Master of Science in Industrial Management and Engineering June 2021
Sales and Operations Planning:
A study into managing the silo culture in an ETO manufacturing
Fares Abugharbia & Amina Glavas
This thesis is submitted to the Faculty of Engineering at Blekinge Institute of Technology in partial fulfilment of the requirements for the degree of Master of Science in Industrial Management &
Engineering. The thesis is equivalent to 20 weeks of full time studies.
The authors declare that they are the sole authors of this thesis and that they have not used any sources other than those listed in the bibliography and identified as references. They further declare that they have not submitted this thesis at any other institution to obtain a degree.
Contact Information:
Authors:
Fares Abugharbia
E-mail: faab16@student.bth.se Amina Glavas
E-mail: amgl16@student.bth.se
University advisor:
Martin Svensson
Department of Industrial Economics
Faculty of Engineering
Blekinge Institute of Technology
Internet : www.bth.se Phone : +46 455 38 50 00
A CKNOWLEDGEMENTS
We would like to express our special thanks to our university advisor Martin Svensson for the valuable feedback and support as this improved our thesis considerably. We would also like to thank our external supervisor Sammi Raad for his invaluable amount of support and for taking his time to gives us an opportunity to do this research. Moreover, a special thanks to the employees at ITAB Shop Concept Nässjö for taking their time to participate in this research. Lastly, we would like to extended our gratitude to Blekinge Institute of Technology and the lecturers at the department of Industrial Economics.
Fares Abugharbia & Amina Glavas 2021-06-06
A BSTRACT
Background: Over the past years, companies have competed in a globalized and dynamic environment which has forced them to implement various incentives in order to gain cost advantages. Companies have tried to implement Sales and Operations Planning (S&OP) but many have not managed to get the expected results. Coordinating sales and operations remains a crucial challenge because of the multiple differences and conflicts in objectives and responsibilities, referred to as having a silo culture. As many companies have encountered this barrier in conjunction with an S&OP implementation, investigating the S&OP process in a company with functional silos and a complex planning process remains.
Objectives: The objective with this study is to provide a deeper understanding of how to manage the silo culture challenge, in order to achieve a higher S&OP maturity level in a manufacturing with a complex planning process.
Methods: The objective with this study was fulfilled through an in-depth empirical case study research in an Engineering-to-order (ETO) company. Data was collected through semi-structured interviews with employees working in the departments involved in the S&OP process, along with a survey that was used to identify the organizational culture. Moreover, a framework synthesis was carried out in order to identify the most suitable S&OP maturity model for assessing the maturity level.
Results: The results revealed that no written rules or policies govern the organizational activities, but an organization chart and some job descriptions exists. The total work is divided, resulting in a functional organizational design. The results showed that the departments facing supply and demand, have different objectives due to their functional specialization and that no common goals exist between the departments. The results also showed that the prevailing organizational culture appeared as different among the departments. The S&OP diagnosis reveled that the S&OP maturity level was low on most of the dimensions except from the IT dimension. Moreover, it revealed the lack of a shared understanding of the S&OP process among the different departments.
Conclusions: The main findings for managing the silo culture in order to reach a higher S&OP maturity level was to: (1) possess a organizational design that facilitates cross-functional alignments, (2) focus on people by ensuring that the S&OP process is fully understood, (3) define clear job roles and job descriptions, (4) state goals for each department and incorporate common goals along with metrics for all departments, (5) incorporate a strong organizational culture with shared values and beliefs and (6) have a clear decision making process along with moving towards a decentralization in some areas.
Keywords: Sales and Operations Planning, Organizational theory, Silo culture, Complex planning process, Engineering-to-order.
S AMMANFATTNING
Bakgrund: Under de senaste åren har företag konkurrerat i en globaliserad och dynamisk miljö, vilket skapat incitament för att erhålla kostnadsfördelar. Flertalet företag har försökt implementera Sälj- och Verksamhetsplanering (SVP) men få har lyckats erhålla de förväntade resultaten. Koordineringen av försäljning och verksamhet återstår vara en avgörande utmaning på grund av flertalet skillnader och konflikter i mål och ansvarsområden, även kallat för silo kultur. Eftersom många företag stött på detta hinder i samband med en SVP implementering, återstår det att undersöka SVP-processen i ett företag med funktionella områden (avdelningar) och en komplex planeringsprocess.
Syfte: Syftet med denna studie är att ge en djupare förståelse för hur man hanterar silo kultur utmaningen, för att uppnå en högre SVP-mognadsnivå i en tillverkande industri med en komplex planeringsprocess.
Metod: För att uppnå syftet med studien genomförde författarna en djup empirisk fallstudie i ett kundorderstyrt företag. Data samlades in genom semi-strukturerade intervjuer med anställda som tillhör de avdelningar som är involverade i SVP-processen, och genom en enkät som användes för att identifiera organisationskulturen. Dessutom genomfördes en syntes av befintliga SVP-ramverk för att identifiera den mest lämpliga SVP-mognadsmodellen för att bedöma mognadsnivån.
Resultat: Resultaten visade på att inga skriftliga regler eller riktlinjer reglerar organisationsaktiviteterna, men att ett organisationsschema och ett fåtal arbetsbeskrivningar existerar.
Det totala arbetet är uppdelat mellan olika avdelningar, vilket resulterar i en funktionell organisationsdesign. Resultaten avslöjade även att de avdelningar som står inför utbud och efterfrågan har olika mål på grund av sin funktionella specialisering och att det inte finns några gemensamma mål mellan avdelningarna. Dessutom visade resultaten att den nuvarande organisationskulturen uppfattas som annorlunda mellan avdelningarna. SVP-diagnosen avslöjade att SVP-mognadsnivån var låg på de flesta dimensioner förutom IT-dimensionen. Vidare avslöjar resultatet bristen på en gemensam förståelse för SVP-processen mellan de olika avdelningarna.
Slutsatser: Huvudresultaten för att hantera silo kulturen för att uppnå en högre SVP-mognadsnivå var att: (1) ha en organisationsdesign som främjar tvärfunktionella anpassningar, (2) fokusera på människorna genom att säkerställa att SVP-processen är fullt förstådd, (3) definiera tydliga arbetsroller och arbetsbeskrivningar, (4) ange mål för varje avdelning och inför gemensamma mål tillsammans med gemensamma mätvärden för alla avdelningar, (5) inför en stark organisationskultur som präglas av gemensamma värderingar och övertygelser och (6) erhåll en tydlig beslutsprocess tillsammans med att gå mot en decentralisering inom vissa områden.
Nyckelord: Sälj- och Verksamhetsplanering, Organisationsteori, Silo kultur, Komplex planerings process, Kunderorderstyrt.
C ONTENTS
ACKNOWLEDGEMENTS ... I ABSTRACT ... II SAMMANFATTNING ... III CONTENTS ... IV
1 INTRODUCTION ... 1
1.1 BACKGROUND AND RELEVANCE OF STUDY ... 2
1.2 PROBLEM DESCRIPTION ... 3
1.3 RESEARCH OBJECTIVE ... 4
1.4 RESEARCH QUESTION ... 4
1.5 DELIMITATIONS ... 5
1.6 THESIS OUTLINE ... 5
2 LITERATURE REVIEW ... 6
2.1 ORGANIZATIONAL THEORY ... 6
2.1.1 Organizational Structure and Design ... 7
2.1.1.1 Organizational Structure ... 7
2.1.1.2 Organizational Design ... 8
2.1.2 Organizational culture ... 9
2.2 INTRODUCTION TO SALES AND OPERATIONS PLANNING ... 11
2.2.1 The Standard S&OP Process ... 13
2.2.2 S&OP Maturity Models ... 14
2.2.2.1 Analysis of S&OP Maturity Models ... 15
2.2.2.2 Summary of the chosen S&OP Maturity Model ... 18
3 METHODOLOGY ... 22
3.1 RESEARCH DESIGN ... 22
3.2 DATA COLLECTION ... 23
3.2.1 Observations ... 23
3.2.2 Interviews ... 24
3.2.3 Survey ... 25
3.2.4 Sampling ... 26
3.3 LITERATURE REVIEW ... 27
3.4 VALIDITY AND RELIABILITY ... 28
3.4.1 Construct Validity ... 28
3.4.2 Internal Validity ... 28
3.4.3 External Validity ... 28
3.4.4 Reliability ... 28
3.5 ETHICAL ASPECTS ... 29
4 RESULTS AND ANALYSIS ... 30
4.1 THE CASE COMPANY ... 30
4.1.1 Organizational Structure ... 31
4.1.2 Organizational Design ... 34
4.1.3 Organizational Culture ... 34
4.2 DEPARTMENTAL OBJECTIVES ... 35
4.3 S&OPDIAGNOSIS ... 37
4.3.1 S&OP GAP Analysis ... 44
4.4 THE SILO CULTURES IMPACT ON THE S&OPPROCESS ... 45
5 DISCUSSION ... 48
5.1 RESULTS DISCUSSION ... 48
5.2 METHOD DISCUSSION ... 49
5.3 LIMITATIONS ... 51
6 CONCLUSIONS AND FUTURE WORK ... 52 6.1 FUTURE WORK ... 53 7 REFERENCES ... 55 APPENDIX A – QUESTIONS TO DEFINE DEPARTMENTAL OBJECTIVES AND S&OP MATURITY LEVEL ... 60
APPENDIX B – QUESTIONS TO DEFINE ORGANIZATIONAL STRUCTURE AND DESIGN .. 62 APPENDIX C – CULTURE SURVEY ... 63 APPENDIX D – RESULTS FROM ORGANIZATIONAL CULTURE SURVEY ... 65
F IGURES
FIGURE 1:THE LITERATURE REVIEW STRUCTURE TOGETHER WITH THE OUTCOMES AND HOW THEY ARE LINKED. ... 6
FIGURE 2:ILLUSTRATES THE U-FORM ORGANIZATION CHART (ADAPTED FROM HARRIS AND RAVIV,2002, P.853). 8 FIGURE 3:ILLUSTRATES THE M-FORM ORGANIZATION CHART (ADAPTED FROM HARRIS AND RAVIV,2002, P.853). ... 8
FIGURE 4:ILLUSTRATES THE MATRIX ORGANIZATION CHART (ADAPTED FROM JONES,2013, P.188). ... 9
FIGURE 5:THE COMPETING VALUES FRAMEWORK (CVF)(ADAPTED FROM CAMERON AND QUINN,2011, P.39, USED WITH PERMISSION). ... 10
FIGURE 6:THE BALANCING ACT BETWEEN DEMAND AND SUPPLY (ADAPTED FROM SHELDON,2006, P.5). ... 12
FIGURE 7:BUSINESS EXCELLENCE ELEMENTS FOR THE S&OP PROCESS (ADAPTED FROM PALMATIER AND CRUM, 2002, P.72). ... 13
FIGURE 8:THE STANDARD FIVE-STEP S&OP PROCESS (ADAPTED FROM WALLACE AND STAHL,2006, P.38). ... 14
FIGURE 9:S&OPMATURITY MODEL (GRIMSON AND PYKE,2007, P.330, USED WITH PERMISSION). ... 20
FIGURE 10:THE RESEARCH PROCESS, ILLUSTRATING HOW THIS STUDY WAS CARRIED OUT. ... 22
FIGURE 11:THE FIGURE IS SHOWING HOW THE AUTHORS WILL REFER TO THE DIFFERENT DEPARTMENTS/FUNCTIONS (SHOWN TO THE RIGHT SIDE IN THE FIGURE) AT THE CASE COMPANY, IN ORDER TO ENSURE THE EMPLOYEES OF THEIR ANONYMITY. ... 30
FIGURE 12:ILLUSTRATING THE FORMAL REPORTING RELATIONSHIP AT THE CASE COMPANY’S DEMAND SIDE. ... 32
FIGURE 13: ILLUSTRATING THE FORMAL REPORTING RELATIONSHIP AT THE CASE COMPANY FOR THE STAFF FUNCTIONS. ... 33
FIGURE 14:ILLUSTRATING THE FORMAL REPORTING RELATIONSHIP AT THE CASE COMPANY’S SUPPLY SIDE. ... 33
FIGURE 15:ILLUSTRATING THE CASE COMPANY’S ORGANIZATION CHART, INCLUDING THE SHARED FUNCTIONS (SHOWN IN ORANGE COLOR). ... 34
FIGURE 16:A MATRIX ORGANIZATIONAL DESIGN SUGGESTED FOR THE CASE COMPANY. ... 46
FIGURE 17:THE CURRENT AND PREFERRED CULTURE AT THE OPERATIONS SIDE. ... 65
FIGURE 18:THE CURRENT AND PREFERRED CULTURE AT THE SALES SIDE. ... 65
TABLES
TABLE 1:DIMENSIONS AND ASSESSMENTS OF ORGANIZATIONAL STRUCTURE (ADAPTED FROM HATCH AND
CUNLIFFE,2006, P.106). ... 7
TABLE 2:THE DIMENSIONS AND QUESTIONS USED IN THE ORGANIZATIONAL CULTURE ASSESSMENT INSTRUMENT FOR ASSESSING CULTURE TYPES (CAMERON AND QUINN,2011, PP.30-32, USED WITH PERMISSION). ... 11
TABLE 3:A SUMMARY OF ALL THE EVALUATED S&OP MATURITY MODELS, DEMONSTRATING THE DIFFERENT STAGES AND DIMENSIONS FOR EACH MODEL. ... 15
TABLE 4:OVERVIEW OF THE INTERVIEWS PERFORMED AT THE CASE COMPANY. ... 24
TABLE 5:SUMMARY OF THE CASE COMPANY'S STRUCTURE THROUGH ITS DIMENSIONS. ... 31
TABLE 6: DEPARTMENTAL OBJECTIVES AND COMMON GOALS FOUND IN THE CASE COMPANY. ... 35
TABLE 7:AN OVERVIEW OF THE EMPIRICAL EVIDENCE IN RELATION TO THE S&OP MATURITY LEVELS. ... 37
TABLE 8:SUMMARY OF THE “AS-IS”S&OP PROCESS AT THE CASE COMPANY, ILLUSTRATING THE MATURITY LEVELS OF EACH DIMENSION TOGETHER WITH THE EMPIRICAL EVIDENCE. ... 42
1 I NTRODUCTION
This chapter gives an introduction to the problem background from a general point of view and motivates the relevance of this study. It continues with a problem description followed by the aim, purpose and delimitations of this study. The chapter ends with an outline that describes the structure of this thesis.
Over the past years, companies have competed in a globalized and dynamic environment which has forced them to implement various incentives in order to gain cost advantages (Pedroso et al., 2016).
According to Oliva and Watson (2011) as companies make an effort to manage and respond to the complexity of suppliers, markets and investors, as a result of globalization and increased competition, they will struggle even more with the supply chain integration. Globalization has also made their supply chains more vulnerable for uncertainties in demand (Lim et al., 2016). To accomplish the objective in supply chain management (SCM), which is to create value for the firm and the end customer, organizations have to integrate process activities (Vatanpour et al., 2013). Process integration refers to coordinating and sharing information and resources in order to manage the business process together (Vatanpour et al., 2013). Coordination is a managerial function that aligns the work of different departments in order to achieve a common goal (Mello et al., 2015), while integration refers to a type of cross-functional collaboration that involves planning, evaluation and execution at operational, strategic and tactical levels (Oliva and Watson, 2011). According to Vatanpour et al. (2013) achieving process integration can be difficult since organizations (medium or large) usually divide their employees in different business units or subdivisions (departments, groups and individuals). Manufacturing companies usually allocate the work to different subdivisions, where each of these subdivisions are specializing in one task of the total work performed (Hahn et al., 2000; Buchanan and Huczynski, 2017).
Functional specialization leads to differences in responsibilities and objectives, each department has their own goals, which complicates the coordination of activities among them (Hahn et al., 2000).
According to Hahn et al. (2000) one common cause of misalignment, when attempting to achieve coordination, is that the functional silos (different departments within an organization) often have conflicting objectives. Moreover, an organization with functional silos can possess a silo culture meaning that these functional silos are focusing on their own goals instead of working towards a common goal (Lapide, 2005; Pedroso et al., 2016). Thus, functional silos refers to different departments within an organization were each possess their own goals by nature, but they might also possess common goals between the departments. Silo culture on the other hand, refers to having functional silos that are focusing on their own goals instead of working towards a common goal (Lapide, 2005; Pedroso et al., 2016). Overcoming this specialization of functional silos through an integration in supply chain planning is quite complex, but it is necessary because of the increased competition and globalization (Oliva and Watson, 2011).
In a practitioner-orientated report developed by American Production and Inventory Control Society (APICS), McCollum (2017) the sales and operations planning manager for Jarden Corporation’s Leisure and Entertainment Group, stated that his business had the usual functional silos: Marketing, Sales, Finance, Supply Chain and Operations, which provided no opportunity to understand or discuss key inputs. This resulted in each functional silo making their own calls which in turn resulted in a business that had difficulties to predict and control (McCollum, 2017). To manage and overcome this, the business implemented Sales and Operations Planning (S&OP), which made a cross-functional priority that resulted in a broader understanding of the overall business capabilities, opportunities and risks (McCollum, 2017). Thus, to address the silo culture and have the different departments working towards a common goal, together with aligning their different business plans into one integrated plan, S&OP should be introduced (Lapide, 2005; Grimson and Pyke, 2007). However, this has not been the case for all organizations which is explained below.
1.1 Background and Relevance of Study
S&OP was introduced by Oliver Wight, in the late 1970s, as a business process with the goal to balance supply and demand (Ávila et al., 2019). In connection with increased recognition from both authors and companies over the past years, the traditional approach has expanded in the literature, which has led to S&OP currently being described as a support for companies to maximize opportunities and minimize risks (Ávila et al., 2019). According to Thomé et al. (2012) the dominating perception of S&OP is that it is a tactical planning tool that seems to facilitate supply chain integration.
S&OP enables companies to improve their business plans by preparing their supply chain to meet expected customer demand (Lapide, 2004a). According to Lapide (2004a) S&OP has proven to be the driving factor in terms of benefits in the supply chain, as it enables companies to better meet customer demand while resulting in reduced inventory and supply chain operating costs. S&OP is described as a cross-functional long-term planning process whose task is to align plans from different business units (Sales, Marketing, Manufacturing, Development, Purchasing and Finance) into one integrated plan (Ávila et al., 2019; Pedroso et al., 2016; Thomé et al., 2012; Oliva and Watson, 2011). The main purpose of S&OP is to balance supply and demand and to link the company's strategic plans with its operational plans (Ávila et al., 2019). Practicing S&OP is associated with positive effects on operational performance such as improved inventory level, capacity utilization and improved demand forecast accuracy (Kristensen and Jonsson, 2018). The increase in operational improvements such as the revenue, profit margin and customer retention, result in increased competitiveness (Kristensen and Jonsson, 2018).
At present, there are a few different S&OP maturity models designed to provide a maturity analysis through a set of maturity levels, of a company's current S&OP process and to give indications for improvements. Thus, a S&OP maturity level refers to a level that determines where a company's current S&OP process is at, which is evaluated according to a S&OP maturity model that is a tool for assessing the current S&OP process (Grimson and Pyke, 2007).
Despite the growing literature within the field of S&OP, several researchers indicate that more research is required in the field, especially research where these maturity models are implemented in companies (Ávila et al., 2019). Grimson and Pyke (2007) claims that S&OP is relatively easy to understand but it is difficult for individual companies to implement. Studies show that following these S&OP maturity models is not necessarily enough for establishing and practicing S&OP (Bower, 2005;
Lapide, 2004a; Piechule, 2008). The “one-size-fits-all” design that is found in the maturity models is not always suitable for all contexts (Grimson and Pyke, 2007). According to Kristensen and Jonsson (2018) each company has their own unique problem context, such as the complexity of demand and supply coordination, which makes it difficult to fit in the “one-size-fits-all” design. The S&OP process varies depending on manufacturing strategies and industrial context (Thomé et al., 2012). Hence, Thomé et al. (2012) claims that there is still a lack of well-documented case studies where the S&OP process is described in different industries using empirical data collected from interviews with employees.
Although there are some few empirical studies on S&OP (Ávila et al., 2019; Ivert et al., 2014; Lim et al., 2016), Ivert et al. (2014) claims that there is still a lack of industry-specific theoretical foundations for S&OP.
The S&OP literature field is rich and found in both practitioner-orientated and academic literature (Cecere et al., 2009; Lapide, 2005; Thomé et al., 2012; Tuomikangas and Kaipia, 2014). Tuomikangas and Kaipia (2014, p. 243) claims that “... research would benefit from empirical studies, particularly from in-depth case studies with multiple perspectives, in order to provide a deeper understanding and guidelines for companies to manage the implementation challenges.” Several authors have mentioned the silo culture as an S&OP implementation challenge (Grimson and Pyke, 2007; Cecere et al., 2009;
Wagner et al., 2014; Pedroso et al., 2016). The challenge when implementing S&OP is to align the
different plans into one integrated plan, since the sales department is revenue orientated while the production focuses on volume and capacity (Oliva and Watson, 2011). According to Pedroso et al.
(2016) silo culture is reported as the barrier with most influence on the S&OP performance. Qi and Ellinger (2017) (referred in Stentoft et al., 2020) claim that the S&OP field is dominated by technology implementation and performance outcomes rather than identifying factors such as organizational orientations that may contribute to an effective S&OP.
Well-documented case studies describing the S&OP process and providing a deeper understanding of the silo culture challenge, within an engineering-to-order (ETO) environment, have received little academic attention. As a result, this leaves a gap for understanding the S&OP process in an ETO environment and getting insights into how different departmental objectives affect the pursuit of an improved S&OP maturity level. As an attempt to fill this gap, this study aims to provide new insights into the silo culture challenge and how to manage this when attempting to achieve a higher S&OP maturity level. This will be fulfilled through an empirical case study research in an ETO company. There are three reasons that make the case company interesting from a research perspective: (1) they operate in an ETO environment with low volume and high production variation which makes their planning process complex (Grimson and Pyke, 2007), (2) they have different functional silos specializing in one task of the total work performed, with their own goals to achieve and (3) they are facing challenges in cross-functional integration. These three reasons make the case company in this thesis a suitable representative for a single case study (Yin, 2018).
1.2 Problem Description
Oliva and Watson (2011) argue that different functional silos specialize in parts of the planning, which leads them naturally towards having their own goals. Coordinating sales and operations remains a crucial challenge because of the multiple differences and conflicts in objectives and responsibilities (Hahn et al., 2000). Poor coordination of activities in the supply chain is the major issue that causes delays and increased lead times in an ETO environment (Mello et al., 2015). Aligning an organization and having all departments working towards a common goal is difficult (Grimson and Pyke, 2007). The different departments might start working towards goals that will only make their specific department appear as better than the others. This challenge is referred to as having a siloed culture, which affects the whole organization negatively (de Waal et al., 2019).
S&OP is a relatively easy term to understand but the implementation of an S&OP process in a company is not as easy (Grimson and Pyke, 2007). Many companies have tried but have not managed to get the expected result from the implementation of the S&OP process (Grimson and Pyke, 2007;
Lapide, 2004a; Pedroso et al., 2016). According to Grimson and Pyke (2007) part of the difficulty is that companies need to implement it in all of its departments and at all levels. It is not only the business process that needs to be changed, the organizational culture needs changes as well (Grimson and Pyke, 2007). Furthermore, Grimson and Pyke (2007, p. 326) states that “... longstanding functional silos must be broken down, and managers with very different incentives must work toward a common goal.”.
According to Pedroso et al. (2016) the barrier with most influence on the S&OP process is the silo culture. Because many companies have encountered this barrier in conjunction with implementing a S&OP process (Pedroso et al., 2016), it is important to investigate the S&OP process in a company with functional silos and a complex planning process in order to gain deeper knowledge in how to manage the silo culture.
1.3 Research Objective
The overarching objective with this study is to provide a deeper understanding of how to manage the silo culture challenge in order to achieve a higher S&OP maturity level. The purpose of this research is to increase the understanding of the silo cultures impact on S&OP and how this can be managed in a company with functional silos and a complex planning process. The purpose will be fulfilled by identifying the current S&OP process, actions for reaching a higher S&OP maturity level, the different departmental objectives and common goals, together with the organizational structure, design and culture in order to investigate how this affects a company’s pursuit of a higher S&OP maturity level.
1.4 Research Question
During the mapping of the different departmental objectives and common objectives at the case company, the authors found different objectives for each department along with no common objectives.
This allowed the authors to develop a research question (as presented below) regarding the silo culture as the mapping of the different departmental objectives revealed the lack of common objectives, which implied that the case company possessed a siloed culture. Thus, in order to fulfill the purpose of this thesis the research question is formulated as following:
• RQ: How can the silo culture be managed in order to reach a higher S&OP maturity level?
The maturing refers to reaching a higher maturity level, than the current one, within the S&OP process. To answer the research question and ease the data gathering, this research is divided into two areas: Organizational Theory and Sales and Operations Planning. This thesis is not a literature review per se, but it uses this method as a basis for data collection. To understand and describe the organization in detail, organizational theory which includes the study of an organization’s structure and design together with the culture, was employed. A literature review of conceptual tools to identify and assess the structure and culture is presented. In the S&OP area, a literature review on different S&OP maturity models was done with the purpose to evaluate according to the type of finding (scientific, empirical or authors’ own experience), the common and deviating elements and if the maturity model was detailed enough to be used as a diagnostic tool for evaluating the current S&OP process. Thereafter, data (such as demand planning, supply planning, integration of plans etc.) collected from interviews at the case company was applied to the chosen maturity model in order to assess the current S&OP process together with mapping the departmental objectives. This contributes with identifying actions for moving towards an enhanced S&OP process.
By analyzing and mapping the current S&OP process according to the chosen maturity model, the maturity level that indicates at which stage the company's S&OP process is at will be identified, and a gap between the current and an improved maturity level will arise. Since an organizational structure and design gives rise to an organizational culture (Jones, 2013), studying the structure and design together with the culture will give more understanding of an organization. Furthermore, an organizational structure and design can facilitate a cross-functional alignment between the departments (Oliva and Watson, 2011), thus studying this will help the authors to identify actions for managing the silo culture.
By studying the organizational culture the answer whether or not the subdivisions have shared values and beliefs will arise. Since an organizational culture where all departments actively participate in the S&OP process is coveted (Grimson and Pyke, 2007), these two together will give insights into how to manage the silo culture in order to achieve a higher S&OP maturity level.
1.5 Delimitations
This research focuses on the S&OP process in a company operating in a ETO environment, named ITAB Shop Concept Nässjö AB. ITAB is a global company that operates in different places around the world, but this thesis is delimited to one of their facilities located in Nässjö, Sweden. Due to this graphical delimitation, the case companies structure and design might appear as different from what it would have been if the authors considered the whole global company. Furthermore, this research is delimited to the departments that are facing supply and demand, as these have a central involvement in the S&OP process (Lapide, 2004a; Grimson and Pyke, 2007). Thus, departments such as Human Resources are not included in this thesis. This thesis is also time limited which means that an evaluation of the current S&OP process and recommendations for improving the current S&OP process and how to manage the silo culture will solely be delivered.
Unfortunately, this paper is limited due to the prevailing global pandemic of coronavirus disease 2019 (Covid-19), as most of the employees at the case company worked from home, which resulted in none face-to-face interactions and minimal observations.
1.6 Thesis Outline
Chapter 1 – Introduction
This chapter gives an introduction to the problem background from a general point of view and motivates the relevance of this study. It continues with a problem description followed by the aim, purpose and delimitations of this study.
Chapter 2 – Literature Review
This chapter presents Organizational theory together with an introduction to S&OP and a comparative analysis of different S&OP Maturity Models. The common and deviating elements will be presented together with an evaluation of which framework is most suitable to use for evaluating an S&OP process.
Chapter 3 – Methodology
This chapter presents the chosen method and how this study has been conducted. The chapter begins with a presentation of how the methods have contributed to fulfill the purpose of this research and continues with a description of how this thesis has been conducted.
Chapter 4 – Results & Analysis
This chapter begins with a contextualization of the case company and a description of the case company in a more detailed way, presenting its dimensions, structure and design. This is followed by the empirical results regarding the current S&OP process and the organizational culture. The results are analyzed in pair with relevant literature presented in Chapter 2. Thus, the answer to the research question in this thesis is explicitly presented in this chapter.
Chapter 5 – Discussion
This chapter summarizes and discusses the main findings and the suggestions. It continues with a discussion of the methods used and the limitations of this thesis.
Chapter 6 – Conclusions & Future Work
This chapter presents a summary of the main findings for answering the research questions, followed by ideas for future research.
2 L ITERATURE R EVIEW
This section presents Organizational Theory together with an introduction to S&OP and a comparative analysis of different S&OP Maturity Models. The common and deviating elements will be presented together with an evaluation of which framework is most suitable to use for evaluating an S&OP process, given the empirical delimitation of this study. The theory presented in this chapter is the foundation of this thesis.
To fulfill the purpose with this study, the literature review begins with organizational theory in order to understand how the case company is functioning, its structure and design along with its culture (Howard, 1984; Jones, 2013). Since an organizational structure and design can facilitate a cross-functional alignment between departments (Oliva and Watson, 2011) and as most of the problems regarding different business processes arise from having a culture that might hinder innovations being implemented (Skerlavaj et al., 2007), studying organizational theory supports the authors to identify actions for managing the silo culture. The literature review continues with an introduction to S&OP and to a standard S&OP process, followed by a comparative analysis of different S&OP Maturity Models.
The outcome of this analysis was a chosen maturity model that was used for evaluating the current S&OP process at the case company. This maturity model also gave indications for how to reach a higher S&OP maturity level. Hence, by studying organizational theory together with S&OP literature, the relationship between silo culture and S&OP can be specified. Moreover, the purpose, which is to provide a deeper understanding of how to manage the silo culture challenge in order to achieve a higher S&OP maturity level, can be fulfilled. The structure of this literature review and how the theory presented in this chapter is linked together with the research question is shown in Figure 1 below.
Figure 1: The literature review structure together with the outcomes and how they are linked.
2.1 Organizational Theory
Organizational theory can be defined in the broadest as the study of an organization's functioning, structure and performance together with the behaviors of the groups within the organization (Howard, 1984). Organizational theory deals with macro level analysis of intergroup relationships (relationship between departments), the organization's strategies and structure (Howard, 1984). Organizational theory provides an understanding for how an organization operates which is necessary in order to evaluate an organization and to learn how to change an organization (Jones, 2013; Soderstrom and Weber, 2020).
Organizational structure refers to the relationship between the parts of a whole organization (Hatch and Cunliffe, 2006), while organizational culture refers to the set of shared beliefs, values and perceptions among the leaders and employees within an organization (Körner et al., 2015). In the following section
Organizational Structure &
Design
Organizational Culture
Introduction to S&OP
Standard S&OP process
S&OP Maturity Models
Analysis of Maturity Models
Understand the organization, its structure and design together with its culture
General review of S&OP and how the process works
Find a maturity model to evaluate the current S&OP process
Analysis for answering RQ
organizational structure, design and culture are described in general terms together with conceptual tools used for studying them.
2.1.1 Organizational Structure and Design
2.1.1.1 Organizational Structure
Organizational structure refers to the formal system of tasks, i.e. how an organization divides the tasks, and it specifies how decisions are made (Jones, 2013). It refers to the authority relationship - who controls flows of information and who has the authority for which decision (Besanko et al., 2013). The purpose with organizational structure is to control the way of coordinating actions and the means used to motivate people (Jones, 2013). The organizational structure is affected by the strategy that the organization adapts. The strategy in turn, is affected by environmental factors such as technology, information and market conditions (Besanko et al., 2013).
To study the organizational structure one can study the dimensions of the organization (Hatch and Cunliffe, 2006). Theorists have operationalized organizational structure in different ways, the common dimensions found by theorists describing the organizational structure are: centralization, standardization, formalization and specialization (Mintzberg, 1979; Pugh et al., 1963). To develop an organization chart, which is a tool for mapping the structure, Hatch and Cunliffe (2006) presented eight dimensions including the four common dimensions mentioned above (See Table 1). These organizational structure dimensions are developed by scholars of classic management with practical experiences as executives and consultants (Hatch and Cunliffe, 2006). The organization chart gives a quick impression of an organizational design, it provides a representation of the hierarchy of authority and a general idea of the division of labor (Hatch and Cunliffe, 2006). The organization chart does not give much information about informal relationships or coordination mechanisms; instead organizational strucutre is used (Hatch and Cunliffe, 2006).
Table 1: Dimensions and assessments of organizational structure (adapted from Hatch and Cunliffe, 2006, p. 106).
Dimension Assessment
Size Number of employees
Administrative component Line function Staff function
Departments involved directly in the production of organizational outputs (e.g.
production departments)
Departments that advise and support line functions such as strategic planning, finance, accounting, human resources
Differentiation Vertical
Horizontal Levels in the hierarchy
The division of labor, which involves: numbers of departments in the organization, span of control or employees reporting to a manager
Integration The coordination of activities through accountability, rules and procedures, cross- functional teams or direct contact
Centralization Extent to which authority to make decisions concentrates at the top levels of the organization; in a decentralized organization, decision making devolves to all levels in the hierarchy
Standardization Extent to which standard procedures govern the operations and activities of the organization as opposed to the use of individual judgment and initiative in dealing with events as they arise
Formalization Extent to which an organization uses written (i.e. formal) job descriptions, rules, procedures and communications, as opposed to communication and relationship based on informal, face-to-face interaction
Specialization Extent to which the work of the organization is divided into narrowly defined tasks assigned to specific employees and work units
2.1.1.2 Organizational Design
Organizational design addresses how to create a division of labor, i.e. how to organize and coordinate the tasks to achieve the organizational goals (Harris and Raviv, 2002). There are several organizational designs, but the main designs are: Functional design (U-form), Multidivisional design (M-form) and Matrix design (Harris and Raviv, 2002; Hatch and Cunliffe, 2006; Jones, 2013; Besanko et al., 2013).
An organization with a functional design (See Figure 2) has one unit for every business function, for example, a sales unit who is responsible for sales (Harris and Raviv, 2002). As this organization grows it is easy to add units or divide the existing ones. This design also allows specialization and could reach scale economies (Besanko et al., 2013). The multidivisional design (See Figure 3) illustrates a company with different divisions where each of the divisions have an operation executive, despite this, all the decisions are made by top management (Besanko et al., 2013). For example, if a company is operating in two countries then they have a president in Sweden and in the US, they have subdivisions separately in both countries. Each country is responsible for its own production, sales, finance etc.
(Harris and Raviv, 2002). This design allows organizations to measure how effective every division is for the organization total profitability (Besanko et al., 2013).
Figure 2: Illustrates the Functional design (U-form) (adapted from Harris and Raviv, 2002, p. 853).
Figure 3: Illustrates the Multidivisional design (M-form) (adapted from Harris and Raviv, 2002, p. 853).
In Figure 4 below a Matrix design is illustrated where the organization is divided by its projects instead of industry segments or units. A matrix organizational design combines functional hierarchy with project dimensions, allowing the organization to maintain the department structure at the same time
CEO
Chief Global Marketing
Marketing
Head Sweden Marketing Head US
Chief Design
Design Head
Sweden Design Head US
CEO
President ABC Sweden
Marketing
Head Sweden Design Head Sweden
President ABC US
Marketing
Head US Design Head US
as teams are formed across ongoing projects (Grubenmann, 2017). For example, project A and B is developed in the same production by the same employees but they have two project managers to discuss with (Harris and Raviv, 2002). For project A, there is one manager and for B, there is another manager that collaborates with the different units. This design increases the information flows within the organization (Besanko et al., 2013; Grubenmann, 2017).
Figure 4: Illustrates the Matrix design (adapted from Jones, 2013, p. 188).
Studying an organization’s structure and design is significant for understanding the decision- making process as well as the vertical (the organization’s hierarchy design) and horizontal specializations (different departments and how they are linked), as this might explain and/or affect the coordination process and information exchange (Murdoch, 2015). Studying the structure and design allows the authors to get a deeper understanding for the different subdivisions and how these interact with each other (Jones, 2013). Since organization culture, like organizational structure, shapes and controls behaviors within the organization (Jones, 2013), the following section deals with the literature on organizational culture and how the culture at an organization can be assessed.
2.1.2 Organizational culture
The definition of organizational culture differs widely among different researchers, but many researchers agree on values being the core element in organizational culture (Hatch and Cunliffe, 2006;
Chatman et al., 2014; Körner et al., 2015). Thus, organizational culture is defined in terms of shared behavioral norms (Chatman et al., 2014), which is related to having shared beliefs, values and perceptions among the leaders and employees within an organization (Körner et al., 2015).
Organizational culture can also be viewed as a framework that provides guidelines for the members behavioral (Tama, 2019).
There are various well-recognized methods for identifying and measuring organizational culture (Jung et al., 2009; Willar et al., 2016). The Organizational Culture Assessment Instrument (OCAI) is an instrument used by many scholarly researchers for assessing organizational culture (Cameron & Quinn, 2011; Willar et al., 2016). OCAI is based on the Competing Values Framework (CVF) which is a theoretical framework for assessing organizational culture (Cameron and Quinn, 2011). CVF contains four key culture types that are based on empirical evidence and have been found to have both face validity and empirical validity, as a result of this, the development of the OCAI was based on the CVF.
The OCAI, presented by Cameron and Quinn (2011), is a diagnostic tool for assessing an organization’s culture using a quantitative method. The OCAI was selected in this study because of its suitability for identifying different types of cultures at the case company, as this tool operationalizes the different cultures which enables a measure of it. Moreover, the OCAI was selected because it is a well-recognized method (Jung et al., 2009; Willar et al., 2016) with both face validity and empirical validity (Cameron and Quinn, 2011).
CEO
Product A Manager
Product B Manager
Product C Manager
Vice President
Engineering Vice President Sales &
Marketing Vice President Finance Vice President Operations
Product Team
The CVF consists of four key culture types: Clan, Adhocracy, Market, Hierarchy, that are used to explain the culture at an entire organization or parts of an organization (such as different departments).
Further, an organization can either possess a predominating external or internal focus and they can either wish to achieve flexibility and discretion or stability and control (See Figure 5) (Willar et al., 2016). The different culture types are described below:
Clan Culture
Teamwork, corporate commitment to employees and employee involvement programs characterizes the clan culture (Cameron and Quinn, 2011). In a clan culture the customers are seen as partners, the environment is managed by teamwork and the management's task is to empower employees and ease their commitment and participation (Cameron and Quinn, 2011). The glue that holds the clan culture together is its members and the culture is characterized by having employees that share the same values, beliefs and goals (Willar et al., 2016).
Adhocracy Culture
An organization with an adhocracy culture is focused on creativity and product innovation (Willar et al., 2016). The underlying assumption is that innovative incentives lead to success and organizations with this type of culture are mainly in the business of developing new products (Cameron and Quinn, 2011).
The management’s task is to foster creativity and entrepreneurship, the culture emphasizes risk taking, individuality and anticipating the future (Cameron and Quinn, 2011).
Hierarchy Culture
Organizations with a hierarchy culture emphasizes stability with focus on the internal organization that maintains rules and centralized decisions (Skerlavaj et al., 2007). This culture is characterized by a formalized and structured environment with formal rules and policies that holds the organization together (Cameron and Quinn, 2011). Having effective leaders that can coordinate and organize in order to maintain a smooth operation and make sure that the structure remains, is important in the hierarchy culture (Cameron and Quinn, 2011).
Market Culture
The market culture refers to an organization that operates as a market itself and is orientated towards the external environment (Cameron and Quinn, 2011). Organizations with this type of culture are goal- oriented and their core values include competitiveness and productivity (Cameron and Quinn, 2011).
The management’s task is to drive the organization towards results, productivity and profits (Cameron and Quinn, 2011). The emphasis on winning is the glue that holds the organization together.
Figure 5: The Competing Values Framework (CVF) (Adapted from Cameron and Quinn, 2011, p. 39, used with permission).
(Collaboration)Clan Adhocracy
(Create)
Hierarchy
(Control) Market
(Compete) Flexibility & Discretion
Stability & Control
Internal Focus & Integration External Focus & Differentiation
To assess which culture type the entire organization has, or parts of an organization, the OCAI consists of six cultural dimensions as presented in Table 2.
Table 2: The dimensions and questions used in The Organizational Culture Assessment Instrument for assessing culture types (Cameron and Quinn, 2011, pp. 30-32, used with permission).
Culture
dimensions Clan Culture types
Adhocracy Hierarchy Market
Dominant characteristics
A very personal place like a family
Entrepreneurial and risk taking
Controlled and structured
Competitive and achievement oriented Organizational
leadership Mentoring, facilitating or nurturing
Entrepreneurial, innovative or risk taking
Coordinating, organizing, efficiency orientated
No-nonsense, aggressive, result oriented
Management of
employees Teamwork, consensus and participation
Individual risk taking, innovation, freedom and uniqueness
Security, conformity, predictability
Competitiveness and achievement
Organization
glue Loyalty and mutual
trust Commitment to
innovation and development
Formal rules and
policies Emphasis on
achievement and goal accomplishment Strategic
emphases
Human
development, high trust, openness
Acquisition of resources and creating new challenges
Permanence and stability
Competitive actions and winning
Criteria of
success Development of human resources, teamwork and concern for people
Having the most unique and newest products and services
Dependable, efficient and low cost
Winning in the marketplace and outpacing the competition
Organizational culture has an important role in business process management as most of the problems regarding different business processes arise from having a culture that might hinder innovations being implemented (Skerlavaj et al., 2007). Organizational culture is one of the largest factors that impede organizational improvements and changes, hence understanding the organizational culture is highly relevant and important (Cameron and Quinn, 2011). Since S&OP can be defined as a business process (Goh and Eldridge, 2015) that addresses both horizontal and vertical alignments (Thomé et al., 2012), studying an organization’s structure and design together with its culture is highly relevant for understanding the organization in order to answer the research question. The following section provides an introduction to S&OP followed by an explanation of a standard S&OP process. The section ends with an evaluation and comparative analysis of different S&OP maturity models together with a summary of the chosen maturity model.
2.2 Introduction to Sales and Operations Planning
Sales and Operations Planning (S&OP) has been used for years in well-managed businesses (Sheldon, 2006) and is still a popular topic which can be seen through the increased recognition from both authors and companies (Oliva and Watson, 2011; Thomé et al., 2012; Ivert et al., 2014; Pedroso et al., 2016;
Pedroso et al., 2017; Dreyer et al., 2018; Ávila et al., 2019). S&OP was introduced in the late 1970s by Oliver Wight (Sheldon, 2006), a business consultant in the United States, as a business process with the goal to balance supply and demand (Ávila et al., 2019). “Orchestrating Success” written by Richard Ling and Walt Goddard in 1988, was the first book to document the widely-known process introduced by Oliver Wight. According to Sheldon (2006) the S&OP process has evolved a lot since the 1980s and
there have been a large number of lessons learned which have resulted in improvements. American Production and Inventory Control Society (APICS) defines S&OP as:
“A process to develop tactical plans that provide management the ability to strategically direct its businesses to achieve competitive advantage on a continuous basis by integrating customer-focused marketing plans for new and existing products with the management of the supply chain. The process brings together all the plans for the business (sales, marketing, development, manufacturing, sourcing, and financial) into one integrated set of plans.” (APICS, 2017, p. 6)
Over the years the traditional approach has been extended in the literature, leading to S&OP currently being described as a support for companies to maximize opportunities and minimize risks (Ávila et al., 2019). Among several authors, the S&OP process is defined as a cross-functional long- term planning process whose task is to align plans from different business units (Sales, Marketing, Manufacturing, Development, Purchasing and Finance) into one integrated plan (Oliva and Watson, 2011; Thomé et al., 2012; Pedroso et al., 2016; APICS, 2017; Ávila et al., 2019). Uncertain events that lead to changes in demand require a supply chain to react quickly, since a slow reaction would lead to missed opportunities and increased inventory levels (Sheldon, 2006). The S&OP’s job is to balance the supply and demand (See Figure 6) by having the right people talking about the right areas (Sheldon, 2006).
The main purpose of an S&OP process is to: (1) balance supply and demand and (2) to link the business or strategic plans with the operational plans of the firm (Thomé et al., 2012). The role of an S&OP process is to sustain a balance between supply and demand at the same time as warning when an imbalance occurs (Thomé et al., 2012). S&OP addresses both horizontal and vertical alignments. The horizontal alignment corresponds to cross-functional and intra functional alignment, while the vertical alignment corresponds to the configuration of strategies, objectives and decisions (Kathuria et al., 2007).
Figure 6: The balancing act between demand and supply (adapted from Sheldon, 2006, p. 5).
S&OP is a monthly planning process composed of two major components: (1) the sales plan and (2) the manufacturing plan (Wagner et al., 2014). The sales plan is based on demand forecasting while the manufacturing plan determines the capacity and inventory levels. This results in an horizontal alignment of the plans among the departments that allows the plans to be monitored and reviewed for accuracy (Sheldon, 2006; Wagner et al., 2014). The horizontal alignment creates a single integrated plan among the departments (Wagner et al., 2014) which results in having common goals (Sheldon, 2006).
In addition to the horizontal alignment the S&OP process addresses the vertical alignment by building a bridge between the organization’s strategic (long-term) plans and operational (short-term) plans (Thomé et al., 2012; Wagner et al., 2014).
Palmatier and Crum (2002) stated that S&OP is fundamentally a management process designed to help people manage the business better. Therefore, people, process and tools must overlap each other (See Figure 7) and work together towards achieving effective management (Palmatier and Crum, 2002).
No matter what the management process is, it will always be operated by people. Thus the people circle represents the knowledge they need to have, the training and the understanding of what is expected from them. Further, they need to handle the process according to agreed principles, policies and procedures (Palmatier and Crum, 2002). The process circle corresponds to the need of a defined process, which includes having process steps, inputs, outputs, measurements and defined roles and responsibilities (Palmatier and Crum, 2002). The tools circle corresponds to providing people with necessary tools to accomplish their part of the process, this includes communications systems, software, hardware etc.
(Palmatier and Crum, 2002).
Demand Supply
Figure 7: Business Excellence Elements for the S&OP process (adapted from Palmatier and Crum, 2002, p. 72).
2.2.1 The Standard S&OP Process
S&OP is an ongoing process that typically follows a five-step process (Lapide, 2004b; Grimson and Pyke, 2007; Wagner et al., 2014; Hulthén et al., 2016; Dreyer et al., 2018; Wallace and Stahl, 2006).
The steps included vary slightly from author to author, for example Dreyer et al. (2018) presented six steps through adding the step “Initial supply planning”, while they add one step, other authors include this step in their five-step process. Although the steps may vary slightly, fundamentally it is the same process. The S&OP process is a continuous process of monthly planning, reviewing and evaluation, done in order to integrate a set of plans into one aligned plan (Wagner et al., 2014).
Wallace and Stahl (2006) presented a five-step S&OP process which has been used by multiple authors in the S&OP field (Grimson and Pyke, 2007; Wagner et al., 2014; Dreyer et al., 2018; Hulthén et al., 2016; Danese et al., 2017; Thomé et al., 2012). In order to exemplify the S&OP process and give clear illustrations of the process, the five-step process presented by Wallace and Stahl (2006) is chosen as they describe and illustrate what each step comprises and who is in charge with what (See Figure 8).
The five steps in a standard S&OP process are described below.
Step 1: Data Gathering
Most of the activities in this first step take place shortly after the end of the month (Wallace and Stahl, 2006). During the data gathering phase the files with data such as actual sales, production, inventories etc., from the month just ended, are updated. The Sales and Marketing departments are handed information that includes sales analysis data, volume, worksheets, statistical forecasting reports etc., in order to develop new forecasts (Wallace and Stahl, 2006). The gathered information is then distributed to the relevant departments/people that are responsible for the next step. To make this a timely process, this first step should be completed within a day or two.
Step 2: Demand Planning
During the second step Sales and Marketing functions review the received information from Step 1 by analyzing and discussing it. Together with their knowledge of the products, market and customers they adjust the forecast based on the anticipated responses to marketing plans such as advertising, and promotions (Grimson and Pyke, 2007), as well as field sales input from large customers (Wallace and Stahl, 2006). The forecasts also include information about new and existing products (Wallace and Stahl, 2006; Grimson and Pyke, 2007). The developed forecasts are reviewed and, if necessary, changed by Product Development as they typically have the most information regarding new product launches (Wallace and Stahl, 2006). The last activity in the Demand Planning phase is a short meeting with the senior level to “finalize” the numbers by allowing them to ask questions and challenge the underlying assumptions (Wallace and Stahl, 2006). The developed demand plans are unconstrained meaning that they capture what could be sold to customers and not what the company can produce (Lapide 2004b;
Grimson and Pyke, 2007).
Step 3: Supply Planning
The Operations department is responsible for the third step which is based on information from the second step. During this step the Operations checks if the plan from the second stage is manageable and
People
Process Tool
if they have the capacity to meet the forecasted demand (Wallace and Stahl, 2006). At this step Operations update the plan received from the demand planning according to inventory and capacity constraints (Wagner et al., 2014). If Operations need extra resources, they will inform middle management during the next step in order to authorize it (Wallace and Stahl, 2006).
Step 4: Pre-Meeting
This step involves a meeting for middle management from Demand side, Operations side and Finance (as process owner), to come up with a plan for the executive meeting in step five. During this meeting the team tries to solve all issues and disagreements regarding the forecast, if they do not manage to do that these issues are discussed during the next step. The team also plans supply and demand, sets the agenda for executive meetings and develops backup plans in case of something going wrong (Wallace and Stahl, 2006).
Step 5: Executive Meeting
The last step in the S&OP process is a meeting with the executives from the board (Wagner et al., 2014).
Attendees in this meeting are the president (general manager, CEO, COO) and the directors of the functions such as Sales, Marketing, Manufacturing (Operations), Supply Chain Management (Planning, Logistics), Product Development, Finance and Human Resources. In this meeting the executives will solve the issues that the team participating in the “pre meeting” did not manage to reach an agreement on (Wallace and Stahl, 2006). Further, the executives will decide whether or not to accept the plan presented, and they might also modify some of the planning that the team developed during the “pre- meeting” (Wagner et al., 2014).
Figure 8: The standard five-step S&OP process (adapted from Wallace and Stahl, 2006, p. 38).
2.2.2 S&OP Maturity Models
An S&OP Maturity Model is a diagnostic tool used to assess the current S&OP process and it provides opportunities for improving the current S&OP (Lapide, 2005; Grimson and Pyke, 2007). According to Lapide (2005) process innovation is difficult in organizations since it involves changes in the decision- making, information, tasks and the people involved. Therefore, these need to be identified first which can be done by the use of a S&OP Maturity Model. An S&OP Maturity Model usually consists of multiple stages where the ranking goes from least advanced process to most advanced process (Lapide, 2005; Grimson and Pyke, 2007). These multiple maturity stages are usually named differently and they include different dimensions that consist of different criteria for evaluating the current maturity of the S&OP process. In this study, the different S&OP Maturity Models will be reviewed based on the common and deviating elements, type of finding and which model is most suitable to use for evaluating an S&OP process.
Thomé et al. (2012) did an extensive S&OP literature synthesis, reviewing 271 papers and choosing 55 for a systematic literature review analysis. In their systematic review, Thomé et al. (2012) identified seven S&OP maturity models, which will be used as a foundation in this thesis. Further, to identify the S&OP maturity models developed after Thomé’s et al. (2012) journal article, a review of scientific articles published after year 2012 was done. The search words used were “Sales & Operations Planning”
OR “S&OP” AND “Maturity model” and “Sales & Operations Planning” OR “S&OP” AND
“Evaluation”. Only peer-reviewed journal articles were reviewed. The first search resulted in 42 journal
End of month
Sales & Supply actuals, Statistical forecasts
Management Forecast
Capacity constraints
Conflict resolution, Recommendations &
Agenda for Exec. Mtg.
Decision &
Game Plan
Step 1: Data
Gathering Step 3: Supply
Planning Step 2:
Demand Planning
Step 4: Pre- Meeting
Step 5:
Executive Meeting
