PSC Session 1 Business Planning

8/4/2019 PSC Session 1 Business Planning

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Master Planning of Resources

Session 1

The Business Planning Process


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1-2Master Planning of Resources, ver. 3.0 July 2004

Session 1 Objectives

Identify and describe the elements of

master planning of resources Identify and describe the levels of the planning

hierarchy

Describe and distinguish the roles in the planningprocess that product volume and product mixplay

Describe the elements of business planning

Identify and describe the inputs to a businessplan

Identify and describe several manufacturingenvironments


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Master Planning of Resources

Demand Management Forecasting

Distribution planning

Order servicing

Sales and Operations Planning

Integrates the plans of the business

> Sales

> Marketing

Utilizes resource planning

Master Scheduling Includes the development of

> Master production schedule (MPS)

> Final assembly schedule (FAS)

Utilizes rough-cut capacity planning (RCCP)

A grouping of business processes that includes

> Development

> Manufacturing

> Sourcing

> Financial


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Demand Management

The function of recognizing all demandsfor goods and services to support themarket place. It involves prioritizing

demand when supply is lacking. Properdemand management facilitates theplanning and use of resources for

profitable business results.APICS Dictionary


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A process to develop tactical plans thatprovide management the ability tostrategically direct its businesses to

achieve competitive advantage on acontinuous basis by integrating customer-focused marketing plans for new and

existing products with the management ofthe supply chain.

APICS Dictionary


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Master Scheduling

The process where the master schedule isgenerated and reviewed and adjustmentsmade to the master production schedule to

ensure consistency with the productionplan.

APICS Dictionary


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The Balancing Act

Demand Supply

DemandForecast ActualOrders ProductionOrders PurchaseOrders


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Product Volume and Product Mix

Volume Establishes the big picture How much? Rates (selling/production) Product families Planned in sales and

operations planning

Mix The details Which ones? Customer orders Individual products Planned in master

scheduling


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The Planning Hierarchy

StrategicPlanning

Planning

Detail

Less

Near TermMore

Long Term

BusinessPlanning

Sales andOperations Planning

Master Scheduling


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Long-Range Planning


Budgeting

Planning Horizons

1 2 3 4 51 2

1 2

1

Source: Adapted from Ling, Richard C., and Walter E. Goddard. Orchestrating SuccessImprove Control of the Business with

Sales and Operations Planning. John Wiley & Sons, Inc. (1988)

1

Legend:

= Time periodin years

BUSINE

SS

PLAN

NIN

G


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Source: APICS Dictionary, 11th ed. 2004.

Business Plan

A statement of Long-range strategy

Revenue, cost, and profit objectives

usually accompanied by Budgets

Projected balance sheet

Cash flow statement


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Business Plan (cont.)

Common features of the business planinclude:

The nature of the firm

Locations and facilities Organization and people

Levels of processing technology

The type and nature of capital resourcesrequired

Primary stakeholders interests


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Business Plan (cont.)

The market Location Growth rates

Changing needs of customers

Regional economic considerations and businessconditions as they affect customer needs

The business environment Major competitors

Projections of business growth Availability of financial resources

Emerging technologies


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Key Business Goals

Growth Profitability

Return on Investment

Market Share Customer Service

Reputation

Company Value


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Business Stakeholders

The Community The Management Team

The Owners and Shareholders

The Members of Associations The Employees

The Customers

The Suppliers

Others


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Benchmarking

Strategies Capabilities

Processes

Costs

Logistics

Systems

Others


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Business Plan Strategic Data Sources

Environmental

scanning

Marketplaceneeds

Companycapabilities

Financial targets

Strategic goals

Demographics, government and

business regulations, economicconditions, competitive environment

Customer orders, market research,focus groups, and forecasts

Personnel skill levels, availableresources

Profit, cash flow, and revenue growth

Levels of desired customer service,planned quality improvements, costreduction goals, and productivityimprovements


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FinishedProducts

ManufacturingProcess

Raw Materials

Manufacturing Environment Characteristics

MTS MTOor

ETO

ATOor

Mass Customization


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Volume/Variety Relationships

Product Volume

ProductVa

riety

HighLow

HighEngineer-to-Order

Make-to-Order

Assemble-to-Order

Make-to-Stock

MassCustomization


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P:D Ratio

Production time

Delivery time


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Manufacturing Environment and Supply Process Strategy

Supply Process

Project,Discrete

Discrete Batch

Intermittent Batch

Continuous Flow or

RepetitiveFlexible high volume

Manufacturing Environment Strategy

Engineer-to-Order

Make-to-Order

Assemble-to-Order

Make-to-Stock

Mass Customization


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Manufacturing Environment Strategies

Make-to-Order

Production initiatedafter receipt ofcustomer order

Concerns: Productionschedule, flexiblefacilities

Lead time may belengthy

Engineer-to-Order

Design and productioninitiated only afterreceipt of customer

order Concerns: Availability of

technical resources,resource availability,

flexible facilities

Lead time may belengthy


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Make-to-Stock

Product shipped fromfinished goods, off

the shelf

Concerns: Inventorycosts, stockdistribution

Forecast error could

be expensive (appliesto all strategies)

Assemble-to-Order

A customer-ordered itemwhere some or allsubcomponents used inassembly, packaging,and finishing processesare planned and stockedin anticipation of a

customer order Concerns: Rapid

delivery, customizedvariations

Manufacturing Environment Strategies


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Service Delivery Characteristics

CustomizedStandard

S O


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Formal business process

Balances demand and supply

Product families (not items) Volume, not mix

Monthly review cycle

Both product and financial units

Source: Wallace, Tom F. Sales & Operations Planning: The How-to Handbook, T.F. Wallace & Co., 2004.

S O


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Sales and Operations Planning Benefits

Links business plan to departmentaloperations

Provides a means to work for a common

goal Provides a realistic production plan for

meeting business objectives

Eliminates counterproductive hidden orunilateral decisions

P d F ili


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Product Families

Represent how the product is presented tothe market

Logical groupings based on similar sales

and manufacturing requirements Should be meaningful in terms of volume of

sales generated

Ideally should be no more than 6-12product groupings per business unit

P d /S i Hi h


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Product /Service Hierarchy

Stockkeeping Unit (SKU)

Package Size

Catalog Number/Model/Brand

ProductSubfamily

ProductFamily

BusinessUnit

TotalCompany

Source: Wallace, Tom F. Sales & Operations Planning: The How-to Handbook, T.F. Wallace & Co., 2004.

R Pl i


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Resource Planning

Conducted at the business planning andsales and operations planning levels, butnormally based on the production plan

Addresses long-range capacity Establishing Measuring

Adjusting limits

Long-term resource acquisition

Always requires top-management approval

Bill f R


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Bill of Resources

A bill of resources is a listing of the requiredamount of constraining resources needed tomanufacture one unit of a selected item or family.

These could include the following resources:

Labor

Materials or components

Facilities

Equipment Research and development

Finances

M t S h d li


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Master Scheduling

Formal business process Balances demand and supply

For specific products and end items

Subject to independent demand

Used for order promising

Sets boundaries for material and capacityplanning

R h C t C it Pl i


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Rough-Cut Capacity Planning

Formal business process Used to convert the MPS into load

projections on critical workcenters and

supply processes Used to determine feasibility of the MPS

S i 1 R i


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Visu1-34Master Planning of Resources ver 3 0 July 2004

Session 1 Review

Identify and describe the elements of

master planning of resources Identify and describe the levels of the planning

hierarchy

Describe and distinguish the roles in the planningprocess that product volume and product mixplay

Describe the elements of business planning

Identify and describe the inputs to a businessplan

Identify and describe several manufacturingenvironments

PSC Session 1 Business Planning

Documents

Transcript of PSC Session 1 Business Planning