Chapter 3 - Supply Chain Planning
Supply Chain Planning
- SCP is the element of SCM; how to best satisfy the requirements of the demand plan
- SCP objective is to balance supply and demand to realize the company’s financial and
service objectives (SCP is a combo of all the planning processes used across the SC)
- Process is a standardized and stepwise approach to satisfy customer demand
- Levels and Horizons:
- Long-range SCP: planning for construction of facilities and major equipment
purchase (APP)
- Executive level (grow market share by 5% in the next 1-3 years)
- Top management takes care (> 1 year)
- Intermediate-range SCP: shows quantity and timing of end items (MPS)
- Mid-level (100 trucks per week for the next 3-18 months)
- Operations middle management take care (3-18 months)
- Short-range SCP: detailed plan for components and parts to support MPS (MRP)
- Planner, 1st line supervisor (100 engines, wheels, etc. over next 12 weeks)
- Operations managers and supervisors take care (< 3 months)
Business Planning
- Business planning is made up of strategic and financial plans
- Long term focused plan provides company direction and goals for next 2-10 years
- Management gather input from different functions to develop business plan
- Plan states goals for profit, growth rate, and ROI
- Plan is updated and reevaluated annually, usually during annual budgeting cycle
- Used as starting point for making production plan or APP
Aggregate Production Plan (APP)
- APP is a hierarchical planning process that translates annual business plans, marketing
plans, and demand forecasts into a production plan for a product family
- Planning horizon is at least 1 year
- Rolled forward by 3 months every quarter
- Product family: products that share similar characteristics
- Purpose: make production rates that reach management’s goal of satisfying demand by
maintaining, raising, lowering inventories while trying to keep workforce relatively stable
- Goals: meet demand, use capacity efficiently, meet inventory policy, minimize any costs
Supply Chain Planning
- SCP is the element of SCM; how to best satisfy the requirements of the demand plan
- SCP objective is to balance supply and demand to realize the company’s financial and
service objectives (SCP is a combo of all the planning processes used across the SC)
- Process is a standardized and stepwise approach to satisfy customer demand
- Levels and Horizons:
- Long-range SCP: planning for construction of facilities and major equipment
purchase (APP)
- Executive level (grow market share by 5% in the next 1-3 years)
- Top management takes care (> 1 year)
- Intermediate-range SCP: shows quantity and timing of end items (MPS)
- Mid-level (100 trucks per week for the next 3-18 months)
- Operations middle management take care (3-18 months)
- Short-range SCP: detailed plan for components and parts to support MPS (MRP)
- Planner, 1st line supervisor (100 engines, wheels, etc. over next 12 weeks)
- Operations managers and supervisors take care (< 3 months)
Business Planning
- Business planning is made up of strategic and financial plans
- Long term focused plan provides company direction and goals for next 2-10 years
- Management gather input from different functions to develop business plan
- Plan states goals for profit, growth rate, and ROI
- Plan is updated and reevaluated annually, usually during annual budgeting cycle
- Used as starting point for making production plan or APP
Aggregate Production Plan (APP)
- APP is a hierarchical planning process that translates annual business plans, marketing
plans, and demand forecasts into a production plan for a product family
- Planning horizon is at least 1 year
- Rolled forward by 3 months every quarter
- Product family: products that share similar characteristics
- Purpose: make production rates that reach management’s goal of satisfying demand by
maintaining, raising, lowering inventories while trying to keep workforce relatively stable
- Goals: meet demand, use capacity efficiently, meet inventory policy, minimize any costs
