8 Measures for Sales and Operations Planning in Turbulent Times, Part 5

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In this series, CEPHAS principal Fane Friberg highlights the interdependent elements of an effective S&OP process for leaders of supply chain management. While some companies tend to fall back on the status quo, Freiberg highlights why it’s critical to actually increase the frequency of the S&OP rather than decrease the operations. He has reviewed the importance of staying committed, strategic imperatives, participation, and technology. Today, he discusses rough-cut capacity planning.

Focus #5: Rough-Cut Capacity Planning

After the S&OP data is loaded, now you need to look at your rough capacity. Is the current demand profile going to be facilitated by your business operations? Are there enough human resources in the correct skillset for the schedule? What about machines and methods?

This step is used as an acid test to ensure that the manufacturing control/execution system or job shop environments can react adequately to the changes, including internal disturbance (e.g., equipment failures, rework) and external disturbance (e.g., variations in customer demand); on the other hand, one must optimize multiple logistic objectives and have short throughput times, low work-in-process (WIP) rates and high schedule reliability to achieve the plan.

This validation point is to substantiate that the enterprise can deliver quality goods-and-services on-time within the existing cost structure. This is not the step to force schedule compression, overtime, expedites, etc. This is a good point in the process to highlight your constraints and begin to strategize how to exploit the constraint(s) and subordinate everything else in the analysis.

For example, James Clear posted the following idea ^[1]:

“When failure is expensive, plan carefully.

 When failure is cheap, act quickly.”

References

1. J. Clear, “3-2-1: On failure, the importance of teaching, and handling the expectations of others,” February 20, 2020.

Fane Friberg is principal of CEPHAS.

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