OPERATIONAL MODULE

prepared by: M. Imran Taseer 1

The MPC System Defined

The MPC system is to manage efficiently the flow

of material, the utilization of people and
equipment, and to respond to customer
requirements by utilizing the capacity of our
suppliers and internal facilities.
• Acquisition of information from customers on
product needs and providing customers with
information on delivery dates and product status.
• MPC system provides the information upon which
management make effective decisions.

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 Typical MPC support activities
1. Long Term: the system is responsible for providing information to make
decisions on the appropriate amount of capacity to meet the market
demands of the future.
The Capacity includes:
• Machines and equipments
• Human resource
• Buildings
• Suppliers/ Outsourcing partners
• Technology
• Geographical locations
2. Intermediate Term: the fundamental issue addressed by the MPC system
is matching supply and demand in term of both volume and product mix.
3. Short term: day by day production plans

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Consequences of Poor MPC performance

A major cause of firm bankruptcy

Poor customer services

Excessive Inventory of finished goods

Unmatched to the required market mix

Missed major opportunities because of their inability to respond
quickly
Inappropriate assignment of materials

Workers and equipment utilization

Large investments on fire fighting equipments

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Benefits of MPC system
• Controlled level of work–in-process inventory and
smooth production flows
• Very short and consistent delivery times
• Rapid response for a few emergency orders
• Efficient production of Lot sizes as small as one unit
• Labor productivity
• A reduction of manufacturing lead time
• Reduction in transshipment costs and risks of aging
inventory
• Matching demand with supply
• Relationships with customers
• Build customer loyalty for the future
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 MPC SYSTEM FRAMEWORK

SALES AND MASTER MATERIAL ENTERPRISE

DEMAND
OPERATIONS PRODUCTION REQUIREMENT RESOURSE
MANAGEMENT
PLANNING SCHEDULE PLANNING PLANNING

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MPC CLASSIFICATION SCHEMA

PROJECT

MRP

Time Between Successive Units

Number of Subparts

BATCHES

REPETITIVE

FLOW

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DEMAND MANAGEMENT

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Demand Management
• Demand management is a gateway module in manufacturing planning
and control (MPC), providing the link to the marketplace, sister
plants, warehouses, and other important “customers”.
• Demand management gather information from and about the market
doing things like forecasting customer demand, entering orders, and
determining specific product requirements.

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 FORECAST

“Prediction of future demand”

Type of Forecast

Qualitative Methods
Quantitative Methods
Mix Methods

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Forecast Vs. Plan
• The pattern of demand and the response by the company points out
the important distinction between forecasts and plans
• In Demand management forecasts of the quantities and timing of
customer demand are developed
• The demands of customers are independent demands
• We can influence the timing (Quantities) through advertising, pricing and
promotion
• Demand of raw materials and components are dependent demand.

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Demand management and MPC Environment
• Make-to-stock firms
• Firm that serve their customer from finished goods inventory are known as make-to-
stock firms.
• Assemble-to-order firms
• Combine a number of options together to meet a customers' specifications are
called assemble-to-order firms.
• Make-to-order firms
• That make the customers product from raw materials, parts and components are
make-to-order firms
• Engineer-to-order firms
• An engineer –to-order firm will work with the customer to design the product, then
make it from purchased materials, parts and components.

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Sales and operational
planning (S&op)

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Hence the Need for a Collaborative
Approach led to
Sales & Operations Planning

Prepared By: Muhammad Imran Taseer 14

 What is S&OP?
A decision-making & Business Management process
To ensures that the tactical plans in all business functions are
• Aligned and in support of the company strategy and the business plans
and goals.
• Product Families (not items)
• Volume (not Mix)
• Monthly review Cycle
 Single Environment for optimally synchronizing
Demand, Inventory, and Supply plans
 While considering costs, revenue and profit objectives of
organization
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What is the purpose of S&OP?

 Sales Plan
 Production Plan
 Inventory Plan
Updated S&OP  Backlog Plan
Forecasts  NPD Plan
Process  Strategic Initiatives
Plan
 Financial Plan

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Sales and Operations Planning Process
The monthly sales and operations planning process

STEP 5
Exec SOP Decisions
Meeting
STEP 4
Pre-SOP Recommendations
Meeting
For executive S&OP
STEP 3
Supply
Capacity constraints
Planning
2-nd pass spreadsheet
STEP 2
Demand Management forecast
Planning
1-st pass spreadsheets
STEP 1
Data
Statistical forecasts
Gathering
Field sales worksheet

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Step 1 – Data Gathering

• Month end data

Actual sales

Inventory

Production
Forecast

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Who brings what to the Table?

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 Sales Product Family A

Jan Feb Mar Apr May June Jul Aug

Forecast 100 100 100 120 120 120 120 130

Actual sales 90 95 85

Difference -10 -5 -15

Cum. difference -15 -30

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 Production Product Family A

Jan Feb Mar Apr May June Jul Aug

Planned
production 100 100 100 110 120 120 120 130

Actual production 98 100 101

Difference -2 0 1

Cum. difference -2 -1

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 Inventory Product Family A

Jan Feb Mar Apr May June Jul Aug

Planned inventory 100 100 100 142 142 142 142 142

Actual inventory 111 116 132

Difference 11 16 32

*January Inventory = 103 Prepared By: Muhammad Imran Taseer 22

 Comparing actual to forecast Product Family A

Jan Feb Mar Apr May June Jul Aug

Forecast 100 100 100 120 120 120 120 130
Acutal sales 90 95 85
Difference -10 -5 -15
Cum. difference -15 -30

Jan Feb Mar Apr May June Jul Aug

Planned production 100 100 100 110 120 120 120 130
Actual production 98 100 101
Difference -2 0 1
Cum. difference -2 -1

Jan Feb Mar Apr May June Jul Aug

Planned inventory 100 100 100 142 142 142 142 142
Actual inventory 111* 116 132
Difference 11 16 32
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*January Inventory=103
Step 2 – Demand Planning

• Price changes

• Competitive activity

• Economic condition

• Large customers are considered in revising the sales forecast

• New forecast has been authorized by sales and marketing

• The operations plan needs to be changed and where it is acceptable

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Step 3 – Supply Planning

3. The supply (capacity) planning phase

Compared changes made in the sales forecast

Changes that have occurred in inventory or customer order backlog levels

Modify the operations plan

Demand exceeds supply by a margin or that is too large to reach with the
current plant, or vendor capacity

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Step 4 – Pre-SOP Meeting
• Make decisions to balance supply/demand

• Resolve differences where possible

• Identify areas of disagreement

• Develop scenarios/ alternative action

• Set agenda for Executive S&OP meeting

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 Step 5 – Executive S&OP Meeting
• Make decision on the sales and operations plans for each product family

• Authorize changes in S&OP plan

• Relate the collective impact of the dollarized version of the sales and
operations plans to the overall business plan.

• Resolve issues

• Review performance, product issues etc.

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What are critical success factors for S&OP?
Top
Management
Supported by Involvement
Integrated Ongoing
Supply-Demand Routine S&OP
Planning Meetings
Technology

CSF for Structured

Measurement
meeting
of Process S&OP agendas

Internal Cross-
Collaborative functional
process participation
Participants
empowered to
take decisions
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Prepared By: Muhammad Imran Taseer