Stochastic programming based sales operations planning in television manufacturing industry

Abstract

Planning in TV manufacturing industry contains significant risks originating from rapid changing technology and high demand volatility. Within this scope, S&OP (Sales and Operations Planning) can be an enriching method for business plans via associating different levels of planning such as supply, demand and operational level planning. The main goal here is to prevent lost sales as much as possible while balancing inventories in terms of critical materials. For competitive business purposes, a make-to-order business model with mass customization allowance can be quite attractive for customers but in the meantime provokes planning complexity. In this study, we propose an S&OP model for a TV manufacturer in Turkey based on stochastic programming that will try to handle demand uncertainty while attaining better inventory compositions. After reviewing concepts of S&OP process and methods of stochastic programming, the planning problem is defined in detail followed by the formulation of optimization model. To inspect the effects of stochastic programming on S&OP process in TV manufacturing industry, a practical implementation from Vestel Electronics is analyzed.