managing Demand
Shifting demand into other time periods
Incentives
Sales promotions
Advertising campaigns
Offering products or services with counter-cyclical demand patterns
Partnering with suppliers to reduce information distortion along the supply chain

19. Quantitative Techniques For AP
Pure Strategies
Mixed Strategies
Linear Programming
Transportation Method
Other Quantitative Techniques

20. Pure Strategies

21. Level Production Strategy
= 100,000 pounds
(50, , , ,000) 4
Spring 80, ,000 20,000
Summer 50, ,000 70,000
Fall 120, ,000 50,000
Winter 150, ,000 0
400, ,000
Cost of Level Production Strategy
(400,000 X $2.00) + (140,00 X $.50) = $870,000
SALES PRODUCTION
QUARTER FORECAST PLAN INVENTORY

22. Chase Demand Strategy

23. Level Production with Excel

24. Chase Demand with Excel

25. Mixed Strategy
Combination of Level Production and Chase Demand strategies
Example policies
no more than x% of workforce can be laid off in one quarter
inventory levels cannot exceed x dollars
Some industries may shut down manufacturing during the low demand season and schedule employee vacations during that time

26. General Linear Programming (LP) Model
LP gives an optimal solution, but demand and costs must be linear
Let
Wt = workforce size for period t
Pt =units produced in period t
It =units in inventory at the end of period t
Ft =number of workers fired for period t
Ht = number of workers hired for period t

27. LP MODEL

28. Setting up the Spreadsheet

29. Setting up the Spreadsheet

30. The LP Solution

31. Level Production for Quantum

32. Chase Demand for Quantum

33. LP Solution for Quantum

34. Transportation Method

35. Transportation Tableau

36. Transportation Tableau

37. Burruss’ Production Plan

38. Excel and Transportation Method

39. Other Quantitative Techniques
Linear decision rule (LDR)
Search decision rule (SDR)
Management coefficients model

40. Aggregate Planning for Services
Most services cannot be inventoried
Demand for services is difficult to predict
Capacity is also difficult to predict
Service capacity must be provided at the appropriate place and time
Labor is usually the most constraining resource for services

41. Yield Management

42. Yield Management

43. Yield Management

44. COPYRIGHT
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