Explain the advantages in using S&OP, even though the forecasts may change?

MGT2440 International Operations and Innovation Management

Portfolio Task 3
This is an individual task and constitutes 5% of total module marks. All four tasks including this should be submitted together as a single portfolio submission by 18th March, 2016.
Read the case study Covolo Diving Gear and respond to the following questions:

1. Develop a level production plan for Covolo Diving Gear [1 marks]. Explain the advantages and disadvantages of this plan [1 mark].

2. Explain if Covolo would be able to or not be able to implement a chase plan? [1 mark].

3. Patricia Rodriguez, vice president of marketing states, “I have got to tell you that I am pretty comfortable with the forecasts for Sep through Nov, but after that, a lot could change. It’s just very hard to forecast for four or more months out in this kind of market”.
a) Explain how a monthly S&OP update with rolling planning horizons help alleviate Patricia’s concerns [1 mark]
b) Explain the advantages in using S&OP, even though the forecasts may change? [1 mark]
Additional guidance:

Marks will be awarded on the basis of appropriateness of analysis and clarity in articulation
COVOLO DIVING GEAR – CASE STUDY
It has been two weeks since Covolo Diving Gear’s contentious semi annual planning meeting, and the senior staff members for Covolo Diving Gear are getting ready to start their first monthly S&OP meeting. Gina Covolo, CEO, gets the ball rolling:
I know it’s been a busy two weeks for all of you, and I appreciate you working extra time to get ready for this meeting. Production is already set for the next two months, so we are going to start by planning for this September through the following August. I have had Patricia from Marketing develop a sales forecast for these 12 months, and I have also had David from manufacturing estimate manufacturing costs and labour requirements, as well as capacity in the plant. Mary from HR was good enough to come up with some estimates of how much it costs to hire and train new workers, as well as the cost of laying off folks. Finally, Jack from purchasing was able to get the accounting folks to estimate the cost of holding a gauge set in inventory for a month. So let’s see what we have got.
Mary passes out the following information to all the attendees:
MONTH SALES FORECAST
Sep 2013 30,000
Oct 31,500
Nov 35,000
Dec 37,000
Jan 2014 22,000
Feb 18,000
Mar 17,500
Apr 27,000
May 38,000
Jun 40,000
Jul 42,000
Aug 40,000
Manufacturing cost per gauge set: £74.50
Holding cost: £8 per gauge set per month
Back order cost: 0
Average labour hours required per gauge set: 0.25 hours
Labour hours available per employee per month: 160
Plant capacity: 35,000 gauge sets per month
Cost to hire and train a new employee: £1,250
Cost to lay off an employee: £500
Beginning and ending workforce: 50
Beginning inventory: 10,000

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