INTEGRATED BUSINESS MODEL
Oliver Wight’s Integrated Business Model has three pillars: product, supply and demand. Gerard de Bruijn used this model to emphasize that long-term planning does not mean that you can ignore the short term. Below the line – which he added to the model him- self – it is more about the short term: about selling what you’ve planned. Above the line
is the about the long term: about planning what you will sell. In every monthly cycle, this bottom-up approach is compared against the top-down strategy. The executive leader- ship team makes decisions about substantial differences between the monthly planning forecasts and the top-down strategy, prepared by the IBP team.
which is jointly coordinated by Supply Chain and Finance, results in a monthly board-level review based on a rolling 18-month forecast with full profit & loss.
Belief 24
Durupthy echoed De Bruijn’s thoughts on leadership: “You need high-level sponsor- ship within the organization. That rein- forces the internal belief in S&OP, which is essential for successful implementa- tion. But it takes time to win that belief.” It’s not necessary for every company to make the transition to IBP. Koninklijke Vezet, a supplier of fresh-cut fruit and vegetables to grocery retailer Albert Heijn, is an example of such a company. By far the biggest challenge for Vezet is to ful- fil Albert Heijn’s level of demand, and then the next challenge is to optimize the margin. “Albert Heijn has very high expectations; we have to achieve delivery performance of 98.4%. We deliver to each of Albert Heijn’s distribution centres five
times a day, and the delivery performance is measured at each of those DCs five times a day,” says Anouk Wissink, Direc- tor of Operations at Vezet.
The products are influenced by the weather, which makes it difficult to meet Albert Heijn’s demands. If there is a cold snap, such as in late February 2018, the demand for traditional winter ingredi- ents such as kale and carrots can sud- denly double, while sales of pre-packed salads can halve. “And the supply of fruit and vegetables largely depends on the weather too. Even if a harvest has failed due to hailstorms or slugs have damaged a lettuce crop, we still have to achieve that high service level,” states Wissink.
The company struggled to do so too often in the past, which is why Koninklijke Vezet introduced S&OP two years ago. “We can only meet those high demands if Sales, Production and Planning all work together.
Which promotional activities
are coming up? How much capacity do we need? And because the supply of raw materials is not always guaranteed, we involve Purchasing too,” continues Wis- sink.
Lack of alignment
Up until two years ago there was little alignment between the activities in the various departments. Sales thought up promotional
ideas without consulting
Supply Chain, Production preferred to produce big batches to minimize change- over times, and Planning thought it could solve everything and meet demand with careful scheduling alone. “There was no alignment between the individual inter- ests of the separate departments. It was essential to start with S&OP to achieve that,” emphasizes Wissink. “And it has been a success. Our delivery performance has risen from 96.8 to 98.2%, and we’ve halved both our inventory and the num- ber of returns.”
SUPPLY CHAIN MOVEMENT, No.29, Q2 2018
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