Develop and integrate S&OP function in the existing supply chain process for a flash sales company

Abstract

The purpose of this project is to develop an integrated S&OP function for Vente-Exclusive (VeX). The scope is limited to the following relevant departments: sourcing, commercial planning, supplier development team, aftersales and warehouse. The process should enhance communication and visibility between departments, so that the allocation of resources can be optimized. It should support the overall strategy and create business value for VeX. One of the major challenges VeX wants to address by this process, is reducing the Click2Delivery time. The report is organised as follows. First a literature review is done, with an external interview and case study of Amazon. Then the flash sales company is thoroughly explored, with data gathering of the different relevant departments. Subsequently, new integrated S&OP process maps are suggested specifically for VeX, to help reduce their business challenges. This is combined with an S&OP framework, an S&OP positioning and a guidance/governance of the S&OP meetings. An Excel based tool has then been developed to support, enhance communication and flag attention points between departments in S&OP. To make the S&OP process effective and value driven in the long run, different KPIs are suggested. Last but not least, recommendations for a successful S&OP process integration are given. The following information was gathered from the literature. Vente-Exclusive is a flash sales business, which is a website where retailers sell products online at a discount during a short time. Sales and operations are a key part of their business. Literature defines S&OP as an integration process that can drive business value and enhance the performance of the company. It is about finding the right match between sales and operations, but also between the business strategy in the long term and operational planning in the short term. It is hard to create a successful S&OP development, mostly because of a misalignment between departments and their incentives. It also doesn't happen overnight but takes time and persistence. It is important that a company knows the maturity level of S&OP. Amazon implemented S&OP, a couple of years ago, to address some of their supply chain challenges. In this development they defined and designed the variables, decision timeframes and a collaborative process. After this initial stage they added a network optimization organization, formalised the S&OP planning and identified metrics to unify the incentives. The literature review is backed-up by practical experience and knowledge of an S&OP subject matter expert, the following insights where shared during the interview. à The ultimate goal of S&OP is to align the 3 core functions: sales, operations and finance to improve the bottom line (ROCE). à This development usually takes two years but is never really finished. à S&OP should be an independent function that reports directly to the CEO, with specific S&OP KPIs that should eventually drive business value. à MS Excel can be used for small companies with limited complexity. Many large organizations invest in ERP systems which provides an analytical platform capable of giving advanced insights. à The IT tool alone is not sufficient, time and money should also be spent on the product, process and people. The following findings were done when analysing Vente-Exclusive (VeX) and its S&OP related departments. Vente-Exclusive was acquired by Vente-Privee (VP) in 2015, which has driven them much more into internationalisation. VeX is now responsible for the fulfilment of the North European Region (NERO). The longer delivery times are a part of the flash sales business model, but measures can still be taken within the company, they might be able improve their operational process by reducing complexity, variations and perform activities in parallel, which will improve the throughput rate. The throughput rate is the number of items VeX is able to fulfil in a certain timeframe. Internal interviews have been conducted to get insights in the different S&OP related departments. A lack of communication and missing required tools are the key take-aways. Different delivery flows: B2B and B2C have also been analysed. Propositions of the S&OP integration are as follows: S&OP is a collaborative and connecting function, that supports on the strategic, tactical and operational level, not the day-to-day execution. There should be a direct reporting link with the senior management to ensure collaboration of all related departments, where the S&OP manager should make trade-offs that are in line with the company's strategy. This might be difficult as all related departments have their own conflicting metrics, targets and incentives. Different challenges of each department are listed, and it can be concluded that S&OP might be more useful and valuable from operational perspective, nevertheless the importance of the commercial teams is needed to tackle those operational challenges. In the newly developed process maps the S&OP function is placed in the middle and is in charge of making collaborative decisions on fulfilment centre, stock to add and capacity issues. But it is much more than just those 3 topics, any attention points of sales should be flagged in advance of the sales, so an appropriate solution can be found. In practice these decisions will be made in the S&OP meeting. All relevant departments should come prepared to the S&OP meeting, therefore a checklist for S&OP inputs, preparation for the S&OP meeting and the weekly S&OP meeting topics have been suggested. An MS Excel based tool is also proposed with different dashboards that should help in raising attention points to discuss at the S&OP meeting. The data input, done by the different departments, is an important element of the tool as it needs to be accurate and trustworthy for the S&OP process to work. Specific business KPIs are also suggested to ensure that the S&OP process stays on track and delivers the intended results. This project was able to address some of the pitfalls, but when actually implementing the S&OP process, there might be many more that VeX needs to deal with. Some recommendations are therefore mentioned at the end of the report.