Development of the S&OP process at Seco Tools AB : Aligned with today´s supply chain planning processes

Abstract:

Background:

Companies strive to produce as close to customer demand as possible to reduce the cost, inventories, etc. One process that deals with this issue of balancing demand and supply is Sales & Operations Planning (S&OP). Seco Tools is a company with their head-office located in Fagersta, Sweden, which is experiencing high inventory levels and a need of cutting cost. The ongoing project Supply Chain Planning at Seco Tools resulted in the implementation of a new software which enables them to improve demand, inventory, and supply planning. As a result of the improved planning ability, a new S&OP process is developed and in need for improvement.

Purpose:

The purpose of this thesis is to evaluate the current S&OP process from the Supply Chain Planning project and to suggest future improvements for Seco Tools AB.

Research objectives:

1. Study and describe the current S&OP process at Seco Tools.

2. Analyse and identify differences in Seco Tools’ S&OP process compared to the literature and a benchmark company.

3. Perform deeper analyses within financial integration and the use of KPIs in Seco Tools´ S&OP process.

4. Suggest future improvements to Seco Tools regarding their S&OP process based on the identified differences from research objective 2 and the deeper analysis from research objective 3.

Method:

The planning report set the framework for the carrying through of the thesis. A literature study regarding S&OP and a case study performed at Seco Tools regarding their S&OP have been done in parallel. Seco Tools’ S&OP process has been studied and described with the help of interviews, observations, and internal documents. Analysis was made where Seco Tools S&OP was compared to the theoretical S&OP and the S&OP at AstraZeneca. The analysis led to recommendations to Seco Tools regarding improvements in their S&OP process.

Conclusions:

Two opportunities for improvement were highlighted during the analysis of Seco Tools S&OP. They were financial integration and the use of cross-functional KPIs covering all the departments that were suggested to be involved in S&OP at Seco Tools. Seco Tools should integrate their finance in the process to compare S&OP against the business plan, and the company’s strategy should be well understood by the participants in S&OP. The knowledge of the company’s strategy together with the right authorities in the process will improve the decision making in Seco Tools’ S&OP. Seco Tools also need to implement an S&OP scorecard with KPIs that covers all departments in the company and the strategy as well. This helps to further develop cross-functionality and to early on make root cause analysis of identified problems. Cross-functionality and KPIs are believed to be general recommendations that all companies can use as well, not only something that Seco Tools can take advantage of. A template for an S&OP scorecard especially for Seco Tools has been made. It contains 16 cross-functional KPIs covering all steps and departments involved in S&OP at Seco Tools.