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Demand Management 

 

PART I. 

 

For a number of years now, consultants have been prescribing regular Sales and Operations Planning (SOP) meetings as an effective way for management to bring together the separate, often warring factions of Sales and Manufacturing to agree on a common course of action—the Sales and Operations Plan. The primary purpose of this meeting is to sanction aggregate produc­tion plans in support of demand, to get the manufacturing com­pany's left hand and right hand working together on the same important job.

However, in today's competitive, capacity and material-con­strained manufacturing environments, there are many possible aggregate plans. How can SOP meeting participants quickly evaluate alternate plans? How can they generate feasible variants of these plans? And how can they ultimately agree upon the best plan to put into action?

Despite the importance of these meetings, participants routinely rely on preformatted reports, Rough Cut Capacity Planning, spreadsheets, and scratch pads to support the decision-making process. The fact is that without responsive, interactive Demand Management and Finite Capacity-based MPS systems to support these meetings, it is likely that the loudest voice will prevail, not the best plan.

The practical alternative to stacks of paper and shouting matches is a set of flexible, responsive systems on notebook computers that allow SOP participants to prepare for and work through these crucial meetings, using up-to-date planning data and techniques.

SOP Process Review

Numerous books and articles have been written detailing the why and how-to of Sales and Operations Planning meetings. By now, there is general agreement on who should attend, how the agenda should be set, even on how the meeting should be led or coached. Unfortunately, there has been relatively little discussion of the tool set required to support these meetings—even though the absence of such tools in standard Sales Order and MRPII systems is often noted.

If we deliberately look at SOP from a tools perspective, the following is clear. The meetings occur regularly—at least monthly, typically not daily. There are several participants includ­ing management from Sales and Marketing, Manufacturing (Pro­duction), Finance, and other departments such as Engineering. The CEO or General Manager is present to facilitate and arbitrate. The participants come prepared to discuss recent performance against plan, to evaluate and change plans based on the latest business conditions.

The SOP meeting typically begins with a review of recent performance against plan for each functional area represented. At minimum, actual customer order bookings are compared with the demand forecast, actual production is compared with the produc­tion plan and actual inventory levels are compared with planned levels.

The meeting focus then shifts to the future. Based on the latest demand forecast and any pertinent information about changing

production capacity or business strategies, the SOP participants may suggest changes to the current plan. One or more alternate plans are proposed.

Alternate plans are evaluated and compared on the basis of their feasibility and the benefits they deliver. In the end, the participants agree either to continue with the current plan or to adopt an alternative. Ideally, before they leave the room, each functional area is confident that it can support the new plan of record and committed to do so.

Let's look now at the two most important steps in the SOP process
and the types of data and tools required to support them.

To be Continued


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