Supply Chain Plan: Develop a forecasting, capacity, and sales and operations plan for the product or service you selected – Week 1 – 3 Solution

Supply Chain Plan

Week 1: Decide on the product or service you will utilize for the development of your holistic supply chain management strategy, implementation, and sustainment.

Week 2: Develop a forecasting, capacity, and sales and operations plan for the product or service you selected.

Week 3: Develop a manufacturing or service plan (depending on whether you selected a product or a service) for the product or service you selected.

What type of forecasting models would be the most appropriate and why?

How would the forecasting models selected be validated and kept current?

Develop a sales plan.

Develop an aggregate plan.

Develop a process flow with areas of risk identified.

Provide mitigation associations with each identified risk.

Guidelines for the Supply Chain Plan Part I assignment are as follows.

It should be a 7-page written paper (double spaced), Times New Roman, and 10 font.

Directly apply the concepts of Modules 1, 2, and 3 to your selected product or service.

Each weighted section should be one page.

Solution

Supply Chain Plan 

Product: Tissue paper

Forecasting Plan

The forecast is based on past data to develop informed estimates that predict the product’s or business’s future direction. The forecast will help determine how to allocate a budgets plan and anticipate expenses and resources needed.

Forecasting process

1. Develop the basis of forecasting, including the business condition and where the company is currently positioned in the market.
2. Estimating the future business operations, projecting and assessing how the product will fare
3. Regulating the forecast and determining reasons for deviation
4. Reviewing the process

Straight-line forecasting: assuming the growth rate will remain constant into the future

Capacity Plan

Capacity planning will help determine the production capacity required by the company to meet the changing product and market demands. It will also help determine the maximum amount of work needed to compete within a given period. The purpose is to reduce stock-outs, increase delivery capacity, identify process inefficiencies, and facilitate risk management.

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Capacity planning process

1. Determine the company’s future needs
2. Identify opportunities to consolidate
3. Determine whether the current infrastructure can support the anticipated growth
4. Implement capacity planning
5. Determine if the existing hardware and personnel are meeting the company’s needs

Capacity planning

• Measuring resource capacity, including the number of delivery drivers in a given period, orders that can fit onto each track, hours it takes for a fleet to make 50 deliveries. Resource capacity includes the number of employees working per manufacturing unit, amount of raw materials needed per product, financial resources per product, quantity produced per day.
• Analyzing the information from accurate measurements to determine whether the company has the insufficient or excess capacity or if the company is utilizing the available resources. The analysis will include graphs to help understand the measurements easier.
• Formulating a plan from the information gathered. The results will indicate the cost to fund new projects, including hiring new full-time employees or bringing part-time workers. The calculations will include ROI for purchasing a piece of machinery or increasing assembly lines in the facility.

Sales Plan

Objectives

1. Achieve sufficient sales volume
2. Provide sufficient profit
3. Experience continuing growth

Sales strategy

1. Build trust with current and new customers
2. Build lasting relationships with clients
3. Hold on to current customers

Customer focus

Target market

• Households
• Hospitals
• Malls
• Business Places
• Prisons
• Government Institutions
• Educational Institutions
• Spas and Beauty Salons
• Sports Men and Women
• Hotels and clubhouses
• Religious houses
• Restaurants
• Every person not listed

Customer focus

• Maintain visibility
• Analyze customer concerns and comfort levels
• Determine reasons for the use of the product
• Configure market share and growth
• Meet decision-makers
• Find reasons for not using the product
• Review routing

Tactics

• Advertise our tissue manufacturing company using national newspapers, local newspapers, radio stations, television, billboard, and social media
• Encourage our loyal customers by offering them incentives for referrals
• Adopting word of mouth marketing
• Engaging in direct marketing using sales and marketing executives
• Ensure the company is listed in Yellow pages and other directories, including online directories
• Promote and sell our product through the company’s website
• Introduce the tissue to commercial offices in the area
• Offer distribution benefits to partners and distributors
• Sponsor social shows, including education fairs and community pageants
• Distribute the company’s handbills and fliers in target areas
• Enhance visibility by using attractive colors on the distribution trucks

Pricing strategy

Pricing will depend on the quality of the tissues. Our price module will adopt competitive pricing, which involves analyzing competitors’ prices and quality of products and pricing our products to ensure the prices are lower.

Payment options include:

Check payment via banks

Payment via Point of Sale (POS) Machine

Online bank transfers

Payment via credit cards

Operation Plan

Operation planning includes primary activities the business engages in on a daily basis. These activities include manufacturing, procurement, warehousing, transportation, marketing, and customer service.

Manufacturing Plan

Manufacturing planning involves coordinating demand management, forecasting, master scheduling, material planning, capacity planning, production control, inventory management, and procurement.

• Sales forecast: anticipated sales will drive the planning process
• Master production schedule: the MPS will act as a pre-planned production order and a supply for other demand requirements.
• Material requirement planning: it will include a complete material plan, including orders, demand, and minimum inventory.
• Capacity requirement planning will help ensure that resources are utilized efficiently and in realistic schedules.
• Advanced planning and scheduling: it will help develop realistic and achievable schedules and plans that utilize available resources, enhance our ability to meet customer schedules and ensure on-time delivery
• Inventory management: includes strategies to avoid excess or insufficient inventory
• Production management: it will help monitor production
• Sales order management: it is crucial in ensuring production and sales volume match

The manufacturing process of tissue paper

Appropriate Forecasting Models

The most appropriate forecasting models for the product include the time series model, econometric model, and the Delphi method. The time series model adopts historical data to perform forecasting. The business can visualize patterns through historical data to identify how the variables interact over time. The patterns will be used to make future estimations. The econometric model is also appropriate for predicting supply, demand, and prices. Throughout the process of creation, it combines complex data and knowledge. The Delphi model is also appropriate, especially for a startup that depends on expert advice and insights (Arvan et al., 2019). The model assumes the group data is unbiased and valuable to forecasting. The model will be useful as our company intends to enter new markets and needs expert insights to predict outcomes.

One way to validate the forecasting models is to conduct out-of-sample forecasting, which entails withholding some of the sample data from the model’s identification and estimation process and then carrying out estimations of the hold-out data using the model to determine the accuracy and errors. According to Weiss (2017), another way of validating forecasting models is forecasting over past historical data whose outcomes are known, which can offer valuable information about the health of the forecast.

Aggregate Plan

Aggregate planning involves establishing, analyzing, and maintaining a preliminary and approximate schedule of the company’s operations. It comprises production levels, targeted sales forecast, inventory levels, and consumer backlogs. It will help balance capacity and demand to minimize costs.

Aggregate planning procedure

1. Determine each period’s demand
2. Determine each period’s capacity
3. Identify pertinent policies like maintaining a particular safety stock level, stable workforce, overtime policies, inventory level policies, and backorder policies.
4. Determine the unit cost for units produced

Aggregate plan:

Output expenses:

Regular time = $5 per unit

Overtime = $8 per unit

Subcontracted = $12 per unit

Other costs:

Inventory carrying cost = $3 per unit per period applied to average inventory

Backorders = $10 per unit per period

Cost of aggregate plan utilizing a level strategy:

Output costs:

Regular time = $5 × 1,500 = $7,500

Overtime = $8 × 0 = 0

Subcontracted = $10 × 0 = 0

Other costs:

Inventory carrying cost = $3 × 850 = $2,400

Backorders = $10 × 100 = $1,000

Total cost = $10,900

Aggregate plan cost using level strategy:

Output

Regular time = $ 5 * 1500 = $7500

Overtime = $8 * 0 = 0

Subcontracted = $ 10 * 0 = 0

Inventory carrying cost = $ 3 * 850 = 2550

Backorders = $10 * 100 = 1000

Total cost = $ 11050

Process Flow and Risks

Mitigation for each risk

Tissue production is associated with multiple hazards, especially during paper and pulp production and those resulting from environmental emissions. The working environment can be hazardous because of the massive falling, rolling, or sliding pulpwood loads putting workers at risk. Misuse of equipment without proper safeguards also puts the workers at risk. Risks of injury to workers from the machines and the heavy loads will be mitigated by creating a safe working environment with proper safeguards. Workers will undergo thorough training regarding the use of equipment and machines. Many emissions arise from electricity production, steam, and hot air during manufacturing. These emissions contribute 39 to 42% of total GHG emissions (Gemechu et al., 2015). Emissions can be reduced by investing in quality machine parts, preventing energy-acting leaks, maintaining equipment effectively, and recycling water used instead of releasing it to the environment.

References

Gemechu, E. D., Butnar, I., Gomà-Camps, J., Pons, A., & Castells, F. (2015). A comparison of the GHG emissions caused by manufacturing tissue paper from virgin pulp or recycled waste paper. The International Journal of Life Cycle Assessment, 18(8), 1618-1628.

Weiss, M. (2017, October 17). How to validate your forecasting model. ICMI. https://www.icmi.com/resources/2017/how-to-validate-your-forecasting-model

Arvan, M., Fahimnia, B., Reisi, M., & Siemsen, E. (2019). Integrating human judgement into quantitative forecasting methods: A review. Omega, 86, 237-252.