Supply Chain Planning Blog

Planning is Important, Re-planning is Even More Important

Posted by Bill Green on Wed, Feb 08, 2017

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Planning is the world’s second oldest profession! Why? Because no matter what you want to do, you need to plan for it. You may argue that there are things that you do not plan for: accidents, Acts of God, inventions. However even these are somewhat planned for in case they happen. Buying insurance is a good example of such planning. Perhaps emotions and feelings are exceptions! But even these were planned by nature for our survival. In the world of manufacturing and supply chain, planning is probably the most important aspect of the business since it has to do with getting the right product in the hands of the consumer on time in the right place. In the absence of proper planning the cost can be very high leading to the demise of the business. Despite, the importance of planning, it is not enough to ensure on-time delivery of goods at the lowest cost. This is due to the stochastic nature of events that can change the demand or supply. Examples are a breakdown of an equipment or plant due to earthquake. Or, sudden increase in demand or shortage of supply from a supplier can lend the original plan somewhat under-optimized. Hence the title of this piece which is a quote from General Eisenhower.

We conclude that S&OP is good for aggregate level decisions for things like expected total production required in a month, but not good enough to figure out how much to produce of each individual product along with the capacity needed of each machine type. You need to have accurate plans that can be executed; and while they are being executed the plan is constantly adjusted to account for the changes that were not foreseen by the plan. To be able to do this, one needs S&OE (Sales & Operation Execution) system that can translate the original plan into more and more detail. A typical S&OP plan can only be as accurate as 40-65%. When combined with S&OE, the accuracy can be as high as 98% or better. We have actually performed simulation studies that confirm the above results.

What S&OE does is simply take the constraints defined by S&OP and apply additional detailed constraints in order to make the plan work and more accurate. In this process, it enables the users to see the details of what will be delivered and where and what potential issues need to be addressed, if any. For example, the S&OP Plan may say the forecast for the month of Product group A is 100, while S&OE says how much for A1 and A2 per day.  S&OP says 80 hours of drilling is required, while S&OE says how much of each type of drill is required each week.

Topics: Supply Chain Planning, Planning, Sales & Operations Planning, S&OP, S&OE