OPERATIONS PLANNING (MATERIAL AND CAPACITY
REQUIREMENTS PLANNING)
Operations planning is the detailed calculation of the material and capacity required to execute the Sales and Operations Plan. Material Requirements Planning (MRP) pulls together all the requirements for an individual part from the variety of demand sources and calculates a recommend replenishment plan that meets all the requirements. In addition, MRP also provides information by exception when the demands and the expected supply are out of alignment. This information allows the planner to react specifically to those areas requiring attention rather than requiring a routine detailed examination of every part.
Detailed capacity requirements planning(CRP)provides the visibility of demand for each of the work centers.This forward visibility allows the operations manager to more accurately plan the overall strategy for the addition or reduction of capacity.This proactive approach to capacity management allows the company to make decisions and plans at a time when many options are possible rather than during a time of crisis.The overall costs and benefits of alternative plans can be evaluated and discussed to determine the best solution. Linking these options back to the sales and operations planning process allows the financial impact of these decisions to also be understood. If the capacity cannot be changed to accommodate the priority plan,a change to the priority plan may be required. This in turn prevents material from being purchased unnecessarily and reduces the assets dedicated to potentially unusable inventory.Integrating detailed MRP and CRP is a key implementation success strategy as it can help in the overall proactive identification and resolution of bottlenecks and identify suspected data errors.
The current world of manufacturing no longer allows a company to commit resources long before customer demand. Planning has become more important than ever.
Demand Management
Demand management is the function of recognizing all demands for products and services in order to support the customers in the marketplace. This demand management process also includes doing what is required to help make the demand happen and prioritizing demand when supply is lacking. Conversely, demand management is also concerned about recognizing when demand is substantially unusual (either positive or negative) and how plans need to be changed to react. Demand management facilitates the planning and utilization of resources for profitable business results. Overall demand management maintains an intense focus on the customer. Demand management can be broken into two levels of control: demand planning,and demand control and execution. Demand planning includes forecasting, customer linkage,new product planning and inventory and capacity strategy. Demand control and execution includes customer order fulfillment, forecast consumption, abnormal demand management,and safety stock or buffer management.
Demand planning is directly dependent on the quality of the demand information. The process must be defined and enabled so that the best,most timely demand information is available. This process includes a forecast review including accountability. To facilitate this process many companies are establishing the position of demand manager or demand coordinator in order to facilitate and coordinate the development of the demand plans for the business. There should be a formal management demand review of the monthly updated demand plan/forecast as part of the Sales and Operations Planning process. One of the most difficult parts of demand management is distinguishing between small changes in demand patterns that are really a signal of significant shifts in the market or one-time demand spikes that are unusual and not recurring. Reacting to every change in demand would cause terrible disruption in the enterprise and throughout the supply chain. Effective demand management is driven by a clear understanding of the underlying causes of demand as well as the contributors for variability from expected demand. A closed loop sales and operations planning system is a key success factor in effective demand management.
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