The value of sales and operations planning in oriented strand board industry with make-to-order manufacturing system: Cross functional integration under deterministic demand and spot market recourse

Abstract

Sales and operations planning (S&OP) has become a widely recognized process of supply chain planning. However, until the present time, the evaluation of its benefits has been conducted mainly through post implementation case studies. This paper explores the fundamentals of the S&OP process and presents a modelling approach to evaluate its impact before implementation. Three MIP-based models are formulated representing, respectively, a multi-site supply-chain-based S&OP (SC-S&OP), that integrates the cross functional planning of sales, production, distribution, and procurement centrally; a multi-site sales–production planning-based S&OP (SP-S&OP), in which the joint sales and production planning is carried out centrally while the distribution and procurement are planned separately in each site; and a decoupled planning (DP), in which the sales planning is carried out centrally while the production, distribution, and procurement planning are performed separately and locally. The models are developed for an alternative multi-site manufacturing system that has different suppliers, produces different products and serves different customers on a make-to-order (MTO) basis where backlogs are allowed. The benefit of SC-S&OP is evaluated by comparing its financial performance over that of SP-S&OP and DP under deterministic seasonal demand and market price conditions. To illustrate the methodology, the models are applied to an Oriented Strand Board (OSB) manufacturing company in Quebec, Canada.