S&OP Valuation

The SOP valuation function displays the different operational and costing data associated with the S&OP. This function automatically checks that the constraints associated to the different resources are satisfied.

The data that will be taken into account in the optimization procedure are displayed. For each period, one can find

•      the sales,

•      the production costs (estimated with the standard costs),

•      the sub-contracting costs (estimated via the standard costs defined for the subcontracting process),

•      the gross margin (defined as the difference between the sales and the production/subcontracting costs),

•      the inventory value (estimated with the standard costs).

It is worth noting that a constraint can be added in order to limit the admissible value for the inventories (which permits one to limit the non-operating working capital). This bound is entered in the Preferences menu (S&OP panel).

The utilization rate for each resource is displayed in the table. The rates have to be lower than 100%.

The different costs associated to S&OP are then displayed for the different periods:

•      the subcontracting costs,

•      the inventory cost (estimated with the holding cost rate defined in the Inventory costs panel, Preferences window). The inventory costs are estimated directly from the calendar days (and not from the working days),

•      the Stockout/backlog costs are estimated from the stockouts and backorders and the corresponding costs defined in the associated item maintenance windows,

•      the resource costs, defined as the resource quantity multiplied by the standard resource cost,

•      the variation costs defined as the amount of resource variation (increase or decrease) multiplied by the unitary resource variation cost (increase or decrease) defined s the associated item maintenance windows,

•      the overcapacity costs defined as the excess resources amount used (with respect to the nominal capacity) multiplied by the corresponding costs (defined in the associated resource item maintenance windows),

•      the S&OP total cost.

In a guess and try setting, the minimization of the total cost can be obtained by efficiently choosing the decision variables in the S&OP tables (namely the backlogged sales, the production plan, the subcontracting plan and the different types of resource capacity variations (defined in the associated resource item maintenance windows that can be accessed by the Constraints button).

An automatic check is made in order to see if all the constraints associated to the S&OP procedure are satisfied (for the Family items and for the Resource items).