LOGISTICS AND SUPPLY CHAIN MANAGEMENT

Literature Review

Sales and operations planning

Group No.11

UdayKiran Edikoju (PGP28304)

Chiranjib Saha (PGP28394)

Niraj Kumar (PGP28311)

ContentsArticle Name:..............................................................................................................................................3

Introduction:................................................................................................................................................3

Scope of the paper:......................................................................................................................................3

Strengths:.....................................................................................................................................................4

Weaknesses:................................................................................................................................................5

Review:.......................................................................................................................................................5

Actual industry:...........................................................................................................................................8

Learning:......................................................................................................................................................9

Comments:..................................................................................................................................................9

Article Name:............................................................................................................................................10

Introduction:..............................................................................................................................................10

Scope of paper:..........................................................................................................................................10

Strength & Weakness:...............................................................................................................................10

Actual industry:.........................................................................................................................................10

Review:.....................................................................................................................................................11

Managerial application:.............................................................................................................................13

Suggestion:................................................................................................................................................14

Learning:...................................................................................................................................................14

References.................................................................................................................................................15

Article Name:

Sales and operations planning: A research synthesis

(Antonio Marcio TavaresThome, 2012)

Introduction:Sales and operations planning is a business tool/process which integrates different business

processes into a single set of plans. Sales and operations planning should be aligned to business

processes in both vertical and horizontal directions. Vertical integration is done by integrating

objectives, strategic action plans and decisions taken at various levels of organisation. Horizontal

integration is done by aligning the goals and working of different functional teams across the

organisation. Its main focus is on balancing the supply & demand, another focus is on

minimising the gap between strategic plan and operational plan. S&OP includes plans for

production, and it also works as planning tool for demand forecasting, sales and resource

capacity planning. Ideally it gives warning signals whenever there is imbalance between supply

and demand. S&OP integrates all functional groups such as sales, marketing, production,

finance, sourcing, and product development in order to minimise the gaps in the effect on

customer of actions taken by these functional groups. It brings all these functions into one

integrated set of plans ensuring the reconciliation among supply, demand and product plans at

aggregate and detailed levels. Proper S&OP reviews performance measures for continuous

improvement. It provides a competitive advantage to those companies which design it and

execute in alignment with all stakeholders of supply chain.

So we have chosen this as topic because of the above mentioned crucial roles of Sales and

operations planning.

Scope of the paper:This paper is review of all the research work done in the field of sales and operations planning. It

took various research papers into consideration to construct a consolidated research work which

can give complete picture of the sales and operations planning. This paper is focused on

gathering findings on S&OP business processes, integrating these findings and give quantitative

evidence to show the effect of S&OP on firms. This article used mainly three databases Emerald,

EBSCO, Science direct which covers most of the research in sales and operations planning. But

it aims to cover various perspectives about sales and operations planning, different ways of

looking it. To judge the quality of the research papers multiple dimensions are used such as

direction of effects, percent change, means, standard deviations with sample sizes, regressions

and correlations.

Strengths:This research study gives a framework which assists in summarising the results of S&OP. This

frame work actually depicts all kinds of information related to S&OP process because it has

taken into consideration of various kinds of relevant research work done in S&OP. It has given a

framework which determines the exhaustive information about S&OP process and one can

analyse S&OP process using this frame work. This frame work can be used as structuring tool

for S&OP process. This research consolidated all the information with different perspectives.

This research perfectly identified the parameters to analyse context, inputs required and S&OP

process. It has also given things to look for to measure the outcome of the S&OP. This research

work used intellect of three independent authors to consolidate the literature with high agreement

factor kappa of 0.83, after removing industry related magazines. So conclusions based on this

would be highly reliable and give correct picture of sales and operations planning.

All research works which are considered in preparing this article are reviewed by at least three

authors. This says the consolidated information in the article is properly reviewed and can be

treated as appropriate content to draw conclusions about S&OP. Authors prepared criteria to

exclude papers and eliminated the research work which gave poor construct of S&OP. Authors

have also eliminated poorly defined methodology in drawing conclusions about S&OP. Papers

based on author’s opinion only are excluded from the analysis. This removes the subjectivity of

an author without the support of enough data.They also did not consider extrapolation firm based

results to a country or industry to avoid undue generalisation which can be complete wrong

conclusion. So it can be concluded that this article gives reliable findings but they are based on

the database that authors have chosen.

Weaknesses:It does not cover the unpublished practices or practices that are published outside this databases

considered by authors. If there is research work which is not published in these databases or else

if there is any innovative practise which is followed in some organisations which has not been

published here would not have been captured by present article.

Review:Many researchers proposed different maturity models to explain this business process taking into

consideration of various dimensions. Dimensions varied from model to model. Such as Lapid

model considered people, processes, technology as their dimensions. Aberdeen group proposed

another model considering five dimensions i.e. process, technology, organisation, knowledge and

performance. In another model proposed by Grimson and pyke, meetings and collaboration was

considered as it evaluates the effectiveness of human component in S&OP. They have also

considered other dimensions like organisation which focuses on corporate S&OP structure,

measurements which applies to both company performance as well as effectiveness of S&OP

process, information technology which focuses on information process and finally plan

integration which measures the effectiveness of independent plan. Maturity models consist of

multiple evolutionary and successive stages as they advance in business processes. Different

maturity models vary in the stages in the planning and inputs they get to design sales and

operations plan

Since various authors use different parameters in their maturity models it is difficult to

summarize the dimensions considered in maturity models and results in S&OP practice. A

framework was proposed as a structuring tool which includes S&OP descriptors from extant

literature to assist in summarising the results. This framework depicts environmental

characteristics in which S&OP is developed. Author includes region ,country, industry in which

S&OP is developed, manufacturing strategy associated with S&OP, product- process matrix, and

also includes level of product aggregation, details of hierarchical planning and the planning

horizon i.e. whether the S&OP is for short term like 3 months plan or medium term or long term.

This Research study says inputs to the S&OP are functional plans, sales, demand forecasts,

inventory, budgets and operational constraints.

This framework explains the process of Sales and operations planning process and parameters

which are considered in it. Context defines the environment in which S&OP is done. Inputs

define which are the inputs required to design S&OP. In context information that is being

captured is exhaustive in nature. It is capturing the information about the environment in all

aspects like region and industry in which a company is operating. Region and industry are very

crucial factors which effect demand for a company. Manufacturing strategy, Product-process

matrix, Aggregate planning, planning horizon, planning hierarchy are mainly internal to a

company which effect the supply by the company. These are the things based on which sourcing

of raw materials is done. So this shows that the parameters chosen to define S&OP environment

are perfectly suitable.

Inputs: Inputs from different functional departments like sales, marketing, production, product

development, finance play a vital role in designing S&OP. Demand forecasts, marketing and

S&OP dimensionsMeetings & CollaborationOrganisationInformation technologyS&OP metrics

Corporate strategic plan

InputsFunctionalForecastSalesInventoryBudgetCostsOperational constraints

Plan integration:

Marketing

Sales

Operations

Operations

ContextRegion/countryIndustryMfg. StrategyProduct-processAggregationPlanning horizon Planning hierarchy

Profit maximisation

Business plan

sales actions, information on customers and sales are required for S&OP. These parameters

determine how much to be produced in order to be aligned with marketing and sales

departments. Information customers like changing preferences, marketing team’s new initiatives

determine variability in production. Having synchronised process with these parameters is very

important in S&OP process. Inputs from sourcing/procurement department are required to have

idea about lead times, supplier’s capacity, raw material forecast, and supply plan. These inputs

from sourcing/procurement departments determine the raw material availability and supply

capacity of the firm. Inventory information gives idea about how much is to be procured and

when it is combined with lead time gives raw material availability at a given time. Inputs like

financial goals, costs of raw materials, labour would have significant affect on S&OP process.

Constraints like productions capacity, work force level, budget, production time required play

crucial role in S&OP process. These constraints help in understanding the requirement of

additional capacity or level of under-utilization of resources if any. Constraints related to

transportation facilities, delivery capacity, and lead time, service level targets are again important

parameters to be considered because they determine how much a company can deliver without

altering their target service levels. It also determines how much extra cost will be incurred if we

have to fulfil the demand or how much capacity will be under-utilized. So incorporating the all

the inputs mentioned in the framework makes sense and without them S&OP process may not

give desired results.

Business plan/corporate plan: Business plan and corporate plan determine if there is plan to go

for an ancillary company, if there is any change in business strategy, or if there is any

collaboration or else company plans to enter into new product category or else company may be

looking for increasing the overall production this year. So these inputs are essential in S&OP

process. Business plan and corporate plan are placed above S&OP process because S&OP

process decisions are to follow corporate/business level decisions. Operations are put below

S&OP process is to show that operations have to follow decisions from S&OP process. When we

look at vertical integration point of view this framework gives correct idea about the S&OP

process.

S&OP dimensions:

Process dimensions are discussed in this area. Meetings and collaboration was considered as it

evaluates the effectiveness of human component in S&OP. Regularity of meetings varies from

firm to firm. Some firms do it on weekly basis, some firms do it on monthly basis and few others

firms do it on event driven basis. So meetings and collaboration is an important area to be

observed in this S&OP process if someone want to evaluate effectives of human resources usage

in the process. Many firms follow five step process to do this S&OP. In first meeting they get

data of forecasts, inventory, demand and backlogs if any. During second meeting demand plan is

revised and third meeting determines the supply plan. Fourth meeting is for recommendations,

decisions and scenarios. Final and executive meeting ends the monthly S&OP process. They

have also considered other dimensions like organisation which focuses on corporate S&OP

structure, measurements which applies to both company performance as well as effectiveness of

S&OP process,information technology which focuses on information process and finally plan

integration which measures the effectiveness of independent plan. Authors have considered

metrics related to plan, source, production, delivery, S&OP dashboard and end results. This

could be possible exhaustive list with which performance and effectiveness can be measured.

Maturity models consist of multiple evolutionary and successive stages as they advance in

business processes.

Outcome: Plan integration among different functional teams and minimising the gap between

demand and supply are expected outcomes. So these are included under plan integration, profit

maximisation. Profit will be maximised when a company is able to satisfy all its demand if there

is other constraint from fixed costs or other constraints like higher marginal labour costs. So a

link is shown between profit maximisation and inputs to show that in addition to plan integration,

there will be other factors which effect profit. So this is again a comprehensive way to look at the

things in S&OP outcome.

Actual industry:Let us take example of Pidilite industries limited to analyse the actual industry scenario and

fitment of the framework given. Sales targets are determined based on the past financial year and

economy growth. But sales targets for different products vary because life cycles of the product,

competitor’s status in that product category, and market growth in the product category are

different to each product. In every monthly review meeting, there will be discussion about the

market scenario if there is any change from last month. Such as is there any new entrant into the

market, or new product launch by the competitor or by Pidilite which might hamper sales of

existing products. This comes under the context analysis according to the framework given in the

present paper. Inputs from each department will be given, sales manager gives inputs from his

point of view in terms of sales forecast also gives information about the schemes which were

planned for the last month, schemes which will be suitable for this month. Production head gives

information about his constraints and also inventory information; marketing department gives

information about the promotion activities which are planned. Finance department gives their

inputs in terms of budget & costs. This consolidated information from various functional teams

forms input to S&OP process. Meetings will be held to discuss about the actual scenario and

accuracy of the information. Also there will be discussion about if there is any changes are to be

done in forecasts. Final list of schemes will also be decided. Schemes will be decided based on

which are all products to be promoted this month. Inputs like which products are to be promoted

come from corporate level meetings. Necessary decisions are taken in this to match the supply

with the corrected forecast. This output will be integrated plan of all functional departments.

Learning:From this paper we learnt about objectives of the S&OP process. We understood in-depth details

of the S&OP process. This study helped us in understanding various inputs to the S&OP process

and the importance of the different dimensions of the process. It gave us insights about how each

and every factor affects S&OP process. This study made us to go through a framework which is

helpful in understanding and analysing S&OP process in an organisation. Apart from all these

methodology of this study made us to go through a structured way of putting all the available

literature about a particular topic. Especially making us to understand importance of agreement

factor “Kappa” in consolidating information related to a particular topic.

Comments:Considering more databases would be helpful in drawing better conclusions than the present study.

Article Name:Cross-functional alignment in supply chain planning: A case study of sales and operations planning. (Rogelio Olivaa, 2011)

Introduction:Supply chain management especially supply side activity and demand side activity plays crucial role in almost all organisation. It is very important for the organisation to create and capture value by minimizing mismatch in supply and demand by ensuring cross-functional collaboration. In a big organisation, there are number of separate department, which work in silos and focus much on their portion of planning activities. This create friction and generated conflict over different expectations, preference and priorities to align supply and demand in their way. This conflict within the organisation would increase as with increase in competition and with globalisation. To overcome these problems organisation has to integrate and align interest of all function within the organisation to common goal overcoming the specialization of functional area. Given the lack of framework as how to integrate cross functional team, this paper used case based research to explore how a functionally differentiated organisation could be integrated to the achieve common goal. This paper took process perspective for analysis,

Scope of paper:Scope of this paper is limited to looking through only process perspective to integration for manufacturing sector. This paper doesn’t talk about S&OP for service industry. This paper didn’t talk about effect of external event, such as, effect of some new regulatory norms or environmental norms how S&OP process would accommodate those changes immediately.

Strength & Weakness:Author took only one firm for study purpose, which has exposure only in consumer electronics. This limit the generalization of the research work to all sector. Most of the interviews were conducted at Leitax’s one facility therefor it might not give real insight for firms with multiple manufacturing plant and how they coordinate to develop S&OP to cover all location units.

Actual industry:Author chose a firm Leitax as a research site, which is a consumer electronics firm having global sales presence. It has distribution centre in North America, Europe and Far East and it sell through retails outlet. Leitax maintains 9 models in product portfolio with product life ranges from 15 to 9 months.

Review:Research methodology used was qualitative because this research is exploratory in nature. Main reasons why author took Leitax for research is that prior to implementing S&OP process, Leitax faced challenges in cross functional integration and Leitax implemented its S&OP process without changing its unsupportive incentive scheme.

Interview session was arranged for manager, employees and other stakeholders who directly or indirectly involved with S&OP. The intent of each interview was to understand the interviewee’s role in S&OP process and his/her perception of the process. Many questions were asked, such as, incentive, goals, internal work processes, relationship with other functional areas. Author also observed the behaviour of different participant’s in the planning process.

Data were collected through 25 semi structured, 45 to 90 minutes interviews with participants from all functional areas involved in S&OP process and head of other divisions affected by this process. Data cleaning and filtering was accomplished by verifying outcomes provided by other interviewee and also used follow up interview to clarify differences.

Data was analysed in unbiased way by narrative given by one interviewee’s was corroborated by other interviewee’s notes. The recorded interviews were used to help reconcile discrepancies. To minimize researcher biases during the data analysis, researchers collated data and made refinement to the scheme. To investigate how the S&OP process provided benefits in possibly unsupported set of functional incentives, authors tried to map the sequence of activities consisting of planning and information flows. Authors first tried to explore the role of information processing in planning process then broadened to other perspective like decision making. Finally the process has three construct related to process attributes – information quality, procedural quality and alignment quality, construct related to the nature of the interaction between the participants in the process is constructive engagements. While this construct is dynamic and rest are relatively stable.

Incentive landscape – it capture the mechanism that the organisation has align the efforts of individuals to the goal of firms, the variety of internal objectives and the consistency of objectives across functional areas. During mapping the incentives they highlighted the natural tension in the landscape that can create integration challenges. It is also the attributes of organisation that diversity of roles and responsibilities that are distributes among functional areas and create the need and challenges of integration. There are two kinds of incentives were explained in the paper, one is high powered incentives that represent contract that can be based on measures of performance, while low powered incentives provides for fixed compensation. Generally many firms have combination of both types of incentives.

Planning at Leitax – Person involved in S&OP process include sales director, head of marketing, strategy, finance & production, they generate aggregate sale figure that would drive all supply chain management, demand management and related financial planning decision. First step in this S&OP process include cross functional preparation and dissemination of a planning related information, they call this step as BAP (business assumption package). The BAP was discussed in detail in formal meeting and carefully validated by functional forecast, a consensus forecast, financial validation and operation validation, which looked for whether there was sufficient capacity to accommodate demand. Additional planning, feedback and learning were facilitated by interaction within team. Generally these kind of meeting happens one a fixed day of a month.

The BAP integrated the price plan, new product introduction dates, end of life dates, promotions and marketing trends, each month entire BAP was updated, discussed and agreed upon by the forecasting group.

Once the team agreed upon, the initial figure was used as starting point to forecast at product family level. PPS (product planning and strategy), the three member group supported all aspects of the product life cycle from launch to end of life, assessed competitive products, their price and change in demand due to change in price. This team prepared a top down forecast of anticipated global demand for its product. Collected data were validated for consensus forecast, more weightage was given to SD’S bottom up forecast in short term and increased weightage for PPE’s top down forecast for future forecast. The final consensus forecast was sent to financial department with their pricing and promotion plan. They compare forecast in units converted into its revenue equivalent then forecasted revenues were compared with the company’s financial targets. If gaps were identified then again rework to be done to match all targets. The approved forecast was released and used to generate the master production schedule (MPS).

Analysis – The first part of planning process include assessment of current and desired state that relies on the information processing capabilities and second part of the process include selection of plan and execution that relies on decision making capabilities. In this paper author infer information quality means the degree to which a process enables the information used for decision making to be appropriate, procedural quality infer the degree to which a process continuously ensures that the rules of inference used to validate information and alignment quality refer to the degree to which a process ensures that organisational and functional goals are supported and that resulting action are synchronised.

Implication of process attributes perspective –

Despite its inherent misalignment and tried to improve integration by implementing changes in process, organizational structure, and reporting mechanisms. This leads to proposition regarding the management of cross functional planning.

Proposition I. For organizational supply chain planning, changes in incentives are not the only solution for what appears to be incentive misalignment. In a highly differentiated organizational

context, that is, a context susceptible to incentive misalignment, a process that promotes informational, procedural, and alignment quality can be a mediator in achieving integration.

Proposition for constructive engagement.

Proposition 2: Constructive engagement can have a direct positive impact on the process attributes—i.e., informational, procedural, and alignment quality—and an indirect positive impact on cross-functional integration.

Third proposition formally closes the feedback loop.

Proposition 3. The quality of the attributes and outcomes of a planning process can have a positive impact on participants’ constructive engagement in that process.

Managerial application:Generally in practice sales force provide forecast to the other functional groups, it was generally ineffective because it was one way transfer of information with little way for reconciliation. But this ineffectiveness was exacerbated by the fact that forecast communicated by the sales group were some time inaccurate, this happens not only because biasing effect of sale, but also because of less motivation to generate more accurate forecast. I have observed S&OP planning process in my previous organisation at Hindalco, which was organised in formal way every month. This is old organisation therefore they are already following S&OP planning process.

They S&OP process in two level one is corporate level and other is at unit level. Under Hindalco there are 4 Aluminium smelter, 3 refining units and 1 copper smelting units. Therefore on aggregate basis planning will happen at corporate level then further detailed planning would happen at individual units. For example at Hirakud unit, we had one smelter unit and one power plant and for smelter unit we would get our sales forecast and we would share our capability to produce products then mutually both party would agree on some specific figure. Then start planning process at unit level, we would start securing all required raw material supplies based on aggregate figure and based on our requirement power plant will plan for power supplies. Each department, such as operation, finance, downstream units and purchase department would get their targets and reconciliation would be done based on their feedback in open discussion. Meeting would happen on a fixed date every month to update S&OP plan and discussion would start with plant head with respective department head for any back log or deviation from set target. There would be appreciation for those who exceed their target. It is also important to note that these targets are also incorporated in KRAs in department head under appraisal system, this system make them serious towards their forecast for S&OP and incentivise them who make serious effort to make these figure as accurate as possible.

Suggestion:Adding to whatever has been discussed by author, it is not mention anywhere in the article regarding involving workman to S&OP process and take their suggestion in the process. At Hindalco whenever there is change in production planning or some new products were introduced as per new product development then there would series of meeting among management team and worker’s union to make them understand the long term benefit by being flexible in production in this competitive environment. We also got many useful suggestion to increase production or increasing quality of product by taking them along with decision making process.

Learning:This case study was not meant to propose a specific solution but to come out with explanation for interesting observed phenomenon which has important implication for S&OP practitioner. By focusing on the supply chain planning in the context of functional differentiation and also focusing on Leitax initial planning approach as being complicated by functional mistrust and poor coordination. The actual conversation with management shows the real life integration problem and unhelpful dynamics that are prevalent in almost all industry. This paper also examined Leitax S&OP process that was aimed to generate an explanation of particular process worked by drawing distinction between incentive landscape and the planning process. This paper recognised a specific characteristics of this process approach and its relationship to tension in incentive landscape, this provide insight how unsupportive incentive landscape can indirectly support cross – functional integration in planning. The empirical and theoretical grounding of study proposes and suggest implication for practitioners and researchers. This case act as first n proof of concept that an S&OP based process can do more than simply coordinate information flow. It can provide both the information processing requirement and the collaborative assessment and problem solving requirements of demand and supply management. This study make it clear that it take more than the implementation of an efficient information sharing tool to achieve true integration.

ReferencesAntonio Marcio TavaresThome, L. F. (2012). Sales and operations planning: A research synthesis. Int.

J.Production Economics, 1-13.

Rogelio Olivaa, N. W. (2011). Cross-functional alignment in supply chain planning: A case study of S&OP. Journal of Operations Management, 434-448.