Aggregate Sales and Operations Planning

heap up Sales and Operations preparationMany companies adopt a caper growth known as sales and operations training (SOP) to shanghai a equilibrise between the subscribe and make out so that the cost of the resources is minimised. The pattern aids to solve the problems related to node satisfaction, inventories stock, sniply shipments, riff pointing at others, cash-flow glitches, select and supply etcetera through execution of channel plan. The sales and operations plan gives a better grip of the demarcation to the top management.The sales and operations be subsequently processes comprises of a number of meetings, in the end ending with high level meetings where in b doediate-term decisions ar finalised. An agreement between motley sections on the future actions is through so that the balance between contain and supply can be met. The aim is to put the business plans to true operational plans. It is difficult to estimate how much of the individual product w ould swop but the larger groups of products sale can be evaluated. The term core refers to the group of products. With the help of this hoard plan, the each hebdomad and daily individual products quest is handled.Overview of major Operations Planning ActivitiesSales and operations planning assists the organisations to balance the demand and supply. This process is alike c bothed aggregate planning. This planning involves functioning of all the activities of the organisation like sales, manufacturing, operations, finance etc. The marketing team cave ins a sales plan for the coming 3 to 18 months. The plan is in units of aggregate product groups. They also plan their marketing schemes and offers. The operations department develop the actual operational plan for the outturn related activities. belongings in mind the sales volume, the plans to meet the demand ar made. barely this is a not an easy task, since the demand keeps on changing with seasons and market situation.On the supply side, the product families comprise the aggregate whereas the groups of customers fall in the demand side of aggregate plan. Generally, the sales and operations planning is done once in a month. It associates the business and the strategic plan to the actual operational processes . The diagram below shows that for manufacturing processes like master scheduling, material necessitys planning and order scheduling are prepared. The weekly/daily custody and customer scheduling is also planned. .Long-range planning is done for companys long term actions i.e. more than one yearMedium-range planning is done for the coming 3 to 18 months, with weekly, monthly or quarterly time increments.Short-range planning is for periods ranging from one day to six months, with daily or weekly time increments.Process planning is done for accessing the new technologies and improved processes for developing products or services.Strategic planning is done to determine the long-term needs for the business like incre asing the number of factories.Sales and operations planning is done by taking the sales plan from marketing and then using it to develop the corresponding operational plan which can balance the demand and supply needs.The aggregate operational plan is almost the comparable for the services and manufacturing industries. The solely difference lies in the inventory control and production procedures. However, the manufacturing and service activities are different from each other.The aggregate plans needs to be updated timely depending on the specific industry needs.In manufacturing, the planning process involves following processes. headmaster production schedule (MPS)Rough-cut capacity planningMaterial exigencys planning (MRP)Capacity requirements planningOrder schedulingThe MPS consists of the dates and the amounts of specific items infallible for each order. Rough capacity planning checks the production and warehouse units. It also monitors the equipment, la bour and material availability. MRP uses the end product requirements from the MPS and finds out the parting parts and subassemblies requirement for creating the material plan. The plan tells when the production and purchase orders are placed so that the products are made as per schedule. The Capacity requirement for the production is also done during the MRP. Order scheduling specifies the daily and weekly action plan for production lines and work place.In service industry, the aggregate manpower is determined. Then the customer and the manpower scheduling during the day and the week is done. Workforce schedules specify the number of hours for which the service is available, the specific skill requirement needed at a particular period etc.Overview of Major Operations Planning ActivitiesProcess planningLong sitedodge capacity planningSales and operations (aggregate) planningForecasting and demand management conflate operations palnSales planMedium RangeMaster SchedulingMaterial requirements planningOrder scheduling periodic workforce and customer schedulingShort RangeDaily workforce and customer schedulingThe Aggregate Operations PlanThe main causation of the aggregate plan is to strike a balance among production rate, workforce level and inventory on hand.Production rate refers to the number of units produced during a period of time(per hour or per day)Workforce level is the manpower required for the production(Production = production rate X workforce level)Inventory on hand is the un-use stock lying in the reserves previously.The data for the planning is derived from the corporate annual plan. So depending on the number of units required in the future or the amount of sales to be achieved, the aggregate plan is made. The other approach to make the aggregate plan is by simulating the production schedule and evaluating the requirements of labour and equipments. The plan is further modified by cut-and-try or numeric methods to come to a final low-cost pla n.Fig undeniable Inputs to the Production Planning SystemCompetitors behaviourRaw material availabilityMarket demandExternal to firmExternal capacity (like contractors) economical conditionsPlanning for productionInternal to firmAcitvities required for production menses physical capacityCurrent workforceInventory levelsProduction Planning StrategiesThere are mainly three production planning strategies. These strategies are applied in different situations and deal differently with manpower, working hours, inventories etc.Chase Strategy Hiring and laying off of employees takes place to match the order rate to the production rate. There should be a number of train people available who can be hired. Also some employees whitethorn slow down their work due to the fear of being expelled after the work gets over.Stable workforce- variable work hours The number of employees are unploughed constant and the working hours are increased or decreased as and when required. This strategy avoids the hassles of hiring and firing the employees.Level Strategy A constant workforce works with a constant production rate. The effects of shortage or excess products are borne by the company. The disadvantage of this strategy is the inventory items may become obsolete after sometime.When only one strategy is used by the company to meet the demand, it is known as Pure Strategy. A Mixed Strategy is one in which a combination of twain or more strategies is used.Subcontracting The work is outsourced by the company in sequel there is a large change in demand. This can be used as an alternative to hiring and firing employees. However, the quality of the product may decrease if the supplier is not good.Relevant CostsThere are four cost to be dealt with by the aggregate plan radical production be These are the costs incurred in producing the product in a given time. This includes both fixed and variable costs, direct and collateral labour costs. etcCosts associated with the changes in the production rate The costs convolute in hiring, training and laying off people.Inventory holding costs This cost includes the capital invested in the inventory. It also includes insurance, taxes, storing costs.Backordering costs These are unsaid to evaluate and include cost of expediting, loss of goodwill, and loss resulting due to backordering.Aggregate Planning TechniquesCompanies use cut-and-try charting and graphic methods to develop aggregate plans. Cut-and-try involves calculating the costs in various production planning alternatives and choosing the one which is the best. Spreadsheets, simulation and analogue programming are often incorporated in such spreadsheets. The mathematical techniques are used when the cost and variable relationships are linear and demand can be assumed to be deterministic.Yield ManagementThe process of allocating the right type of capacity to the right type of customer at the right price and time to maximize the revenue. It can also be use d to make the demand more predictable. This system was started in the mid-1980s by American Airlines computer reservation system (SABRE). The ticket price on any route changed according to the demand forecast. This is also applied to hotels where the same room is offered at different prices in different seasons.