J O U R N A L O F B L O O D S E R V I C E S M A N A G E M E N T

Benefits to blood banks of a sales and operationsplanning process_2945 2785..2787

Donald A. Keal and Phil Hebert

A formal sales and operations planning (S&OP) processis a decision making and communication process thatbalances supply and demand while integrating all busi-ness operational components with customer-focusedbusiness plans that links high level strategic plans today-to-day operations. Furthermore, S&OP can assist inmanaging change across the organization as it providesthe opportunity to be proactive in the face of problemsand opportunities while establishing a plan for everyoneto follow. Some of the key outcomes from a robustS&OP process in blood banking would include: highercustomer satisfaction (donors and health care provid-ers), balanced inventory across product lines and cus-tomers, more stable production rates and higherproductivity, more cooperation across the entire opera-tion, and timely updates to the business plan resultingin better forecasting and fewer surprises that negativelyimpact the bottom line.

Aformal sales and operations planning (S&OP)process, which has been utilized in manymanufacturing companies for years, is basi-cally a decision-making and communication

process that balances supply and demand while integrat-ing all business operational components with customer-focused business plans that links high-level strategicplans to day-to-day operations. It also establishes formalmanagement reviews that result in approved productproduction plans. These reviews assist management inunderstanding current performance and what to expect inthe future. In the world of blood banking, S&OP is particu-larly important because blood banks have customers atboth ends of their supply chain—blood donors on the

front end and health care providers and their patients atthe back end. Furthermore, S&OP can assist in managingchange across the organization, as it provides the oppor-tunity to be proactive in the face of problems and oppor-tunities while establishing a plan for everyone to follow.

Having consulted in blood banking at numerousvenues across North America and the United Kingdom,along with various types of large and small manufactures,we often faced the objection that blood banking is “differ-ent” from other manufactures and therefore a processsuch as S&OP would not be necessary. Or, we are told thatwe have our own way of doing things because we arehighly regulated. To be sure, the Food and Drug Adminis-tration does highly regulate blood banks just as it identi-fies them as manufactures in 21CFR600.3 & 606.3 and wewould agree that blood banks are different from mostmanufacturing operations since, as noted earlier, theyhave customers at both ends of their supply chain andthey cannot purchase their raw materials. From our per-spective, these conditions make S&OP even more impor-tant in blood banking. Some of the key outcomes from arobust S&OP process in blood banking would include:higher customer satisfaction (donors and health care pro-viders), balanced inventory across product lines andcustomers, more stable production rates and higher pro-ductivity, more cooperation across the entire operation,and timely updates to the business plan resulting in betterforecasting and fewer surprises that negatively impact thebottom line.

Although many manufacturers around the worldembraced the concept of lean manufacturing (simply put,taking waste out of the manufacturing process) in the1990s, blood banks, for the most part, came to thisconcept rather late in the game. Some blood banks havehired consultants to assist them in implementation of leanconcepts, or they have made their own efforts. To takeperformance improvement to the next level blood banksshould implement S&OP, which is a process that makesimprovements that do not cost anything except discip-line while improving communication and co-ordinationacross the organization. However, most blood banks haveprobably never heard of S&OP, much less implementedit. Our belief is that S&OP is the natural next step in

From Joshua Jordan Associates.

Address reprint requests to: Donald A. Keal, 173 Regal

Court, Monroeville, PA 15146; e-mail: dkeal405@aol.com.

Received for publication September 1, 2010; accepted Sep-

tember 21, 2010.

doi: 10.1111/j.1537-2995.2010.02945.x

TRANSFUSION 2010;50:2785-2787.

Volume 50, December 2010 JBSM 2785

continuous improvement. S&OP originally focused onmatching supply and demand, but now its aim is to facili-tate organizational alignment between business plans andgoals while enabling quick responses to frequently chang-ing conditions.

Consistent increases in return on net assets (RONA)can only be achieved if there is a single version of thetruth represented in the strategic and operational planswhere performance to the plans are frequently measuredand monitored. To accomplish this, the plans need to betranslated into execution profiles—the anticipated ratesof the execution of the plan. For example, a strategic planfor a blood center might look out over 2 to 3 years, withone of its goals being to increase its RONA by 3% eachyear. The operational plan to meet that strategic planwould establish the means and more detailed timelinesto reach this goal. Then, as the year progresses, themetrics that measure performance to the plan need to bematched with this profile to identify deviations and theneed for any plan adjustments. For example, assume thatthere is a monthly demand plan in place in a bloodcenter for 500 single-donor platelets (SDPs). Again, withcustomers at both ends of the supply chain, the plan’sobjective must shape the behavior of donors and healthcare providers to meet that demand and address devia-tions from the plan. In this instance, because of the rela-tively short shelf life of SDPs, to dynamically respond todemand the blood center would need to get into thedetails minimally each week, but most likely daily. Bydetails, we mean factors such as: forecast SDP usage andoutdate rates by health care provider on the demandside, and specific donor show rate, deferral rates, splitrate, testing failure rate, and so forth on the supply side.In order to shape supply and demand, the blood centershould understand any deviations from the anticipateddonation and consumption profiles and take timely andappropriate action to mitigate any negative effects of thedeviations. If the consumption is less than anticipated,the excess SDPs may be exported if they have sufficientshelf life remaining, or donors may be rescheduled toreduce supply. If SDP demand spikes, recruitment andcollections may have to work overtime to recruit moredonors and collect more SDPs. Now, this may seemlike Blood Banking 101; however, too many times, wehave seen blood centers that have no regular or formalprocess to address deviations in supply and demand.Instead, they address these situations on the fly in a reac-tive and ad hoc mode. With an effective S&OP process inplace blood banks would be in a more proactive mode,which reduces the confusion that contributes to thesense of “We’re fighting fires all the time.”

Leading manufactures, recognizing the need to tran-sition from disparate, decentralized business decisions,are rethinking the role that S&OP can play in managingtheir businesses. They are moving beyond purely tactical

approaches of using S&OP as a means of balancing supplyand demand within their supply chains, and instead usingit to align product launches, marketing and sales pro-grams, production plans, and resource allocations toensure their investments are being made appropriately toachieve business objectives.

Again, consider how this applies to blood banking.Regardless of what individual blood banks call theseactivities, all blood banks, under the umbrella of qualitycontrol and FDA regulations, perform six major activities:recruiting donors, collecting blood, processing the variousblood components, testing the components, distributingthe components, and keeping track of every componentwith a blood management system. To be sure, there aremyriad methods of performing these activities and thereare other major business components used in support ofthese activities. Transportation springs immediately tomind. Nevertheless, would it not be better if all of theseactivities were operating with the same truth before them?So, how is that truth disclosed? Data.

It has been said so often that it has become a clichéwhen someone says, “You cannot improve what youcannot measure.” Even companies with very informalS&OP practices must measure performance. Historically,metrics have been specific to a single function; forexample, blood-drive goal achievement or donor showrates. However, the drive for competitive advantage inother manufacturing arenas has spurred a rethinking ofwhich metrics should be used to determine the success ofthe S&OP program. The emerging best metrics, such asRONA, encompass the two-way impact of demand andsupply decisions, rather than having separate and unre-lated metrics for each. For example, in blood banking thiscould amount to meeting your hospital demand, buthaving a negative RONA while doing it. We have frequentlyobserved mobile blood drives being scheduled where thecost per unit (CPU) collected is higher than the sales costof a unit to the health care provider or what an importedunit would cost. This is merely one component of how acenter can have a negative RONA.

That being said, we have noticed that in many bloodbanks, there is often another difficulty that contributesto problems with metrics—data accuracy. The mostcommon data deviations we see come from the bloodmanagement system and the financial system; that is, theyare frequently out of balance. Add in another softwaresystem, such as Hemasphere, and getting numbers tobalance can be further complicated, or not. This leads toother difficulties such as inaccurate and untimely reportsthat can be misinterpreted or create skepticism abouttheir reliability, which, in turn, can pit one part of theorganization against another or everyone. Think recruit-ment versus collections, for example. Therefore, a key to asuccessful S&OP process is reliable, current, and accuratedata.

KEAL AND HEBERT

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Today, business intelligence systems and data ware-houses can offer decision makers an accurate, up-to-the-minute operational picture based on pre-defined keyperformance indicators (KPIs). The frequency of reports,amount of detail in the reports, analysis, and action stepsare dependent on the management structure of a bloodcenter. For example, the CEO might look at three or fourKPIs daily, the COO might look at five or six that wouldinclude those of the CEO but three others, the Director ofRecruitment would look at five or six that may or may notoverlap with five or six for the Director of Collections andso forth. These various KPIs would be related to value-chain processes, product and customer profitability, orderfill rates, customer satisfaction or retention (again, donorsand health care providers), labor hours per unit collected,percent volume growth, and gross RONA. The metricscould all be delivered through highly flexible role-basedportals and executive S&OP dashboards. For a S&OPprogram to succeed over the long term, blood banks mustconsider how performance measurement itself mustchange. This means putting new metrics into place asbusiness conditions change as well as increasing the fre-quency of reporting and analysis.

Experience tells us that plans to install an effectiveS&OP process are often slowed down by the effort of gath-ering data that has minimal importance to the overallproject. Consequently, it is important to ensure that orga-nizations know exactly what business issues they aretrying to address and understand the minimum data nec-essary for the project so that they do not become boggeddown in minutiae. We suggest, therefore, that the 80-20rule is very much alive when it comes to S&OP, dash-boarding, and KPIs.

AUTHOR IDENTIFICATION

Mr. Keal is the President of Joshua Jordan Associates and has

worked as a consultant to blood banks for over 15 years in the

United States, Canada, and the United Kingdom.

Mr. Hebert is a Professional Certified Materials Manager,

Certified Distribution Manager, and a Certified Lead Auditor

having spent over 35 years in all aspects of supply chain and

operations.

CONFLICT OF INTEREST

The authors have declared no conflict of interest.

S&OP FOR BLOOD BANKS

Volume 50, December 2010 JBSM 2787

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