Case Summary
S&OP is a method of coordinating several aspects of a company’s operations in order to match consumer demand with the appropriate level of supply. It is critical to evaluate who will be accountable for each phase of the way when developing the plan (Nabil et al., 2018). Company Lawn King is a lawnmower manufacturer that produces four different models, with sales subject to seasonal demand. The demand projection has recently increased; therefore, management intends to assess the correctness of the prediction and devise a production strategy. Management and lobby group relations are always positive. Increased supply throughout these times due to high growth conditions, sales increase during the spring and summer months.
Case Analysis
Lawn King is a medium-sized lawnmower equipment manufacturer. It offers four different types of mowers, depending on the size of the lawnmower and the needs of the consumer. The marketing director of Lawn King Company thought that the market would grow in the fiscal year 2020; thus, he wanted to double-check the forecast’s accuracy. The management wanted to make sure that the predictions were accurate in order to prevent a stock-out crisis. To discuss this, a meeting was called with all high-ranking officials. The team looked into all of the options for raising production and managing inventories.
At the moment, all of the mowers are put together on the same production line. The manager inquired about the possibility of constructing a new manufacturing line to satisfy the growing demand. Nonetheless, the management wanted to make sure that the prediction was correct so that the expenditures were worthwhile. The connection between administration and labor unions is positive, but employee turnover is significant. Every year, about half of the remaining workforce depart, putting a strain on the company’s recruiting and training budget.
Additionally, there is a consistent absence on Mondays and Fridays, causing the development schedule to be disrupted. As a result, the company hired six filler personnel who will either fill the positions of missing employees or train new hires. Currently, the company operates on a single shift, with overtime available if necessary. The senior management considered all options for increasing the shift count. The manager asked the team to create an S&OP strategy that took inventory expenses, overtime, recruiting, and severance costs into account.
Forecast
Lawnmowers will be in higher demand; as a consequence, leadership has the option of expanding production capacity to meet demand. Management, on the other hand, wanted to double-check the forecast’s accuracy before making any investment decisions. The creation of new autonomous lawnmowers has been aided by advancements in machine vision. The new coronavirus has quickly spread throughout multiple countries around the world, wreaking havoc on people’s lives and civilization as a whole. It started as a human health issue and has since evolved into a significant threat to global trade, economics, and finance. Lockdown caused by the COVID-19 outbreak has put a stop to the production of several lawnmower parts.
Compact lawns and backyard gardening are an essential component of residential properties in North America and Europe since they considerably improve the property’s visual look. This has increased the amount of lawn scheduled maintenance, creating a need for lawnmowers, spurred customer attention to gardening activities, and promoted market growth for lawnmowers. Additionally, the availability of a wide range of farm equipment with varying cutting capacities allows it to be used on both small and extensive lawns. The advancement of improved battery technology has aided in making owning and running lawnmowers easier. Furthermore, the incorporation of GPS and other methods is an approach that has assisted in the creation of robotic farm machinery that requires little user input.
The landscaping sector is expanding and incorporating construction practices, which is fueling growth in the industrial lawn mower market in the Americas and Europe. The increased installation of innovative retail technologies on golf resorts and other big parks and lawns is likely to drive market growth in the coming years. Zero-turn mowers and push-type lawn mowers are also commonly utilized in commercial landscaping and grass management applications. Furthermore, development in standardized procurement contracts such as cities and municipalities, business houses, institutions, and landscaping service providers is mainly related to the overall market for corporate lawnmowers.
S&OP Plan
Sales and operations planning, or S&OP, is a monthly integral part of the project process that allows leaders to focus on crucial supplier drivers such as sales, marketing, order fulfillment, manufacturing, stock control, and introduction of new products. The purpose of the S&OP system is to help professionals to make the best choices through continuous connectivity of strategies and tactics across the firm, with an eye on economic and corporate effects (Ambrose et al., 2018). S&OP, which is constantly quoted on a quarterly basis, provides effective inventory management by focusing an organization’s resources on supplying what its consumers require while being competitive.
The results are displayed to the executive team during the monthly Executive S&OP conference once the demand and supply plans have been matched and approved. The meeting’s outcome is an authorized quantity-supplied strategy that can be implemented effectively by operations (Kreuter et al., 2021). The meeting will be overseen by the S&OP leader, but the Executive Sponsor is a mandatory attendee who will be necessary to approve all conference results.
Table 1: Information from the case study
Performance leveling is used by significant firms to cut costs in a variety of ways, many of which benefit companies that create thousands of pieces or high-ticket commodities. Smaller businesses can also profit from a more consistent production flow in ways that improve the quality of products and services while lowering expenses (Ivanov et al., 2021). Considering the advantages of the level of production manufacture can aid in the evaluation and improvement of processes. When a corporation employs a level approach, it means that it will produce at a steady rate regardless of demand (Rivera-Gómez et al., 2019). This indicates that merchandise inventory levels will increase during downtimes and drop during strong demand seasons in firms that produce to stock.
Table 2: Inventory cost, hiring/firing price, and inventory carrying charge for each month on the basis of the above data by using a level production strategy
The total cost as per level production strategy is $301,925.40. Finally, given the volatility of their industry, the Level production approach is the most expensive productivity ratio; it aids in the reduction of personnel hiring costs (Wei & Zhang, 2018). Furthermore, reducing the timeline inventories to a safe quantity to mitigate the strained demand lowers the inventory holding costs. Leveled production improves the chance of meeting unusual customer requirements and completing large orders on time (Tao et al., 2021). Unlike the equitable approach of completing customers’ orders after they have been placed, level production keeps production capability from becoming fully booked.
To summarize, S&OP is a means of coordinating all areas of a company’s business in order to meet customer demand with an adequate amount of supply. Lawn King is a lawnmower company that makes four different types, with sales based on seasonal demand. The firm now runs on a particular shift, with extensions available when needed. All ideas for expanding the shift count were reviewed by senior management. The manager instructed the team to develop an S&OP strategy that included product cost, overtime, recruitment, and termination costs.
Significant corporations utilize performance leveling to minimize costs in a number of methods, many of which benefits enterprises that produce hundreds of pieces or high-ticket items. According to the level production plan, the total inventory cost is $301,925.40. Eventually, given the industry’s unpredictability, the Level production method is the costliest efficiency ratio; it assists in the minimization of people recruiting expenses. Furthermore, reducing period stockpiles to a safe quantity to avoid strained demand minimizes inventory costs.
References
Ambrose, S. C., Matthews, L. M., & Rutherford, B. N. (2018). Cross-functional teams and social identity theory: A study of sales and operations planning (S&OP). Journal of Business Research, 92, 270-278.
Ivanov, D., Tsipoulanidis, A., & Schönberger, J. (2021). Production strategy. In Global Supply Chain and Operations Management. Springer, Cham. 149-169.
Kreuter, T., Kalla, C., Scavarda, L. F., Thomé, A. M. T., & Hellingrath, B. (2021). Developing and implementing contextualized S&OP designs–an enterprise architecture management approach. International Journal of Physical Distribution & Logistics Management, 51(6).
Nabil, L., El Barkany, A., & El Khalfi, A. (2018). Sales and operations planning (S&OP) concepts and models under constraints: A literature review. International Journal of Engineering Research in Africa, 34, 171-188.
Rivera-Gómez, H., Montaño-Arango, O., Corona-Armenta, J. R., Garnica-González, J., Ortega-Reyes, A. O., & Anaya-Fuentes, G. E. (2019). JIT production strategy and maintenance for quality deteriorating systems. Applied Sciences, 9(6), 1180.
Tao, F., Fan, T., Jia, X., & Lai, K. K. (2021). Optimal production strategy for a manufacturing and remanufacturing system with the return policy. Operational Research, 21(1), 251-271.
Wei, M. M., & Zhang, F. (2018). Advance selling to strategic consumers: preorder contingent production strategy with advance selling target. Production and Operations Management, 27(7), 1221-1235.