S&OP process structure description

This chapter presents the process structure of the company’s sales and operations planning process. It serves as background information for the sales and operations execution process after every month. Thus, it is intended to be merely a “nice-to-know” information and help to set a framework for the S&OE process.

S&OP process structure is easier to present as a SIPOC model. SIPOC is a tool for Suppliers, Inputs, Process, Outputs and Customers analysis, which helps identifying all important factors of a process for process improvement purposes (Brown 2018, 198). The SIPOC model for S&OP process in the case company is illustrated in Figure 5 below.

The case company executes S&OP every month for the next three to fifteen months, depending on the cycle. S&OP meetings start around the second half of every month after all the sales and other forecasts are updated. The meeting starts with going through a task list of notes and tasks that need to be considered. During the S&OP meetings, supply chain planners go through the plans and inventories together with production planners and the rest of the team, based on the collected data and information about sales and supply. In the monthly S&OP meetings, there are multiple company representatives: Supply Chain Planners and their manager, Business Controller, Production Planners, Head of Supply chain Planning and modelling team. In other words, the process starts with data gathering from different units, which are described as “Suppliers” in Figure 5.

Figure 5. S&OP process in the case company.

Suppliers and inputs are organized through importance and effectiveness so that the most significant suppliers and inputs are presented on the top and the least significant on the bottom. Therefore, the most important suppliers are market data providers, which consists of several areas such as market, freight and premium levels. These all have different suppliers. Next are sales and supply, production, steering input, and finally risk desk. The inputs of S&OP, as illustrated in Figure 5, are pricing, term sales and supply volumes, restrictions, steering overview and contangos. Contango is a situation where the future price of the product is higher than the current spot price. This means that it is better to sell it with a higher future price than sell it now. In contrast, backwardation is a situation where it is not ideal to reserve or store the products.

One of the challenges in the planning process is to forecast seasonal products’

manufacturing; how and when should the manufacturing of seasonal commodities start. In other words, supply chain planners must forecast the demand of the seasonal products well in advance. In addition, taking restrictions and possible shutdowns into account is also important for the planning. Another target in the S&OP meetings is to align the actuals from the first half of the month with the plans.

Basically, optimizing plans with scheduling, so that the plans for the rest of the ongoing month match with the actual inventory levels in scheduling.

After all the inputs from the different suppliers have been collected, the input data is being modelled and iterated in S&OP process. In the pre-meetings, S&OP is run

multiple times for iteration. The plans are presented against previous S&OP and analyzed how well the plan met the actuals previously. Every product group is first planned individually and then aligned with the entire S&OP plan. The data can be adjusted and modelled again multiple times in order to match with the actual inventory or warehouse levels for instance.

Finally, 15- or 3-month S&OP is created, depending on the company’s cycle. Final S&OP generates output data to multiple units: The most important function is to produce a production and operative forecast for economic forecasting processes. It indicates spot sales and spot supply volumes, which sales, SCM and trading use. It illustrates the feedstock structure for production purposes and generates inventories and refinery transfers data to different customers, such as risk desk, finance and other departments. In addition, finalized S&OP is the framework and basis for S&OE.

In the final S&OP executive meeting, other company departments are also invited to see the final S&OP, for instance Vice President of Supply Chain Management, Head of Supply Chain Development, Logistics Planners, Process Engineers and Manufacturing Managers. In this meeting, the participants present an updated profit forecast, the most significant points and differences compared to the previous S&OP, important findings and necessary changes in the model, and possible scenarios. In the review, possible management of change (MoC) items are presented, which means for instance that it is identified that a change in the process must take place in order to implement the S&OP. In that case, the items will be listed, and a responsible person will be put forward. In this meeting, final S&OP is thus communicated to other company business departments and S&OP is ready to be carried out.

All in all, S&OP is a significant planning process, which generates data from different company departments and provides guidelines for multiple units in the company to use. S&OP offers information flow to both levels: from business planning to master scheduling and execution. The key take-away is that the initial data for S&OE is always the decisions made in S&OP. Thus, the information flows from upper planning levels to lower planning levels.