Sunsweet Growers Inc. is the world’s largest agricultural corporate dealing in dried tree fruits. It has its headquarters in Yuba City (California) and it processes and markets 40,000 cases of dried fruits every day. It is the global market leader of prunes. Like any other company, Sunsweet has issues with its supply chain management. Some of the constraints faced by the company are as follows: * Single limited source of supply Supply and demand beyond company’s control; supply determined by the weather whereas the market influences the demand side * Anticipated increase in demand during festive seasons was difficult to manage * Packaging of goods for international market was complex * Every operational department followed a different model, which necessarily did not collaborate well with other department procedures * Paper-based spreadsheet system lead to outdated data at hand.
Due to the above constraints, Sunsweet Growers faced the below problems: * Single source of supply was inadequate at times to satisfy market demands * Inventory management was not uniform with changing market trends * Scheduling and line utilization was inefficient * Paper-based spreadsheet system lead to outdated data at hand * Manual book keeping not optimal for big companies * Seldom problems were diagnosed in time Critical analysis took longer than usual, delaying management decisions * Outdated process lead to inefficient operational procedures * Monthly meetings were held as decision making data was not readily available * All these factors made instantaneous decisions difficult for the internal management Sunsweet Growers approached Zemeter with their supply chain limitations and inefficiencies and they advised their S&OP program to them. The aim of S&OP is to balance demand and supply on a standardized level, tailoring to the custom needs of the company.
S&OP advices companies on what steps to take in case of unexpected demand, supply shortages and production issues. S&OP has five stages: 1) Demand Visibility – To understand the nature of demand and its variability with time was crucial for internal staff and management decision. At this stage all the users from different departments got access to the same set of data and department targets. 2) Demand Planning – This stage delivered Sunsweet the complete forecasting solution together with planning a routine demand plan, monitoring and enhancing the plan.
This also included creating and updating statistical forecasts, adjusting for price variance and promotions, and monitoring orders and shipments. Demand Planner accumulated all this data and provided an objective method of balancing sales targets with operational directives. This resulted in better budgeting the operational costs. Demand Planning also included warning algorithms through e-mail alerts to the concerned staff. 3) Inventory Planning – This system simulated current inventory level with inventory history to identify trends and warn the stakeholders for contingency measures to be taken. ) Supply Planner – Here Sunsweet maintained a uniform labor force over a period of 15 months to understand the nature of production and supply. Once they were able to determine the production limit, they set production requirements (no need to rely on seasonal ups and downs). 5) Finite Scheduling – This stage set the daily operational objective for the cooperative society, which included handling fruit-size issues, material availability, overtime and downtime, change over times at packaging and work hour issues.
Prerequisite of implementing the S&OP was to get rid of all the old data to attain uniformity in the database. Using one set of data was optimal to get all the stakeholders in the supply chain to work effectively with one another. Next in line was to train all internal staff to cope with the new methods and procedures of the S&OP program, and to take care that the transition to the new system was as smooth as possible. As S&OP was implemented, Sunsweet noticed positive improvements in their business as well operational procedures.
S&OP’s distinctive five stages helped in the following manner: 1) Demand Visibility – This stage helped Sunsweet get rid of old data and leap into the realm of automated data compilation as a collective task. Therefore better communication between departments was necessary, giving rise to methodic and rapid decision making at any level. Sunsweet finally was able to accomplish a uniform database, comprehensible to any internal staff or management. 2) Demand Planning – Provided Sunsweet a complete forecasting tool wherein it collects data from various sources and renders the best available solution(s).
As different scenarios were generated, management could easily take economically viable decision(s). It also gave rise to an alert system that would warn concerning staff through emails of any potential crises, and thus avoid huge financial losses to the firm. Forecasts increased by 15-20% and took lesser time. 3) Inventory Planning – This system simulated recent inventory level with past inventory to identify trends and notify the stakeholders for emergency measures to be taken. As a result, order discrepancies were solved within 2-3 weeks. ) Supply Planner – Help the firm pan across its various suppliers and bring them together into the same platform. A policy in their workforce management would help their cause of a uniform production and supply, irrespective of seasonal changes. This stage protects the firm from being short on supply and prepares the firm for any sudden increase in market demands.
This lead to reduction in production lines, production line changeovers, inventory and transportation costs, and overtime dropped to 10% (from 30%). ) Finite Scheduling – This stage set the day by day operational goal for the conglomerate, which included handling fruit-size issues, material accessibility, overtime and downtime, change over times at packaging and work hour issues. 6) Meetings were held on a monthly basis prior to S&OP but now meetings can be held on a weekly basis due to the easy access to latest information. 7) With everyone having access to one uniform frequently updated database, Sunsweet was in a position to attain more customer satisfaction and reduce operational costs at the same time. ) Sunsweet was able to implement S&OP in half the time expected due to proper training and ease of use. 9) With frequent meetings and information readily available, decision making was quicker compared to days wasted using spreadsheets. 10) S&OP developed a positive synergy between the various departments, all working in harmony to accurately forecast the demand and supply conditions. Even though S&OP is a well designed supply chain model, it lacks in a few areas.
In addition to S&OP, I would suggest the following to better Sunsweet’s supply chain concern: a) Instead of having one limited source, Sunsweet can sub-contract smaller manufacturers to produce for them. This would enable Sunsweet venture into new markets and protect them in case of a sudden hike in demand. b) Tie up or partnerships with big retail shoppers like Wall-Mart can account for a chunk of inventory, and hence reduce costs and better manage inventory. c) Sunsweet can invest in green-houses and use them for cultivation and liberate their reliance on favorable weather. ) Introduce robots into the manufacturing plant to speed up certain processes in production and packaging. This would further reduce their need for human interference and also meet international hygiene standards. e) Hire in-house programmers to monitor the S&OP and customize the software algorithms if necessary. The programmers can also be used to train the staff on a regular basis regarding any updates in the system and troubleshoot any arising problem. f) Integrate CRM (Customer Relationship Management) into S&OP to better serve the clients on priority basis. Bigger customers will be happier with the level of service and commitment.