Ch 14 sales and operations planning – Flashcards
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Sales and operations planning (S&OP)
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A process for coordinating supply and demand.
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Aggregate refers to?
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Sales and operations planning for product lines or families.
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For services, capacity is often limited by?
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Space Ex: hotel room, Seats on an airplane.
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What are the two objectives to sales and operations planning?
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1. To establish a company-wide game plan for allocating resources, and 2. To develop an economic strategy for meeting demand.
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What does aggregate planning involve?
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Involves planning the use of our existing facilities for an intermediate time horizon - 6 months to 2 yrs, typically.
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What is the first step in S&OP planning process?
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End of month reports, Run forecasting model.
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What is the second step of S&OP planning?
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Demand planning, First pass sales plan (include promotions and input from field)
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What is the third step in S&OP planning?
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Supply planning, First pass operations plan (includes workers, resources, and inventories)
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What is the fourth step of S&OP?
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Pre- S&OP meeting, Alternatives, what-ifs, consensus.
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Step 5 of S&OP planning?
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Executive S&OP meeting, Company game plan.
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What are the meeting demand strategies?
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• adjusting capacity • managing demand
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What are strategies for managing demand?
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• shifting demand into other time periods to smooth out fluctuations. • offering products or services with counter-cyclical demand patterns. • partnering with suppliers to reduce information distortion along the supply chain.
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What are ways in which you can shift demand into other time periods?
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By: • incentives- ex: coupons valid during certain times • sales promotions- ex: happy hour • advertising campaigns.
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What is an example of Florida state managing demand?
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Summer school. • teachers get more money and classes are smaller.
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What are the strategies for adjusting capacity?
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• level production • chase demand • peak demand • overtime and under-time • subcontracting • part- time workers • back ordering • renting equipment
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Level production
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Producing at a constant rate and using inventory as needed to meet demand.
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During periods of low demand,
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Over production is stored as inventory, to be depleted in periods of high demand.
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The cost of level production is?
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Is the cost of holding inventory, including the cost of obsolete of perishable items that have to be discarded.
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Chase demand
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Matches production plan to the demand pattern Nd absorbs variations in demand by hiring and firing workers.
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The cost of chase demand strategy is?
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Is the cost of hiring and firing workers.
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Chase demand will not work for what industry?
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It won't work for industries in which worker skills are scarce or competition for labor is intense.
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Peak demand
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Maintaining resources for high- demand levels. Ex: Nordstrom's department store.
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When is peak demand strategy used?
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Is used when superior customer service is important or when customers are willing to pay extra for the availability of critical staff or equipment.
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Overtime and under time are common strategies when?
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Demand fluctuations are not extreme
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Overtime and under time
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Adjust working hours to meet demand.
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Subcontracting
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Let's outside companies complete the work, (Common solution for component parts when demand exceeds expectations for the final products.)
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What does the subcontracting decision require?
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Maintains strong ties with possible subcontractors and first hand knowledge of their work.
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What are the disadvantages of subcontracting?
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• reduced profits • loss of control over production • long lead times • the potential that the subcontractor may become a future competitor.
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Part time workers
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• hire part time workers to complete the work.
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Using part time worker is feasible for?
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Unskilled jobs or in areas with large temporary labor pools (such as students, homemakers, or retirees.)
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Backlog
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Accumulated customer orders to be completed at a later date.
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Backordering
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Ordering an item that is temporarily out of stock.
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What if the customer is unwilling to wait for backordered item?
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Then the sale will be lost.
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Lost sales
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Forfeited sales for out of stock items
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What is a way to mitigate the bullwhip effect?
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Is to collaborate with suppliers, even in an economic down turns. This will help make things go smoother so no over has too much inventory or a shortage.
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The most effective AP (aggregate planning) strategy depends on what?
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• The demand distribution • competitive position • cost structure of a firm or product line.
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What are quantitative techniques for AP?
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• pure strategies • mixed strategies • linear programming • transportation method • other quantitative techniques.
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Pure strategy
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Vary only one capacity variable in aggregate planning.
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Linear programming
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Gives an optimal solution, but demand and costs must be linear.
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Mixed strategy
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Varying two or more capacity factors to determine a feasible production plan.
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Mixed strategies can incorporate management policies, such as:
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"No more than x% of the workforce can be laid off in one quarter"
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What are the characteristics of aggregate planning for services?
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1. Most services cannot 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 appropriate place and time. 5. Labor is usually the most constraining resource for services.
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Capacity is also difficult to predict
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"Capacity" of a bank teller depends on the number and type of transactions requested by the customer.
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Service capacity must be provided at the appropriate place and time.
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Determining the range of services and staff levels at each location is part of aggregate planning.
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Revenue management (yield management)
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Seeks to maximize profit or yield from time sensitive products and services.
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Revenue or yield management systems work best for services that are:
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• perishable • in a market that can be segmented • sold in advance • high fixed cost relative to variable costs. • uncertain demand.
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What are the types of problems addressed by revenue management?
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• Overbooking • partitioning demand into fare classes • single order quantities
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Capacity is segmented to correspond to _ _.
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Market segments
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Can different segments of capacity be sold at different prices?
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Yes!
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The trick of selling at different prices:
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• sell some portion at highest prices to those who can and will pay • sell remainder at reduced prices to avoid having unused capacity.
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What are some services that accept more reservations than their capacity?
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Ex: hotels, airlines, rental cars
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Why do companies overbook?
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Customers sometimes make reservations, but don't show up- "no shows"
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Fare classes
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Are different ticket prices for certain classes for the same service/ or product. Ex: airline seats.
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Cu
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Cost of underestimating no-shows (Cost of unused capacity)
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Co
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Cost of overestimating no shows (Cost of accommodating a "bumped" customer- one refused service due to lack of capacity)
