The document discusses Sales & Operations Planning (S&OP) and how supply chain simulations can be used to improve logistics planning and operating efficiencies. It describes a 5-step process for S&OP: 1) sales forecasting, 2) demand planning, 3) supply planning, 4) reconciling plans through simulations, and 5) implementing and monitoring the plan. The document uses a case study of a furniture company to illustrate how a cloud-based simulation platform can be used to model the company's supply chain, identify issues, and develop an optimal operating plan through cross-functional collaboration.

1. Sales & Operations Planning (S&OP)
with Supply Chain Simulations
Deliver better logistics planning and greater operating efficiencies
Michael Hugos, SCM Globe Corporation
www.scmglobe.com

2. 2
Necessity is the Mother of Invention
• Challenge – Expand “Java Furniture Company” supply chain to
support rising sales worldwide. Guide multi-disciplinary task force to
evaluate options and design new supply chain
• Goal – Train and empower people to manage high performance
supply chain and respond effectively to continuous change by
combining strengths of people and computers
– Combine rising numbers of people trained in logistics and supply chain
management with ever-cheaper technology to create value
(See Brynjolfsson and McAfee, 2012, MIT Digital Frontier, Race Against the Machine)
– Create resilient, easy to use and cost-effective supply chain
management platform with consumer technology and available cloud-
based applications
• This presentation is based on work done with actual company manufacturing
furniture in Indonesia and exporting to customers around the world -
http://blog.scmglobe.com/?page_id=2439
• See a short video about this here: https://youtu.be/9JnMaztM4Ms

3. 3
Sales & Operations Planning (S&OP)
1.
Sales
Forecasting
2.
Demand
Planning
3.
Supply
Planning
4.
Reconcile
Plans
5.
Implement
& Monitor
NOTES:
• S&OP is guiding framework for supply chain planning
• Build supply chain model based on data from Demand Plan and
Supply Plan.
• Reconcile Supply Plan with Demand Plan by making adjustments
to the supply chain model based on monitoring simulation results.
• Supply chain model that delivers best results becomes the
operating plan for the next 30 day period!
Modeling and Simulation
Demand Plan:
- Product specs
- Facility demands
Supply Plan:
- Vehicle specs
- Delivery Routes
Mkt Forecast:
- Sales by market
- Prices and costs
Operating Plan:
Effective supply
chain operating plan
for 30 days
Operating Cost:
Operating budget
and performance
metrics

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Easy and Accurate Supply Chain Simulations
• Define combinations of PRODUCTS, FACILITIES, VEHICLES and ROUTES
• Then place them on a map to create accurate supply chain models
Products – Facilities – Vehicles – Routes
Store
Factory
Product Category C
Product Category B
Product Category A
Store
Store
Store
Warehouse
Train
Large Truck
Medium
Truck
Depot

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Step 1. Sales Forecasting: Business Operations
Sales Forecast defines products, prices and market demands:
• Product sales, product prices and customer demand by market area
• Costs of supplies and services used by company

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Step 2. Demand Planning: Products, Facilities
Sales Forecast drives creation of Demand Plan
Specify PRODUCTS in
supply chain (at category
level in shipping container or
pallet size quantities)
Specify FACILITIES in
supply chain and assign
product demand and
production rates to
individual facilities

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Step 2. Demand Planning: Data Used
PRODUCTS Name Price Weight
(kg)
Size
(m3)
Data is for
average product
in each category
(pallet size)
Category A
Small
$650 30 kg 1.0 m3
Category B
Medium
$1,500 60 kg 1.5 m3
etc.
FACILITY Name Type Storage Rent Ops Cost
Specify each
supply chain
facility
Java Main
Factory
Factory 18,000 m3 $0.1/ m3 $13,530
Jakarta
Store 1
Store 500 m3 $1.5/ m3 $350
etc.
FACILITY -
PRODUCT
Product Name Demand Production On-Hand
Define product
demand and
production for
each facility
Category A
Small
4 0 60
Category B
Medium
3 0 20
etc.
Small data
sets define
PRODUCTS
and
FACILITIES

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Step 3. Supply Planning: Vehicles, Routes
Demand Plan drives creation of Supply Plan:
• Decide how to use available VEHICLES to move products between facilities
• Define ROUTES and delivery schedules for vehicles serving each facility

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Step 3. Supply Planning: Data Used
VEHICLE Name Type Carry
Volume
Max Weight
(kg)
Speed
per Hr
Ops
Cost per
km
Delay -
Depart
Define data
for each
vehicle
Small Truck Truck 40 m3 4,000 45 $0.45 8
Rail Freight Train 130 m3 63,000 65 $0.13 24
etc.
ROUTE Name Vehicle Distance Time
Define vehicle
routes (each
vehicle has one
or more routes)
Factory - Stores Small Truck - 2 (calculated) (calculated)
Port - Factory Med Truck - 10 (calculated) (calculated)
etc.
ROUTE -
PRODUCT
Name Facility/Stop Drop Qty Pickup Qty
Define product drop qty
for each product at
each facility on a route
Product A Store 1 8 0
Product B Store 1 11 0
etc.
Simple data sets enable accurate simulation of any supply chain

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STEP 4. Reconcile Plans: Build Supply Chain
Test Supply Plan to see if it meets requirements of Demand Plan:
• Demand Plan - data for: 1. PRODUCTS; 2. FACILITIES; and product demand
• Supply Plan - data for: 3. VEHICLES; 4. ROUTES; and product delivery qty

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Step 4. Reconcile Plans: Run Simulations-Fix Problems
Simulations find supply and demand mismatches and show operating metrics
• Simulate operations
to find and fix points
of failure
• Explore options,
make adjustments so
supply chain runs for
30 - 60 days
Supply chain model
that works best in
simulations
becomes real
operating plan!

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STEP 4. Reconcile Plans: Analyze Simulation Data
• On-screen displays show graphical and numeric data for use in resolving problems
• Simulation data can be downloaded to spreadsheets for printed reports and analysis
Simulations generate data for analysis and problem solving

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STEP 5. Implement and Monitor: Operations
• Collect real-time operating
data from Facilities,
Vehicles, and Routes
• Respond to new situations
as they arise
Continue planning and
simulating responses to
new situations as they
arise…
(Back to Step 1)
Model that works best in simulations becomes real operating plan

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STEP 5: Implement and Monitor: Collaboration
Procurement
SalesOperations
Finance
• Cloud-based platform accessible with PC or laptop and Internet connection
• People learn to work collaboratively to solve common problems
• Driven by easy and accurate simulations to support group decision making
• Technology is secure, resilient and cost-effective
Cloud-based collaboration platform accessible and usable by all

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Major Findings to Date
1. Findings based on four years work with companies in Asia, Europe and North America,
plus students and instructors at colleges, universities and education seminars around the world
2. Simple and accurate modeling and simulation enables use by wide audience of academic,
business and professional people, not just small group of experts
3. Map-based user interface enables understanding of overall supply chain structure and
performance, and develops real-world skills for improving supply chain operations
4. Engages participants and develops both analytical and intuitive understanding of supply
chain principles and practices
5. Encourages effective collaboration between people to achieve common goals when all
can see what is happening in a supply chain as it happens
6. Can monitor real supply chains and support online S&OP process where cross-functional
project teams review supply chain operations and make adjustments to respond to changing
situations
November 2017, SCM Globe Corp.
See full Java Furniture Company case study on SCM Globe website -
http://blog.scmglobe.com/?page_id=2439

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Supply Chain Modeling and Simulation
Learn more about supply chains and simulations on SCM Globe website:
• Java Furniture Company – models real company supply chain for use in business analysis
• Cincinnati Seasonings – introductory case for learning about supply chains and simulations
• Alexander the Great – supply chain supporting Alexander’s campaign in Afghanistan, based on
historical research by professor at University of California, Berkeley
• Go to www.scmglobe.com  click “Start Here”  click “Case Studies”