Operations and Supply Chain Management The Core

∙ Marketing chimes in with, “We had a great month; what are you complaining
about? We told you mid-month that things were going well.” The plant manager
replies, “There is no way that we can
react that quickly. What are you expecting
from us? Our schedules are fixed six
weeks into the future. You want us to be
efficient, don’t you?”
∙ The president asks, “Should we just
bump everything up 30 percent for
next month? I sure don’t want to run out
again.”
∙ Marketing responds, “Only if you are
willing to keep running that 2-for-1 deal
that we were running last month. Our
customers pass on that discount to their
customers and that keeps sales going.
I am not sure that we are making much
money when we discount like that.”
∙ This wakes up the finance guy, “Oh, so
now I understand why we have such a
big negative revenue variance. We can’t
give away the stuff anymore.”
This struggle between those selling the
product, those supplying the product, and
those keeping track of the money goes on
month after month. The problem is one of
matching supply with demand at a price
that makes the firm profitable. It is a difficult
balancing act and one that plays out at
most companies.
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Today, many companies are using a business process called sales and operations
planning (S&OP) to help avoid such problems. This chapter defines S&OP and
discusses how to make it work.