Operations and Supply PlanningCourse Management Page
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Course Digest
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Project Instructions
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Announcements
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Session Summaries will be posted here.
Session 1: Well begun in half doneHello All, welcome to yet another new beginning.
In today's session, we started out with intros where we got to know each other. We started out by recapping the key learnings and insights from the IOM course which dealt with questions of "How, What and Where?" We then discussed what to expect from the OSP course where we would be discussing more nuanced questions like "What if? How much? and When?". Slides attached here.
Session 2: Fortune comes with foresightThe first step to matching supply with demand is to understand the nature of demand and the factors that it depends on. Our session started with a simple coin toss task where we saw how uncertainty could ruin the best laid plans of a business. We then considered demand forecasting, which is aimed at providing the much needed insight for managers to make relevant short, medium and long term decisions on capacity building, workforce planning and replenishment. We looked at the impact of the level of aggregation on forecast accuracy. Finally, we also briefly covered some qualitative techniques of demand forecasting. During the next session, we shall be covering the various quantitive forecasting.
Slides attached here.
Session 3 & 4: HNY! Hope all your forecasts come true!In these sessions, we explored some basic methods of forecasting and got our hands dirty with these techniques. We also explored the various error measures of forecasting including MAD, MAPE and MSE. Tracking signal is also a useful error metric which is for self study.
Slides and data set attached here.
Session 5: Winter is coming!Having equipped ourselves with basic methods if forecasting and error measures, we moved on to look at forecasting when the data consists of trend and seasonality. While trend analysis could be done using linear regression, we also looked at the theoretically superior double exponential smoothing (a.k.a Holt's model). We started to look at ways to deal with data characterised by seasonality. More on seasonality in the coming sessions, therefore, winter is coming!!
Slides attached here. Spreadsheet solutions to sample problems has also been attached for ready reference.
This file was revised on 10/1/2019. Session 6: Trend-ar Mogulis!"All trends will eventually end!", said Lord Vinay of the house Kalakbandi!!!
We concluded the topic of forecasting by looking at good forecasting practices, mistakes to avoid and things to keep in mind during the forecasting process. We then started off on the new topic of Sales and Operations Planning which we will cover in detail over the next week. Meanwhile, request you all to kindly check out the project instructions and be ready with your choice of company by next week. Slides for the session attached here.
Session 7 & 8: of Elephants🐘 & Cheetahs🐆Forecasts are useless unless these are incorporated into the planning of the company's planning. Sales and Operations planning is a crucial step in this direction. In the first session, we discussed the fundamental idea of SnOP and why it is important. During the second session, we got our hands dirty with an planning problem using level, chase and mixed strategies. The attached excel file has solutions for 3 plans. You are required to work on plan 4 by yourself.
In the context of the session, please remember that being an elephant is far more sustainable and productive in the long run compared to being a cheetah! So this should also be an important life lesson for you all! Slides and excel sheet has been attached.
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Session 9: want to minimize cost: there is APP for that!In this session we wrapped up our discussion of the various policies that underlie an Aggregate Production Plan (APP). We discussed about how efficient aggregate planning could help in superior managerial decision making.
PFA the slides.
Session 10 & 11: Turn inventory faster than people!In these sessions, we understood the key purposes of holding inventory, the different inventory classifications and examined the the basic EOQ model.
PFA the slides.
Session 13: Don't be an average ManagerVariability is the only constant. Uncertainty is the way of life. Without uncertainty life has no color, no meaning, no fun!
So in this session, we started our discussion on how to deal with demand uncertainty while making inventory decisions. The core lesson of the session is not to rely on expected (average) demand but on your assessment of cost of doing too much and cost of doing too little! PFA the slides.
Session 14: When you are down to four, order more!Today we discussed the most realistic models of inventory management that are suitable for most products. We compared and contrasted fixed order quantity and periodic order quantity models and discussed their pros and cons.
PFA the slides.
Session 16: Here stock, there stock, everywhere stock stockIn this session, we discussed about the perils of SKU proliferation and ways to deal with the same. Usage of product category based inventory policies is key to an efficient inventory management. We ended our discussion discussing some practical aspects like shrinkage and use of technology in Inventory Management. Entire slide deck for the inventory management module is attached here.
Further, we started our discussion on Materials Requirement Planning.
Session 17: of exploding BoMs and time phasing!In this session, we understood the fundamental principles of Materials Requirement Planning and worked on a sample problem. Time phasing, impact of initial inventory, impact of lot sizing rules and role of product structure were discussed.
PFA the slides used.
Session 18: Stitch in time, saves nine!The major part of today's discussion was surrounding what I like to call the last mile of the of Operations Management, the step just before execution, Operations Scheduling. We got a quick glance into some classic scheduling problems Job sequencing, Johnson's algorithm and the Hungarian method. We have barely scratched the surface of vast literature in scheduling, however, I hope this was a good primer.
PFA the slides used.
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Operations and Supply Planning course covers key aspects of operations planning. The main objective of operations planning is to ensure supply meets the demand.
- The course begins with teaching students understand demand, methods of estimating independent demand various ways of measuring forecast accuracy. Top-down and bottom-up approaches are used in organisations to fix sales targets.
- Then, organisations estimate the level of resources required from departments such as sales, marketing, HR, finance, operations, quality, maintenance etc that can satisfactorily meeting the forecasted demand through a process called Sales and Operations Planning. Presence of senior management is essential in these meetings to resolve any inter-departmental conflicts and also to ensure commitments from individual departments. Taking the output of this high-level exercise as inputs, individual departments make detailed plans at a granular resource level. (This step is not covered in detail in OM-II course)
- First stage of operations planning is called Aggregate Planning in which the managers identify the level of operations resources such as people, equipment, storage, supplier agreements, transportation etc required to meet the forecasted demand. In this stage, alternate plans are evaluated based on the trade-off involved between customer service levels and the cost of the plan.
- One of the key elements of cost of plan is inventories. Thus an operations manager has to know when and how much inventory to order (Economic Order Quantity) and also how frequently should it be monitored. After understanding various costs associated with Finished Goods inventories, students learn the relationship between inventory levels and service levels in 3 scenarios namely, (a) inventory can be ordered only once and perishes, once the season is over, (b) inventory can be carried over to future ordering periods and is continuously monitored and (c) inventory can be carried over to future ordering periods but is only periodically monitored. Students also learn the implications of certain (deterministic) (Cycle Stock) and uncertain demand (stochastic) (Safety Stock) in all the 3 scenarios.
- Finished goods are built from components / raw materials. Such a list & usage of components / raw materials needed to produce a finished good is called Bill of Materials (BoM). Thus the demand for components / raw materials is derived from the demand of finished goods and hence also is called as dependent demand. Students learn to estimate the quantities (called BoM explosion) of components / raw materials that required meeting the production demand, and also when and how much to order based on the delivery constraints. This process is called Material Requirement Planning (MRP or MRP – I). Purchase orders are released for components / raw materials that are bought from suppliers and Production orders are released for components / raw materials that are produced in-house.
- Once Production Orders are received by the Manufacturing / Service Delivery department, they will need to be scheduled based on resource availability and delivery due date. Students learn various ways of scheduling production orders and the trade-offs associated in this process.
- Software applications are now available to plan materials and production scheduling simultaneously instead of hierarchically as described above. Such applications are called Manufacturing Resources Planning (MRP-II) applications. Practitioner sessions are scheduled to expose students to such emerging and sophisticated operations applications.
Group Project Guidelines
The objective of Group Project in Operations Management –II is to emulate the above steps for a chosen product (category not a SKU e.g., not White Swift Dzire, but Sedan or not 50 ml Parachute coconut oil bottle, but Parachute coconut oil as a category). Students should form groups of no more than 6 per group and identify a product as a first step. The following are some guidelines in each stage of the project.
- Forecasting: Collect past 3 years data (Quarterly) from primary / secondary sources e.g, Prowess (viz.,2014-15, 2015-16 & 2016-17). Creative reverse engineering e.g., “(revenue/average price) = SKUs” sold methods are welcome. Based on this data, develop forecast for next year (2017-18). Verify with your instructor to go to next stage.
- SnOP – Ignore
- Aggregate Planning: Collect salary data (regular & overtime) from industry labor data sources.
Look at the annual reports / websites of the companies to get head-count. Make assumptions in terms of labor: manager mix. Assume capital equipment level is fixed and capacity is function of labor only. Find-out / estimate direct labor content per product, from your previous process analysis experience. Guesstimate hiring / firing, inventory and back-log costs. Develop optimal production plan. Verify with your instructor to go to next stage. - Distributor Perspective: Chose a retailing city for your product and the corresponding slice of the demand (Total demand / # of cities in India, where the product is sold OR in proportion of the users, based on demographic data). Assume one distributor for this city. Estimate transportation costs (assume 150% of this as ordering costs, to cover for loading/ unloading and GST/paper- work costs) from factory to this retailing city and the lead-time (for a full truck load). Look at some trucking sites for quotations. Estimate the variability of demand (say standard deviation of last 12 months demand). Find out Economic Order quantity (EOQ), Reorder Quantity (ROQ) & Reorder Point (ROP). Verify with your instructor to go to next stage.
- Go back to organization level demand data. Get BOM for your product. Choose any 10 components / raw material. Get prices, suppliers, locations, transportation costs and thereby EOQ for each of these 10 components / raw materials. Given your annual demand, develop a MRP schedule for these 10 components / raw materials. Make final presentation.
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