The OSP
methodology is designed to generate and propose selling and production plans that optimize
profitability and productivity using criteria set by the user. Maximum
profitability plans, for example, can be determined by finding which
products to produce and sell for maximum variable margin or profit.
Maximum productivity plans can also be determined by finding
which machine to run each product on at each stage in the
manufacturing chain in order to maximize the production throughput.
Examples of optimum
criteria that can be selected by the user are: maximum variable margin,
minimum variable cost, maximum volume, minimum direct labor, etc., where
these functions to be maximized or minimized are defined by the user as
production-related variables.
Strategic demand constraints
are
used in determining optimum plans and based on customer orders and sales
forecasts. These constraints are user selected.
The optimum plans generated
give solutions between the selected minima and maxima with the optimum
criteria and manufacturing constraints, and can be used by sales and
marketing to direct the sales efforts to ensure that what is sold in each
planning period can also be produced.
The
manufacturing constraints on available resources are the machines, materials,
labor and other resources defined by the user. The optimum
plans generated are used by manufacturing to set production and inventory
levels for the master production schedule to ensure that what is produced
can also be sold in each planning period.
These optimum plans propose realizable production and sales levels and show
the impact or effects on productivity and profitability of accepting and
producing at these levels.
The optimization
techniques used are based on the Simplex Method from Linear Programming. These techniques
are implemented
in subroutines that are used in generating the optimum demand and supply plans.