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Figure 4 is a very simplified example of a data display. There should be one of these for each product family, and one in total for the busi­ness. This is typically developed with the use of spreadsheet software (for example, Lotus or Excel). The arithmetic on this data display is as follows for make-to-stock (MTS) and make-to-order (MTO) environ­ments, respectively:

(MTS) Open Inventory + Production - Sales = Closing Inventory (MTO) Open Backlog + Sales - Production = Ending Backlog

If a given family is both MTS and MTO, both of these formulas need to be applied in some appropriate fashion, according to the nature of the demand.

Most companies have all of the information for this data display available, but it is typically not all in one place on one page for each

family. One of the keys to this process is that the related data is shown in one place on one page. That is sales, production, inventory, and/or backlog are all on one display for each product family. This is a very important issue. There are other issues that also must be addressed.


The data display shown above then becomes the focal point of the fol­lowing process, which includes five distinct steps:

1.        data closing

2.        demand planning

3.        production planning

4.   partnership (pre-meeting) meeting

5.        executive meeting.

Data Closing

In this step, at month-end the actual results for each category (sales, production, inventory, and backlog) for each family is recorded. This information is then distributed to all of the participants. The re­sponsibility of this step can be assigned to anyone who has access to, or can be provided, accurate data.

Demand Planning

This step is the responsibility of the sales/marketing functions. They perform the following actions:

      Review performance; plan to actual.

      Explain any variance out of tolerance.

      Determine future customer needs based on new information.

      Develop a new demand plan (forecast).

      Redefine and inventory or backlog targets as appropriate.

      Run first preliminary set of S&OP reports.

      Pass to production planning and other appropriate people.

Production Planning

While this step may be administered by a function such as material planning, the basic responsibility and accountability is with operations management (plant manager). It includes the following:

      Review performance; plan to actual.

      Explain any variance out of tolerance.

      Determine future impact on capacity: equipment, people, etc.

      Revise production plan based on changes to demand plan and

      Run second preliminary set of S&OP reports.

      Pass to sales/marketing and other appropriate people.

To Be Continued

For balance of this article, click on the below link:

Lean Manufacturing Articles and click on Series 11

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