Sales & Operations
MPC – 5th Edition
SOP provides the framework
Materials resources and plant
capacities can be coordinated
consistent with the strategic business
Key input into the capital budgeting
1. SOP Fundamentals
Balance between demand and supply
D>S customer service suffers because the
customer will not be able to receive the products.
Costs increase because of overtime and fast
freight (lett.: trasporto, cioè qui: spedizione)
S>D Inventories increase because of the
imbalance. Layoffs results from production rate
cuts. Profit margin is reduced because of price
cuts and discounting.
SOP should provide a strategy for how demand
will be met over the business cycle.
The operations portion of the SOP is a plan for
manufacturing that if followed will meet the
strategic objectives of the firm from a
The Sales & Operations Plan (SOP) is stated
in terms commonly understood by upper level
management: aggregate units of output per
month (sometimes per week) while the MPS
(Master Production Scheduling) will be in
units per week (sometimes per day).
SOP Management (Cont.)
The operations plan is not a forecast. It is the
planned production, stated on an aggregate
basis, for which manufacturing management
is to be held responsible (sulla base del sales forecast).
Links through the MPS to material
planning and other MPC functions can
provide the basis for what-if
simulations of alternative plans.
The value of the MPS function is
questionable if there is no monitoring
of performance – for instance
deviations of performance.
Reconciliation of the MPS with the
operations plan is a constant activity.
1. The monthly SOP process
Run the sales forecast reports.
Reviews the impact of changes & determine
whether there is enough material and capacity
Demand planning phase (override statistical
forecasts when appropriate and bring mkt. in.)
Pre-SOP meeting (Formulate agreed-on
recommendations for top management
regarding changes in the plan).
Executive SOP meeting – Make decisions on
the plans including spending for changes and
break ties where there was no consensus.
2. SOP Planning Displays
Forecasts – Bar chart of monthly
Chase Strategy – Production output
changes every time period to match
the value of forecasted sales.
Level Strategy – Production is at a
constant rate of output with inventory
buildups and depletions.
In either strategy the plan is to satisfy
the forecasted demand.
SOP committee is made up of the
firms top management group
representing all functional areas.
To assure that SOP plans are
consistent with annual business plan
Establish performance measurements
for evaluating the SOP process
To monitor actual results against
plans and make adjustments as
To manage the FGI with the targets
established in the SOP
To provide direction to the
development and execution of the
master production schedule