Experiential Supply Chain Analytics Problems for Sales and Operations Planning

S&OP online Group dynamics Seasonal demand A manufacturing company in the beverage sector produces beer in 600 ml units. In the last year, the company had its revenues reduced by 20%, and operating costs increased by 10%. Although the demand for beer has not shown an upward trend, there is also no downward trend, but demand is seasonal throughout the year. The president faces difficulties in conducting tactical Sales and Operations Planning (S&OP) and implementing its execution in the company. According to him: ..."our strategic planning is promising, coherent, and aligned with our vision of the future, but in practice, it is very detached from the company’s tactical and operational plans. Therefore, we haven’t been capable of implementing our strategy. Furthermore, the demand, finance, production, and supply plans are disconnected from each other and do not provide the information back to our strategic plan, so we do not know if we can use these plans to adjust our strategic plan for a more realistic situation too"... Figure 1: Supply chain schema including Vvendors, Findustrial plants, DC distribution hubs, and Ccustomers. The company is described as follows (see Figure 1): There are two types of beer: lager (Y1) and Indian Pale Ale, IPA (Y2). They are sold and delivered to the warehouses of two supermarket chains (C1 and C2). There are two suppliers (V1 and V2) responsible for sandoponline.com Group dynamics supplying two types of raw materials for the manufacture of the product: malt (X1) and hops (X2). The company has two beverage processing plants (F1 and F2). Production takes place in two in-line processes. Factory F1 has production resources RA and RB, while factory F2 has production resources RC and RD. Before products reach customers’ warehouses, products can pass through two distribution centers (DC1 and DC2). Products can be transported by train (M1) or truck (M2). At the beginning of the S&OP implementation, the president is more concerned with the plans’ integration, so he asks the teams to prepare an integrated plan for the next two months only. The Sales & Marketing team collects data from the last ten months of sales. Sales personnel are responsible for developing a demand forecast model, while market analysts bring information about consumer consumption trends to help calibrate the demand forecast. The demand forecast only analyzes the market, with no restrictions on the company’s capacity about demand values. The Logistics and Supply team is responsible for carrying out a historical analysis of the last ten months on the availability of items at suppliers, the level of safety stock, maximum stock and final stock minimum level, DCs input, and output. The team evaluates the multiple production batches in the factories, the batches imposed by the suppliers, and the transport capacities of trains and trucks in each available route. The Production team updates information about the bill of materials, the production routes of the products on the machines, the production time of each product on each equipment, the number of resources available for operation, their historical efficiencies, the production, the time (hours) available for production and the need for planned overtime. It also raises whether there is a need for preventive maintenance scheduled for the next two months and the duration of each one. The Finance team is in charge of raising production and logistics costs and setting the ideal pricing for the products. For this, the tax rates for the products, the raw materials costs or even a substitute product from suppliers (in case of production replacement), the fixed costs of resources, the variable costs of the products, the extra capacity cost, raw material and finished product inventory costs in factories and DCs, logistics costs for each link (origin-destination) for each logistics modal. With this information, the Logistics team must prepare a supply (purchasing) and logistics plan. The logistics plan includes the entry and exit of products at the DCs, the inventory plan at the DCs, the plan for transporting raw materials to the factories, and products from the factories to the DCs and from the DCs to the customers in each modal, the modal usage plan. The Logistics team must interact with the production team. The Production team must prepare the component consumption plan, the production plan in the factories, the raw material, and finished product stock plan in factories, the resources use plan, and the eventual use of extra production capacity. Production and logistics team send their plan to the Finance team that prepares a budgeted Income Statement contemplating sales revenue, fixed production costs, variable production costs, purchases, overtime, stock, and shipping to get the profit each month. 2 sandoponline.com Group dynamics Figure 2: Sales, logistics, production, and finance spreadsheets files are attached. Round 01: (disjointed plans) Each group member must bring their individual plan (supply, production, logistics, and finances) to present at a planning meeting. Round 02: The group makes a presentation as a S&OP meeting for alignment and reconciliation. Check the plans: 1. Does raw materials use follows the proportion shown in the bill of materials? 2. Does the time use in production not exceed the available hours in the periods? 3. Are efficiencies and yields applied to production? 4. Are safety, maximum, and final stocks respected in every plan? 5. Are the transport capacities in each link and modal respected? 6. Are input and output handling capabilities on CDs respected? Round 03: The group must make a new presentation in the format of a S&OP executive meeting with the company president. The team should present the after-reconciliation plan from the last meeting with two additional plans (scenarios). We describe the three views below. The team must argue about the best plan (in their opinion) to the president. •Optimistic: 10% increase in demand. •Most likely: Current demand. •Pessimistic: 20% decrease in demand. For reflection: How can mathematical programming models contribute to this process? 3