Supply Chains are planned then scheduled for outcomes

Roger OakdenLogistics Management, Operations Planning, Procurement, Supply Chains & Supply NetworksLeave a Comment

Time to deliver

Planning and Scheduling supply chains

An objective for supply chains professionals is to not only consider the effectiveness and efficiency of a process, but also its complexity. As it is generally recognised that supply chains can be complex, to simplify the planning and scheduling of supply chains will be help your organisation.

However, some websites that promote Sales & Operations Planning (S&OP) software applications appear to provide additional complexity, such as including aspects of scheduling. And then they add Artificial Intelligence (AI) to manipulate even more unnecessary detail, so the application becomes more complex.

To counter this approach, the senior decision makers in an organisation need to be clear about the Aim of a Supply Chains group (Procurement, Operations Planning and Logistics) and how S&OP will help to achieve the Aim.

Aim of the Supply Chains group: to provide Availability of products and associated services that satisfies the needs of customers and end users.

Availability: requires the time-related positioning of internal and external resources to provide goods and services for customers at the lowest total cost. Availability is required across two areas:

  1. Physical availability (place, time and quantity)
  2. Operational and infrastructure availability (operational support; maintainability and supportability of products, facilities and equipment)

To provide Availability is a two step process. It initially requires Planning, which uses the approach of S&OP. Then, the Plan must be Scheduled through the functionality of Sales & Operations Execution (S&OE), mainly provided by ERP systems. However, viewing IT supplier’s websites, there are some where the terms Planning and Scheduling are used interchangeably. But they are independent terms, which requires that Planning and Scheduling are differentiated:

  • Planning: thinking into the future regarding the activities required to achieve a desired goal. As Planning is about the future, inputs are assumptions that can change, due to events. Therefore, the process of collaboration between groups to agree on an outcome becomes important as errors with inputs are better understood
  • Scheduling: the action of assigning resources to perform tasks within a timeframe, to achieve agreed outcomes

Planning is the macro view and Scheduling is the micro or detailed view. To put Planning into context, think about your next holiday. You start with the known parameters – the elapsed time available and the maximum affordable cost. Then identify the destinations that meet the parameters and are available. Only when the final plan is agreed with members of your party and the deposit paid, will detailed scheduling commence.

The S&OP model requires a similar approach, whereby the operational parameters are the initial input. Thinking about the future is guided by Capacity – if it cannot be made, it cannot be sold. For Planning purposes, the maximum output for each factory and warehouse can be identified by a standard unit of measure – in tonnes or litres or labour hours (or other value) by selected period.

At the strategic level, the gross margin for each product ‘family’ within S&OP will define the preferred product mix at each facility. The mix will be modified (and margins adjusted) by forecast sales, ‘Available to Promise’ customer service logic, new product introduction, product ‘end of life run-outs’ and promotions by product family. The product mix can also be modified by the likely availability of supply items. The output identifies the capacity of resources to be used by each product family in each month or period. As the data is aggregated, the level and quantity of data required is reduced and it does not require an extensive analysis.

As shown in the diagram, it is for participants at the executive S&OP meeting to take account of future scenarios of interdependencies and constraints in the organisation’s supply chains, to arrive at an agreed position. The inputs from Finance enables a unified financial and operation perspective of the business, which enables a balance of demand with supply, which is financially viable (although some commentators argue that this is an insufficient outcome).

Freeze Period in Planning

As noted in the diagram, an important feature of S&OP is that the planning horizon does not commence at the current meeting date. This is because operational schedules, sales promises and supply contracts are in place, and to change them can be expensive, requiring (at least) the SBU manager approval to occur.

Planning therefore commences after the ‘freeze period’, which is two or three planning periods into the future. Also, the planning horizon needs to extend to the period by which new assets can be acquired or seasonal purchase agreements finalised, and this will usually extend for more than 12 months. Therefore, the planning horizon could contain plans by month for 12 months, followed by consolidated plans by each quarter.

This discussion indicates that Planning should be a process more concerned with policy and objectives than analysing large volumes of data.

S&OE process

As shown in the diagram, the S&OE process contains the ERP/MRP functionality that has existed for many years. However, in current software applications, Procurement, Operations Planning and Logistics modules often have only the most basic of interactions.

At the Operational level, there is the volume of data available and a need for analysis. Also, the potential for connection of equipment with Industrial Internet of Things (IIoT) sensors to enable online data collection through SCADA (supervisory control and data acquisition) systems. This will provide a ‘digital twin’ replica of the physical environment, for use in scheduling operations and profiling equipment performance to schedule maintenance.

Strategic links

Few businesses have implemented interactions between Strategic, Tactical, and Operational levels in their corporate business systems. If a supply chains strategy is not available, the Tactical plans and Operational schedules cannot be focused on strategies that generate the best financial return for the business.

To be successful requires changes in attitudes about working collaboratively in teams and how ‘success’ is measured. S&OP is about developing achievable outcomes through collaboration rather than data analysis. It is not a quick process, as people are involved. It could take about three years for S&OP collaboration to become embedded in the organisation, although some benefits can show after about six months.

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About the Author

Roger Oakden

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With my background as a practitioner, consultant and educator, I am uniquely qualified to provide practical learning in supply chains and logistics. I have co-authored a book on these subjects, published by McGraw-Hill. As the program Manager at RMIT University in Melbourne, Australia, I developed and presented the largest supply chain post-graduate program in the Asia Pacific region, with centres in Melbourne, Singapore and Hong Kong. Read More...

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