A System Dynamics Model for Sales and Operations Planning: An Integrated Analysis for the Lime Industry

A System Dynamics Model for Sales and Operations Planning: An Integrated Analysis for the Lime Industry

Nayara Teixeira Santos (Federal Institute of Education, Science and Technology of Northern Minas Gerais (IFNMG), Araçuaí, Brazil), Gisele Tessari Santos (Institute of Technological Education (IETEC) and Brazilian Institute of Capital Markets (IBMEC), Belo Horizonte, Brazil), Washington Santos Silva (Federal Institute of Education, Science and Technology of Minas Gerais (IFMG), Campus Formiga, Brazil) and Wanyr Romero Ferreira (Institute of Technological Education (IETEC), Belo Horizonte, Brazil)
Copyright: © 2020 |Pages: 17
DOI: 10.4018/IJSDA.2020010101

Abstract

The use of system dynamics techniques to model the sales and operations planning (S&OP), associated with the economic and financial processes, is an innovative proposal. The objectives of this article are to model and simulate the S&OP process integrated with the financial management in a Brazilian lime processing industry, based on the system dynamics approach. Initially, the model was validated. Then, over twenty scenarios were simulated to assess the behavior of the system with its key factors variation. In the microenvironment scenarios, the company's internal perspective was the only element taken into account. In turn, regarding the macro environment scenarios, the basis was the projection of lime consumption related to the country's GDP. The results have genuinely contributed to the industry researched, since the lime processing industry is struggling with obtaining enough supply due to lime acquisition price fluctuations and, consequently, the oscillation of its production costs.
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Literature Review

Sales and Operations Planning (S&OP)

The S&OP emerged after the identification of gaps in the classic resources and materials planning (Platt & Klaes, 2010).

S&OP fosters the reduction of operational costs, while it increases the business top line (Prokopets, 2012). According to this result, information obtained through the S&OP application, according to APQC (Open Standards Benchmarking), indicate that companies that had a S&OP process decreased US$ 1.34 in costs related to demand and supply planning every US$ 1,000.00 in revenue (Spiegel, 2011).

Kralik and Fogliato (2016) compiled the main results obtained through the implementation of the S&OP in businesses related to cleaning products, a multinational of the chemical industry sector, a large scale petrochemical industry and an industrial electronics company. The main results found were: an increased accuracy of sales forecast, improvement in the level of customer service and an increase in the inventory turnover. The authors also found an improved balance of the supply chain and an alignment between the organizational strategy and the companies’ functional areas.

S&OP is an effective process and, in unstable or a drift economies, it can become a “cornerstone”, particularly in the introduction of new products (Atkinson, 2009). However, according to Singh (2011) and Iyengar and Gupta (2013), the majority of companies knows the concept, but could not execute it properly. The association of the S&OP with strategic objectives, financial metrics, detailed mapping of “action” and “metrics” is therefore necessary, dodging the “tribal knowledge” used by former managers in the management of the balance between supply and demand.

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