A Framework for Sales and Operations Planning in Process Industries

University dissertation from Linköping : Linköping University Electronic Press

Abstract: This thesis studies Sales and Operations Planning (S&OP) in process industries. S&OP is a planning process which has a role of balancing demand and supply at an aggregate level. S&OP has traditionally been considered as a generic process meaning that it is independent from the context of the industry in which it is implemented. Process industries do; however, have specific characteristics which affect their planning and control processes, including S&OP. Therefore, the aim in this thesis is to reconcile these two contradictory stances and furthermore investigate how the specific properties in process industries should be included into an S&OP framework. Such a differentiated framework aims to support process industries to design/implement their S&OP process based on their unique requirements in relation to their markets, products and processes while it also takes into account the specific characteristics regarding the continuous production. Consequently, the process industries would realize the expected benefits from S&OP process to a greater extent.The study starts with a literature review on S&OP in process industries in order to build the knowledge foundation for subsequent studies. The results show that the underlying difference between process industries and discrete industries is the object continuity which affects the selection of production processes including resources. Thus, process industries are often hybrids in the sense that their production processes include both continuous production, when the transformed object (material) is continuous, and discrete production when the object (material) turns into discrete products after the discretization point. In other words, process industries deploy both continuous production and discrete production while discrete industries use only discrete production. The specific characteristics of process industries are actually related to the continuous production part and influence the planning processes as well. As the result of this study, the continuous production characteristics that can affect the S&OP process are identified.In the continuation of the thesis and in order to provide a typology for planning and control purposes, the object type (continuous and discrete) is combined with two other dimensions i.e. mode type (onetime, intermittent and continuous) and driver type (customer order driven and forecast driven) into a planning and control typology. The mode type addresses the repetitivity of the flow and the driver type takes into account the trigger of the flow. Each dimension has a transition point – i.e. the discretization point for the object type, mode interface point for the mode type and customer order decoupling point for the driver type – and represents a hybrid situation since different production environments are required before and after each transition point. The typology aims to illustrate how each dimension affects the planning and control issues as well as how the dimensions are interrelated and how this combination influence the managerial decisions. The typology integrates the concepts from both process industries and discrete industries and thus, is applicable for both.Thereafter the typology is applied to the S&OP process and an integrated framework is suggested based on the three dimensions with specific focus on process industries. In this framework, the effects of hybridities within each dimension and cross-hybridities between the dimensions on the S&OP process are also considered. The importance of hybridities and cross-hybridities lies in the fact that the planning of the hybrid systems is a complex task due to the varying managerial decisions before and after the transition points. Finally, implementation steps for the suggested S&OP framework are outlined for the process industries in order to position themselves in the framework, identify the implementing procedures, and obtain potential benefits based on the differentiated S&OP process.