Sales & Operations Planning in Supply Chain Management

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  • 0:01 Supply Chain Management
  • 0:49 Sales & Operations Planning
  • 2:10 Strategies
  • 4:05 Lesson Summary
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Lesson Transcript
Instructor: Natalie Boyd

Natalie is a teacher and holds an MA in English Education and is in progress on her PhD in psychology.

How do business leaders manage the flow of goods and services when they are faced with seasonal variations in demand for their products? In this lesson, we'll explore what sales & operations planning is and some of its major strategies.

Supply Chain Management

Kyra owns a schools supply company. They make brightly colored and artistically decorated notebooks, pens and other school and office supplies. She wants to make sure that she's making enough supplies for her customers, but not too many. After all, she doesn't want to get stuck with thousands of notebooks that she can't sell. Kyra is thinking about supply chain management, which involves managing the flow of goods and services. Essentially, supply chain management is about getting from raw materials to having completed products in the consumers' hands.

The problem that Kyra is facing is how to handle her company's production to meet customer demand without exceeding it. That is one part of supply chain management. To help Kyra manage her production, let's look at sales and operations planning and some common strategies for companies like Kyra's.

Sales & Operations Planning

Because Kyra's company makes school supplies, they don't sell the same amount every quarter. They do a lot of business in the third quarter of the year, at the end of the summer and beginning of fall, and they sell a good amount of supplies in the first quarter too, as students start a new semester. But they sell very few products in the second and fourth quarters of the year. She would like to know how she should run her business so that they are able to produce the right number of products at the right times.

Part of supply chain management is sales and operations planning, which is the integration of input from sales, operations, and finance departments to set in place intermediate supply and demand plans. It is also sometimes called aggregate planning. In addition to being based on information from different parts of the company, sales and operations planning influences functions throughout the company. For example, it might change how people are hired and laid off, or how the company's financial budgets are distributed over the course of the fiscal year.

Sales and operations planning is particularly useful for companies that experience seasonal or other variations in demand for their products. As we've seen, Kyra's company has seasonal variations in demand from their customers. Sales and operations planning can help Kyra focus on how the company should be run so that they can meet the high demand of the first and third quarters while not making too many products in the second and fourth quarters.

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