Page 298 - DMGT501_OPERATIONS_MANAGEMENT

Operations Management

Notes Aggregate planning is the basis for decisions at this stage. The aggregate plan serves as a broad
blueprint for operations and establishes the parameters within which short-term production
and distribution decisions are made. It allows the supply chain to alter capacity allocations and
change supply contracts. In addition, many constraints that must be considered in aggregate
planning come from supply chain partners outside the enterprise, particularly upstream supply
chain partners. Without these inputs from both up and down the supply chain, aggregate
planning cannot realize its full potential to create value.
The output from aggregate planning is also of value to both upstream and downstream partners.
Production plans for an organization define demand from suppliers and establish supply
constraint for customers. If a manufacturer has planned an increase in production over a given
time period, the supplier, the transporter, and warehousing partner must be aware of this plan
and incorporate the increase in their own plans.
Because operation decisions are being made in the short term, there is less uncertainty about
demand information. Given the constraints established by the configuration and planning
policies, the goal during the operation phase is to exploit the reduction of uncertainty and
optimize performance.
Ideally, all stages of the supply chain should work together to optimize supply chain performance.
An important supply chain issue is collaboration with down stream supply chain partners. Slack
of co-ordination will result in shortages or oversupply in the supply chain. Therefore, it is
important to perform aggregate plans over as wide a scope of the supply chain as is reasonably
possible.

13.7.1 Internal Supply Chains

The internal supply chain is that portion of a given supply chain that occurs within an individual
organization. The first step in moving towards supply chain management is to develop these
internal chains. Internal supply chains can be quite complex. Given the multidivisional,
international organizational structures found in many businesses, it is not uncommon for the
internal part of a supply chain to have multiple "links" that span the globe. Developing an
understanding of the organization's internal supply chain is often an appropriate starting point
for firms considering an SCM initiative.

In these multi-divisional structures, the employees of one division often view the "other" divisions
in much the same manner as they would external suppliers or customers. In some cases, turf
wars between divisions make integrating cross-divisional functions and processes very difficult.
The supply chain has to be seen as a set of interrelated processes rather than a series of discrete,
non-aligned activities. Process maps are developed to understand the overall internal supply
chain linkages. These maps provide the basic information required to link the different entities.
Examples of key processes and associated entities include order information from sales, order
entry for materials planning, order preparation by purchasing, manufacturing, or warehousing,
and order shipment for distribution and transportation. Each key process is documented along
with current performance information.

It is beneficial when the different divisions understand the steps in their portion of the supply
chain and "what happens" outside their part of the process. Developing supply chain process
maps (flow charts) for major supply chains and their related processes is a basic requirement to
establish an effective supply chain.

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