Ch14_6e - Chapter 14 Sales & Operations Planning...

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Unformatted text preview: Chapter 14 Sales & Operations Planning Lecture Outline Lecture • Sales & Operations Planning Process • Strategies for Adjusting Capacity • Strategies for Managing Demand • Quantitative Techniques for Aggregate Planning • Hierarchical Nature of Planning • Aggregate Planning for Services Sales & Operations Planning Planning • Determines the resource capacity needed to meet demand over an intermediate time horizon • Establishes a company wide game plan for allocating resources • Develops an economic strategy for meeting demand • Matches supply and demand Monthly Sales & Operations Planning Process Planning • • • • • Forecasts Demand Planning Supply Planning Pre-SOP meeting Executive SOP meeting The S&OP Process The 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 • Overtime and under-time – Increasing or decreasing working hours • Subcontracting – Letting outside companies complete the work • Part-time workers – Hiring part time workers to complete the work • Backordering – Providing the service or product at a later time period Strategies for Managing Demand • Shift demand into other time periods • Offer products or services with counter-cyclical demand patterns • Partner with suppliers to reduce information distortion along the supply chain Quantitative Techniques for Aggregate Planning • Pure Strategies - chase demand; level production • • • • Mixed Strategies Linear Programming Transportation Method Other Quantitative Techniques Level Production Level Demand Units Production Time Chase Demand Chase Demand Units Production Time Example of Pure Strategies Example QUARTER Spring Summer Fall Winter SALES FORECAST (LB) 80,000 50,000 120,000 150,000 Hiring cost= $100 per worker Firing cost= $500 per worker Regular production cost per pound = $2.00 Regular Inventory carrying cost = $0.50 pound per quarter Inventory Production per employee = 1,000 pounds per quarter Production Beginning work force = 100 workers Beginning Level Production Strategy Level QUARTER FORECAST Spring PRODUCTION PLAN INVENTORY 80,000 Summer SALES SALES 50,000 Fall 120,000 Winter 150,000 Cost ( X $2.00) + ( x $0.50) = $ Chase Demand Strategy Chase QUARTER SALES PRODUCTION WORKERS SALES FORECAST PLAN NEEDED Spring 80,000 Summer WKERS HIRED 50,000 Fall 120,000 Winter 150,000 ( Cost of Chase Demand Strategy X $2.00) + ( x $100) + ( x $500) = $ $2.00) WKERS FIRED General Linear Programming (LP) Model LP gives an optimal solution, but demand and costs must be linear 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 LP MODEL Minimize Z = $100 (H1 + H2 + H3 + H4) + $500 (F1 + F2 + F3 + F4) + $0.50 (I1 + I2 + I3 + I4) Subject to: Demand constraints Production constraints Work force constraints P1 - I1 I1 + P2 - I2 I2 + P3 - I3 I3 + P4 - I4 1000 W1 1000 W2 1000 W3 1000 W4 = 80,000 = 50,000 = 120,000 = 150,000 (1) (2) (3) (4) = P1 = P2 = P3 = P4 (5) (6) (7) (8) 100 + H1 - F1= W1 W 1 + H 2 - F 2 = W2 (9) (10) Transportation Method Transportation EXPECTED QUARTER DEMAND 1 2 3 4 900 1500 1600 3000 REGULAR OVERTIME SUBCONTRACT CAPACITY CAPACITY CAPACITY 1000 1200 1300 1300 100 150 200 200 500 500 500 500 Regular production cost per unit $20 Overtime production cost per unit $25 Subcontracting cost per unit $28 Inventory cost per unit per period $3 Beginning inventory 300 units Beginning See LP handout PERIOD OF PRODUCTION 1 2 3 4 PERIOD OF USE 1 2 3 4 Unused Capacity Capacity Burruss Production Plan Burruss REGULAR SUBENDING PERIOD DEMAND PRODUCTION OVERTIME CONTRACT INVENTORY 1 2 3 4 Total 900 1500 1600 3000 7000 Items Items Production Production Planning Planning Capacity Capacity Planning Planning Resource Resource Level Level Product lines Product or families or Sales & Operations plan Resource requirements plan Plants Individual Individual products products Master production schedule Rough-cut capacity plan Critical Critical work centers centers Components Material requirements plan Capacity requirements plan All All work centers centers Manufacturing Manufacturing operations operations Shop floor schedule Input/ output control Individual Individual machines machines Aggregate Planning for Services Aggregate 1. Most services can’t be inventoried 2. Demand for services is difficult to predict 3. Capacity is also difficult to predict 4. Service capacity must be provided at the Service appropriate place and time appropriate 5. Labor is usually the most constraining Labor resource for services resource 6. Yield management is common in services. Yield Overbooking Example Overbooking Rooms rent for $100 a night and cost $25 to maintain Overflow customers are sent to Motel 7 for $70 a night. What is the cost of overbooking? What is the cost of underbooking? Given the following data on past noGiven shows, how many rooms should be shows, overbooked? overbooked? NO-SHOWS PROBABILITY 0 1 2 3 .15 .25 .30 .30 P(N < X) .00 .15 .40 .70 Optimal probability of no-shows u 75 P(n < x) ≤ =75 + 70 = .517 C u o C +C Hotel should be overbooked by two rooms .517 ...
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This note was uploaded on 08/30/2011 for the course ART 3514 taught by Professor Dhbannan during the Summer '03 term at Virginia Tech.

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