The planning part of Operations Planning and Scheduling

Roger OakdenLogistics Management, Operations Planning, Procurement, Supply Chains & Supply NetworksLeave a Comment

Supply Market

Planning is a macro view

Planning roles have always being analytical, but there is an increasing emphasis on working with system applications and tools and the integration of transaction data with annual budgets or ERP outputs. With the increasing ease of re-running Operational models, the objective of Planning appears to be accurate and fast. However, this is an incorrect view of Planning.

An additional hurdle for Planning is the current portrait (provided in articles) of planning an organisation’s ‘end-to-end’ supply chains. But ‘end-to-end’ is not defined and, due to the independence of Tier 1 suppliers (and their suppliers) and customers, is an unlikely possibility.

As a sales objective for technology businesses is to sell high in a customer organisation, the outcome can be ‘solutions’ imposed by senior management. This can lead to an unnecessary use of technologies, rather than commencing with a ‘bottom-up’ consideration of what customers require from the supply chains of their suppliers.

Missing in all of this this is the macro approach of Planning – to consider the broader picture. This requires macro level data and collaboration with stakeholders to gain a consensus plan from the options and probabilities presented. These plans are then expanded with the scheduling of Operations – this is the level where data is analysed and computing applications required. To differentiate the two levels, the role should be titled Operations Planning & Scheduling.

Planning process

As a business grows nationally or internationally, it will likely become more complex, with additional constraints through supply, manufacturing and distribution. As noted in previous blogposts, Planning is thinking into the future regarding the activities required to achieve a desired goal. The goal is to be Effective in serving the customers, rather than being driven by an assumption of complexity that requires lots of computer applications to overcome.

However, it must be accepted that inputs to planning are assumptions which can change, due to unexpected events. It is therefore important that collaboration occurs between affected groups to better understood the inputs and influences, enabling agreement on the outcome. The process of planning is therefore more important than the plan which is produced. This is because the plan is for a future period that commences after the designated ‘freeze’ period. And will be updated the following period, based on more current inputs.

The process by which the plan is produced is called Sales & Operations Planning (S&OP). To facilitate this tactical planning process is the critical role for Operations Planning, as it establishes the future direction and the outcome becomes the driver for scheduling Operations.

Importantly, S&OP is a collaboration process, NOT a software driven process. However, the process can be improved by using specialist software that assists with analytics, building scenarios and answering ‘what if’ questions. It is also important to recognise that S&OP is not:

  • The strategic business plan
  • A budget review. S&OP is a planning process, while budgets are an annual financial positioning exercise. S&OP must not be constrained by the budget; however, decisions from S&OP can be an input to budget updates
  • A weekly or bi-weekly Operations Scheduling meeting concerning performance

The groups that collaborate through the S&OP process are shown in the diagram below. The senior planner in Operations Planning is the facilitator for the S&OP collaboration process.

The objective of S&OP is to enable a balance between expected future demands for the organisation’s products and services, the organisation’s internal resources and the supply of purchased or intra-company provided items. Also, that decisions from the S&OP process can be financed.

Each of the review meetings and the Executive S&OP meetings are short – with practice, they become limited to one hour each, because attendees know the format and the data required to be discussed. The focus of each meeting in the S&OP process is on the important. The role of the Operations Planning facilitator is to gain an understanding from the participants of the possible trade-offs between conflicting approaches.

Drive the S&OP outcome

The important elements that will govern the S&OP outcome are: demand; constraints; margins; and the building blocks for scheduling the flow of items – capacity; inventory and lead times.

Giving Operations Planning the responsibility for balancing capacity, inventory and lead times is the first step in changing an organisation from function (or silo) thinking to thinking about flows – of items, money, data and information. This step allows Operations Planning to demonstrate how the interconnection of capacity, inventory and lead times influences reliable, on-time delivery. There is also the more complex understanding of possible interactions between the three resources and quantifying the possible trade-offs between them. This is important for understanding the possible trade-off limitations imposed by outsourcing production to contract manufacturers and obtaining production volume and supply from low-cost countries.

Capacity needs in a business can change depending on the: product mix, demand levels, volatility of demand, order priorities, production efficiency, distribution effectiveness. and order-to-delivery lead times. Also capacity requirements can be influenced by:

  • the time required to change (or flex) capacity
  • demand uncertainty and the need for probability ranges to be incorporated into sales forecasts
  • capacity requirements against inventory form and function decisions (for both raw materials and finished goods) and
  • in-transit inventories that may affect inbound/outbound order-to-delivery lead times
  • Similar to the Demand Plan, the Capacity, Inventory and Lead Time Plans must be re-evaluated within each period S&OP process.

The S&OP process is also informed by the macro operational performance:

  • future delivery performance. Measured by the probability of ‘delivery in full, on time, with accuracy’ – DIFOTA;
  • providing Availability for customers. Achieving the Plan – S&OP, S&OE and Execution Schedules;
  • minimising Uncertainty. Management of risk, even though some functions are outsourced

Too often, the role of a group called Operations Planning (or similar) is only concerned with scheduling operations. Tactical Planning is not done, as the business relies on the budget or the ERP Master Schedule as the guide for schedules. The experiences of LAL is that implementing Tactical Planning via S&OP aligns the teams with outcomes, enabling a unified approach to serving customers effectively.

Share This Page

About the Author

Roger Oakden

LinkedIn X Facebook

With my background as a practitioner, consultant and educator, I am uniquely qualified to provide practical learning in supply chains and logistics. I have co-authored a book on these subjects, published by McGraw-Hill. As the program Manager at RMIT University in Melbourne, Australia, I developed and presented the largest supply chain post-graduate program in the Asia Pacific region, with centres in Melbourne, Singapore and Hong Kong. Read More...

Leave a Reply

Your email address will not be published. Required fields are marked *