Optimization of Sales and Operations Planning of a Computer Manufacturer

Young M. Lee, Roger Tsai, Markus Ettl, Feng Cheng, Tom Ervolina,
John Konopka, Shannon Liu
IBM Research

---

Several IBM divisions make quarterly Sales and Operations Planning (SOP) decisions each month.The supply quantity, or SOP decision, is based on many factors.  The SOP decision had been typically made using rule of thumb or heuristic methods.  We have recently developed a Newsvendor model that computes an optimal SOP decision.The model is designed to optimize the expected financial performance.  The performance of the model was estimated using historical data and simulation of stochastic demand.  Our study indicates that substantial financial benefit can result from the optimization model.

---