Questions Around S&OP, MPS and Capacity Planning

Executive Summary

  • The following are questions and answers around S&OP.
  • These questions highlight the confusion around these planning topics.

Introduction

These questions were asked and answered on the topic of S&OP.

Question #1

I am not understanding how S&OP is technically done (at the supply side). There are so far three different approaches I found. But I am not sure if I correctly understood them.

To calculate at product Family Level with simple spreadsheet use (according to Wallace How-To Handbook on Sales and Operations Planning). And afterwards, compare or disaggregate the data for master scheduling??

To calculate at the Product Level using Master Production Scheduling. Even though I am not sure if this is called Master Production Scheduling because according to your blog it should be called MRP. But is this then aggregating this for S&OP??

Using APS- Master Planning Modules. Are the Supply Planning Modules you mentioned in your book About Supply Planning like SNP Master Planning Modules or something totally different?

Besides, there are S&OP Softwares available. Are they mainly for creating Dashboard, what if Analysis and demand planning or also for capacity planning?

Answer #1

I believe you have mixed up different supply planning threads. See this article for the differences called out in How to Appreciate The Four Supply Planning Threads and Their Timing.

I would leave aggregation out of the analysis for now. Aggregation can happen in any of the planning threads, its not unique to S&OP, although S&OP is really just more aggregated.

Question #2

As far as I understand S&OP and MPS can be produced by the same technique. But S&OP involves finance and sales while MPS does not. Besides S&OP can also be done without a supply planning software while for MPS a supply planning software (like MRP or APS) is necessary. Is this correct?

But what I am now a bit confused about is why rough-cut capacity planning is the same method as S&OP and MRP. Is rough-cut-capacity planning what you referred to as capacity leveling? And where is the difference between capacity requirement planning and resource requirement planning?

Answer #2

Yes, that one item you brought up is a major point of S&OP. S&OP has finance as one of the three involved parties.

As for MPS, that gets a little grey, because the term has changed in use over time. See the article How the Master Production Schedule Changed Through Time.

The term rough-cut capacity planning is not used much anymore. It just means a less accurate or detailed capacity plan. Capacity planning is very difficult, so it is abstracted to make it more manageable. So it is capacity planning, but less detailed. This usually looks out far further in time but is less detailed.

Capacity planning, resource planning, resource requirements planning are all the same thing.

S&OP capacity planning is supposed to take in account capacity, and sometimes it does. But the company doing it needs to really make it a focus. I had a client with an incredibly detailed capacity planning spreadsheet that was highly tuned to the actual capacities of the factory.  But now that I think of it — I am not sure if it was ever used in their S&OP process. I was asked if the spreadsheet could be reflected in SAP, and I said absolutely not. Applications have much more simplified assumptions around capacity planning.

See the definition described in the article Production Planning with Constraints Versus Capacity Leveling Definition. 

The problem is that these terms come into existence, and people often use them in an imprecise manner, so over time, their meaning gets confused and commingled with other terms. Notice this term — “perpetual inventory.” Because of the universal use of computers, this term basically lost its meaning, but it used to be a very important term in inventory management. See the article Whatever Happened to the Perpetual Inventory System?

Furthermore, consultants often provide descriptions of these terms that are not accurate but are good for selling their services. The business world is not like science, it is filled with a lot of hyperbole and exaggeration.

I think it might help others if I place your questions out on a few articles and show my answers. Would you be interested in having your name attached or would you prefer if it is anonymous? I can tell you, there are people with a lot of work experience who are actually confused about these terms or think they mean something when the actual definition is different.

Brightwork Research & Analysis has developed an application that addresses S&OP. That is not all that it does, but that is one of the things it does. See the article Brightwork MRP & S&OP Explorer.

Conclusion

Hopefully these answers have been helpful.

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