S&OP Example Demand Forecast: Quarter Demand (units) 1 9,000 2 12,000 3 15,000 4 12,000 Constraints: Costs: Inventory Holding Cost = Start inventory = 1000 units Ending inventory must be =>1000 units per quarter Max number of Workers = 13 (Assume we start with 12) Regular time capacity = 13,000 units/quarter $2 per unit per quarter Production Costs: Regular time = $7.50/unit Overtime = $10.00/unit Hire/Fire Cost $550/employee Production Rates & Inventory Positions for S&OP Strategies Beginning + Production = Ending Strategy Quarter -Demand Inventory Regular Overtime Inventory 1 1,000 9,000 Level 2 12,000 3 15,000 4 12,000 1 1,000 9,000 Chase 2 12,000 3 15,000 4 12,000 1 1,000 9,000 Mixed 2 12,000 3 15,000 4 12,000 Costs of S&OP Strategies Strategy Quarter. Workers Regular Prod + Overtime Prod +Hiring & Inventory Firing Holding Total Cost 1 Level 2 3 4 Totals 1 Chase 2 3 4 Totals 1 Mixed 2 3 4 Totals