Supply Chain Free Consulting.
Where does Product Mix Planning fit into the MRPII/Interated Business Planning/S&OP framework?
I have Petroleum – I can make Aviation Fuel, Petrol or Polymers. I need to maximize my profits. That depends on what’s in demand, what’s cheaper and faster to make and what gets more margins, what’s easier to handle and ship.
I have milk – I can make butter, cream, cheese or simply pack and sell as it is.
I have so many brewing tanks. What beers should I make? Pints? Cans? Kegs?
Often planning is isolated from financial objectives. Planners isolated from finance guys.
IF there is a demand for something that gets you more money, you should produce that.
IF you are obligated to some agreements, you should produce that.
IF something sells more in some seasons and makes more money, sell that.
IF you still do not have anything to sell, you can buy from market and sell. Because there is demand.
Else merely ‘forecasting’ demand means you want to sell what you sold all these months and lose out on opportunities to make margins.
I do not know which Software does this kind of simulation on the fly. But I can do this on Excel.
Since I do not own the company, I often do not get into this money talk. Most finance guys were sitting up there somewhere. No interface on most ‘Supply Chain’ Projects. Left to sales alone, they will create 4000 SKUs from 40 to begin with.
I have been a ‘Supply Chain GUY’ doing Product Mix Planning. Actually no one does. It just happens. Implicitly at times. Only issue is cost of producing something at the expense of something else is often way too expensive.
Analogy – 70% of the items in the fridge just lie there. You don’t eat it. You don’t throw it. It just consumes electricity. 10 buck’s stuff. 1000 bucks’ electricity bill.
