The purpose of this article is to present the process of planning material and product flows. The article consists of two parts. The first part covers the theoretical foundations of supply chain planning for an organization according to APICS standards. The next part describes the implementation of a planning cycle in a distribution organization and the practical application of a spreadsheet for supply chain planning.
Theoretical foundations of the planning process according to APICS
One of the key aspects of logistics management is the coordination of processes occurring within an enterprise. The effective functioning of a logistics system requires consistency and alignment of plans at all levels of management. The planning process scheme, promoted by the APICS organization, is presented in Figure 1. In this approach, planning begins with the formulation of a business plan. This document defines the strategic assumptions for the enterprise’s operation and indicates the direction in which the organization is heading. It takes into account adopted sales, marketing, financial, and operational strategies, as well as the strategy for the development and implementation of new products. This plan is most often expressed in monetary terms, broken down by product groups, and indicates the resources necessary to achieve the assumed sales level. The time horizon of the business plan usually covers three to five years.
The strategic guidelines of the business plan are the basis for creating a Sales and Operations Plan (SOP). This plan is a tool ensuring consistency between the business vision of gaining a competitive advantage and the daily management of the supply chain at the operational level. The SOP serves as a link between marketing and sales plans and the production plan. Furthermore, the SOP enables the coordination of activities of individual enterprise units, eliminating the possibility of implementing their particular, often divergent plans. The process of creating an SOP is usually carried out monthly and covers a horizon of one to one and a half years. In addition to the business plan, the input data for the SOP formulation process are usually marketing plans and information about available production and financial resources. Based on this data, the company’s senior management makes decisions regarding the planned production volume and sales level for a given product group. To verify the feasibility of the proposed plans, a Resource Requirements Planning (RRP) process is then carried out. This action is performed for key resources. In the RRP process, the resources needed to implement the adopted SOP are calculated by multiplying the quantities of products to be produced in a given period by the quantities of resources necessary to produce one unit of the product representing a given product group. If the sum of resource quantities calculated in this way, necessary to produce all product groups, exceeds the available production capacity, it is necessary to reformulate the SOP or provide additional resources. The result of the SOP formulation process is: a Production Plan, a Sales Plan, and the planned inventory level. These plans are aggregated at the product group level and expressed in monthly periods.
The next level of planning is the Master Production Schedule (MPS). In the literature, this plan is often called an “anticipated build schedule.” The process of creating an MPS consists of breaking down the quantities adopted in the production plan from the product group level to the product level. The key enabling the transition from the product group level to the product level is detailed sales forecasts. Time units in which production is planned are also divided. The transition is made from the monthly level to weekly periods or, in special cases, shorter ones. As a result of such detailing, an exact production schedule for individual products is obtained.
The article comes from the magazine “Logistyka” 3/2010.