What’s the message?
Information use in the S&OP process
Hylke Reitsma
S2771799
MSc. Supply Chain Management
H.W. Mesdagstraat 7
9718 HA Groningen
+31653719879
hylkereitsma@gmail.com
First supervisor: prof. dr. D.P. van Donk
Co-assessor: dr. K. Scholten
University of Groningen
Faculty of Economics and Business
Master Thesis
20
thJune 2016
Acknowledgements
2 ABSTRACT
Purpose – This thesis aims to find out how procedural quality influences information quality perceptions and the way information is used in the S&OP process. The S&OP process is very information intensive which presents a challenge for its users to deal with this information effectively.
Design/methodology/approach – Exploratory interviews are held at eight multinationals in the process industry. By means of semi-structured interviews, 17 S&OP information users with different roles in the S&OP process are interviewed. Logic models in Visio facilitated the qualitative data analysis.
Findings – Reliability and credibility were experienced as significant information quality dimensions and led to different types of decision making. Procedural measures can serve as a means to improve those quality perceptions and can lead to direct conceptual information use or indirect instrumental information use.
Originality / Value – This research shows how a formalized process can be differently substantiated and serves as a benchmark for S&OP managers. Apart from showing differences in perceived information issues and its use, it shows how successful conceptual information use via procedural steps can lead to higher flexibility for the S&OP team to use information instrumentally.
Keywords Procedural quality, Information quality perceptions, instrumental information use, conceptual information use
3 CONTENTS
1. INTRODUCTION ... 5
2. THEORETICAL BACKGROUND ... 7
2.1 The S&OP process ... 7
2.2 Procedural quality ... 9
2.3 Perceptions of information quality ... 10
2.4 Information use ... 11 2.5 Conceptual model ... 13 3. METHODOLOGY ... 14 3.1 Research context ... 14 3.2 Respondent selection ... 15 3.3 Data collection ... 15
3.4 Qualitative data analysis ... 16
4. RESULTS ... 20
4.1 Procedural quality ... 20
4.2 Perceptions of information quality and use ... 22
5. DISCUSSION ... 27
5.1 Procedural control in the S&OP process ... 27
5.2 Information quality perceptions; implications for information use... 30
5.3 Other issues for information use and prospective research ... 32
6. CONCLUSION ... 33
6.1 Managerial implications ... 34
6.2 Limitations and further research ... 34
REFERENCES ... 36
4 FIGURES
Figure 1. Monthly S&OP process, adapted from Wallace & Stahl (2008) ... 8
Figure 2. Conceptual model ... 14
Figure 3. Example of data structuring ... 19
Figure 4. Procedural quality and information use ... 24
Figure 5. Procedural quality, information quality perceptions and information use ... 24
Figure 6. Example of a consensus forecast, adapted from Oliva & Watson (2009) ... 30
Figure 7. Emergent challenges and further research ... 33
TABLES Table 1. Information quality dimensions, adapted from Gustavsson & Wänström (2009) ... 11
Table 2. Information use framework ... 13
5 1. INTRODUCTION
Companies are aware of the value of information that facilitates performance. However, in instituting information and knowledge management, many companies are not sufficiently addressing the need of end users (O’Sullivan, 2002). Because decision makers often feel overwhelmed and distracted by having an overload of information, this leads to less than optimal results (Tokar, Aloysius, Waller & Williams, 2011). That is why firms should focus on the quality of their information as it improves decision making and enhances efficiency (Karim & Hussein, 2008). The business community awareness of information value does not translate well to the micro level, where users struggle with issues of information quality and have insufficient tools to deal with it effectively (O’Sullivan, 2002). This situation is also reflected in Sales and Operations Planning (S&OP), where information handling is an intensive process and is endangered by information based on speculations, like customer order information or challenges from manufacturing planning and control levels (Gustavsson & Wänström, 2009). Procedural quality of the process should ensure that decision making is based on accurate and consistent procedures (Poppo & Zhou, 2014). While participants are expected to make decisions, information may not always be present, or there may be a lack of clarity despite information being present (Oliva & Watson, 2011). This ambiguity is in conflict with the standardized nature of S&OP, which then raises the question of how these decision makers in the S&OP process perceive information quality and use it for their decisions.
6 S&OP should serve as a communication and decision making process, by looking at the product and volume mix and the company’s resources (Tuomikangas & Kaipia, 2014). Its main task is to assemble all the plans for the business departments into one integrated set of plans (McCormack & Lockamy, 2005). Although S&OP is inextricably linked and central to the entire supply chain, much research has focused on the external linkages of information sharing. The internal linkages of information sharing, which includes the connection between functional entities within the company, has been largely neglected by scholars (Barratt & Barratt, 2011). Oliva & Watson (2011) suggest that procedural quality should assure sound rules within and across these functions, but so far there is insufficient empirical evidence supporting this view (Ambrose, 2015). Micro-level perceptions of information quality in S&OP are missing, as they are not easy to match with macro-level approaches of structure or contracting (Oliva & Watson, 2011). Although data requirements in S&OP has been discussed, much of the observations were derived from practitioner literature rather than academic literature (Tuomikangas & Kaipia, 2014). Even in the broader context of operations management in which S&OP finds itself, very few studies have evaluated the effect of information quality on firm performance, partly because it had not been well conceptualized (Forslund, 2007). Moreover, a lot of previous research has implicitly presumed use of information, which makes it challenging to find an accepted framework of information use (Myrelid, 2015). A multiple-perspective view in S&OP is lacking, as previous research has relied only based upon single case studies or surveys (Tuomikangas & Kaipia, 2014). Given the substantial implementation costs of S&OP and the high degree of expected benefits, perceptions of its users at best-performing companies is required (Tuomikangas & Kaipia, 2014). This study aims to target these gaps by looking at information quality perceptions and use of information by the S&OP workforce (hereafter users), based on the procedural quality of the S&OP process. This results in the following research question: ‘Do perceptions of information quality influence the use of information by users in the S&OP process, based on procedural quality’?
7 better understand the intricacies of processes around information quality, and can provide some directions on how to communicate with stakeholders in their monthly S&OP cycle of meetings (Grimson & Pyke, 2007). Finally this study informs how S&OP users perceive figures, data, and other tools and how they behave and react to the provided information.
Section 2 will provide more details on the theoretical background, including the conceptual model. Section 3 explains how information users were selected and the respective data collection and analysis process. The outcomes and interpretation of results can be found in section 4 and 5. The concluding remarks as the managerial contributions are then stated in section 6.
2. THEORETICAL BACKGROUND 2.1 The S&OP process
S&OP is normally regarded as a monthly tactical planning process that balances supply and demand capabilities in order to bridge the company’s business strategic plan and the business functions and operations (Kjelssdotter Ivert & Jonsson, 2010). S&OP is a cross-functional ‘integrative device’, that allows managers to strategically direct the business, and align internal operations such as sales, R&D, marketing, manufacturing, procurement and finance (Thomé, Sousa & Scavarda do Carmo, 2014). This function of S&OP is also known as the internal S&OP which will be the focus of this research, without compromising the understanding that integration within the supply chain with both suppliers and customers is a prerequisite for S&OP to be successful (Feng, D’Amours & Beauregard, 2008).
8 In other words, eventually going back to the executive-level for decision making in those stages is frustrating. Middle managers and planners are empowered and responsible to make decisions based on interactions with other actors and their own interpretations (Lapide, 2004).
Figure 1. Monthly S&OP process, adapted from Wallace & Stahl (2008)
9 S&OP includes the CEO and his or her direct informers, which is where major decisions are reviewed and leadership decisions are made (Stahl, 2010).
So what we can derive is that information is largely important in S&OP as the process is very information intensive (Smith, Andraski & Fawcett, 2010). Thorough data gathering is required for demand and supply planning, and the abundance of data often disrupts clear-cut decision making. To overcome the issue of information overload, information is often compressed by means of integrated spreadsheets and graphical displays in its transfer to others (Stahl, 2010). However, oversupply of information persists, and managers often find themselves with a lack of the required proper information, which results in a paradox (Edmunds & Morris, 2000). Little is known though about how this paradox exactly pertains to the S&OP process and its users.
2.2 Procedural quality
One of the mechanisms that should guide the decision making process of S&OP is procedural quality. Empirical contributions for procedural quality in S&OP are thin, as it was first identified as such by Oliva & Watson (2011). They framed it as: ‘The degree to which a process continuously ensures that the rules of inference used to validate information, and to make decisions within and across functions, are sound’ (p.438). Despite scarce use of the explicit term, it is obvious that procedural aspects have received plenty attention in the S&OP context. Next to S&OP implementation manuals, several S&OP maturity models are established which are highly fixated around procedural steps (see Lapide, 2005; Grimson & Pyke, 2007). The cyclical nature of S&OP naturally requires high quality procedures to safeguard planning integrity (Ambrose, 2015). Cohen and Spector (2001) have shown that for individuals, procedural quality should assure the ability for free communication and redesign of procedures via supervisors. Furthermore procedural quality should assure users have access to detailed information with regards to planning activities, and that performance evaluations are conducted consistently without bias (Bellavance, Landry & Schiehll, 2013).
10 methodology. These procedural deficiencies relate to the tasks and algorithms to generate the forecast. It was proposed that procedural deficiencies could lead to informational deficiencies, which deflects users to work with the available information (Oliva & Watson, 2009). This study takes this stance forward by stretching this proposition over users in the entire S&OP process. It also accentuates the limited understanding of which intra-organizational factors lead to information quality perceptions and information use in an operations planning environment (Myrelid, 2015).
2.3 Perceptions of information quality
Information sharing is generally regarded as one of the first steps in improving supply chain performance (Huang, Lau & Mak, 2003). Nakano (2009) states that shared information can both be standardized (e.g. forecast, inventory, production data) and customized (e.g. demand fluctuations, operational constraints). Sharing these types of information in itself though, will not impact planning performance unless it constitutes high quality information (Hartono, Li, Na & Simpson, 2010).
11 to be useful in terms of completeness and conciseness (Popovič, Hackney, Coelho & Jaklič, 2012; Myrelid, 2015). The combination of the other dimensions will have an influence on the perceived credibility of information on the long run (Jonsson & Gustavsson, 2008). The earlier information overload issues are captured in the accessibility dimension, which suggests that information should not be too overwhelming, but is rather presented in a compact way (Gustavsson & Wänström, 2009).
Dimension Definition
Inherent Timeliness The extent to which the information is delivered in time and at correct intervals, i.e. not too often or too infrequent for the planning process
Reliability The extent to which the information provided to the planning staff is accurate
Completeness The extent to which the information is comprehensive for the planning tasks
Conciseness The extent to which the information can be used directly without reworking
Pragmatic Credibility The extent to which the information is credible, believable, and trustworthy for the information user Accessibility The extent to which the information is easy to access
when required
Table 1. Information quality dimensions, adapted from Gustavsson & Wänström (2009)
The six in table 1 will be the dimensions under study, because by distinguishing more dimensions to assess information quality it becomes harder for users to actually make information quality comprehensible (Gustavsson & Wänstrom, 2009). Some dimensions like security and validity of information have only been marginally covered. These dimensions will be excluded because they are not very relevant in the S&OP process. Other remaining quality dimensions are consistency, relevance, understandability and objectivity, these were found to overlap with other dimensions that are used more frequently (Gustavsson & Wänström, 2009). 2.4 Information use
12 may be ascribed to the ambiguity around its meaning, as it is used in many different settings, including academia and healthcare literature, for example in clinical decision making. Because measuring outcomes of information use is challenging, it may explain why researchers have refrained from studying it in the past (Case & O’Connor, 2016). Outcomes in this context reflects applying retrieved information to a task, knowledge formation or other effects on the user. Basically, there are two types of results in using information: either the information changes or reinforces the knowledge of the user (conceptual) or it leads to some task or decision to be made (instrumental) (Case & O’Connor, 2016). Conceptual and instrumental use of information are not two separate, isolated entities, but conceptual use is rather seen as a necessary condition of instrumental use (Todd, 1999). This hints at the bilateral role of information use, which intangibly informs, instructs, clarifies or socializes, or tangibly triggers actions and responses (Taylor, 1986, p.184) Decision making can be characterized as part of instrumental use of information, and has an extensive deal of literature related to it which will not be explored in depth in this study.
13 Coelho & Jaklič, 2012). This latter understanding supports the indication of this study that the organizational processes and its procedural quality should be clear-cut for users to use information appropriately.
Conceptual, instrumental and non-information use will be combined with categories of information use as proposed by Larsen (1985). These classifications are presented in table 2 and provide on a principal level how information is used. It is one of the scarce tools to put information use in concrete terms via straightforward classifications. It will be suitable for exploring information use in S&OP on a primary level. Conceptual use is considered as information under consideration or steps taken towards information use (validations, clarifications), whereas instrumental use relates to the ultimate choice of what to do; either it is rejected or action is taken.
Classifications of using information (Larsen, 1985) Type of use (Todd, 1999)
1. Information considered and rejected Instrumental
2. Nothing done with information Non-use
3. Information under consideration
Conceptual 4. Steps taken towards information use
5. Information partially used
Instrumental 6. Information used as presented
7. Information used and adapted to fit user’s needs
Table 2. Information use framework
2.5 Conceptual model
14
Figure 2. Conceptual model
3. METHODOLOGY
As stated previously, information quality is not measured in an objective way, but is subject to the perceptions of the users in the S&OP process. Also, the resulting use of information lacks a widely accepted approach (Todd, 1999). Conceptual information use has been recognized as a comprehensive term for ways of looking at the world and the subsequent spin-off of what is going on in people’s minds when they do something with information (Todd, 1999). This conveys an implicit need for in-depth interviews which initially target respondent’s perceptions and feelings, rather than the social conditions surrounding it (Crouch & McKenzie, 2006). Therefore this research will employ exploratory interviews to discover the specific thoughts and ideas of users, rather than confirming them (Deshpande, 1983). Hereby it also addresses the need posed by Tuomikangas & Kaipia (2014) to address multiple perspectives of the complex S&OP phenomenon, by studying both procedural quality in the S&OP process as well as the perceptions of the user, at best performing companies in depth. Exploration ultimately aims to uncover and justify new areas for research and is therefore not very focused (Voss, 2009).
3.1 Research context
15 argued that this would help to pinpoint both healthy procedures and rules as well as some weaker or flawed ones. As expected in the conceptual model, this would in turn lead to greater satisfactory around information quality and its use. Since different maturity models are in circulation and recognizing the S&OP stage is ambiguous, the requirement for this study was to have an S&OP process in place for several years at least. After commitments of several organizations, the process industry was found suitable to approach other organizations. More specifically, the organizations were operating in food processing, beverages, agriculture, tobacco, chemicals and steel.
3.2 Respondent selection
The exploratory interviews emphasized a focus on the S&OP user, which was the unit of analysis under scrutiny. In each organization a planner at the tactical or strategical level was interviewed, that is involved in the S&OP process. Hence, a planner at this position was expected to be involved in at least some important meetings within the S&OP cycle and is naturally involved at the tactical or strategical planning level, 3-24 months in the future. To assure speaking to decision makers in the S&OP process as well, a frequent information user in the S&OP cycle was detected and subjected to further interrogation on how information quality is perceived and used, and the process steps. Typically, representatives at the tactical or strategical level have substantial working experience in the planning environment and are well informed. By selecting two information users per organization, plenty of insights regarding both the process and personal perceptions ought to be captured. Partly due convenience, respondents occupied different types of positions. 17 respondents at 8 organizations were consulted which were all active in the process industry. The companies they represent differ in size and were expected to have their own ways of dealing with information. That is, the strategic importance of information assets is often still not understood and companies are still struggling of how to put information to work (Marchand, Kettinger & Rollins, 2000; Evans & Price, 2015). The overview of respondents is presented in table 3.
3.3 Data collection
16 around information input, quality and use. A semi-structured interview guide consisted of 15 questions. The interview guide was comprised in assistance with several academic experts in the field of operations management and is shown in appendix A. The guide addresses the users perceptions of information input quality and resulting use in his or her specific role, next to the phases, meetings, involved parties and responsibilities in the S&OP process. These questions were similar for respondents of the same organizations, which enhances data reliability (Voss, 2009). At the start of each interview, study benefits were explained and informed consent was obtained such that the organizations remained the right to stay anonymous. Interviews lasted between 58 minutes and 103 minutes and 16 numbers of interviews were conducted by two interviewers. After the interviews, respondents were given the opportunity to approve the transcriptions to improve reliability (Yin, 2009). Some follow-up questions via mail were found to suffice with regards to interview data that was unclear. Internal validity was assured by asking respondents to either send an S&OP deck in advance or to have it present at the interview, which resulted in useful S&OP documentation files and even an S&OP movie. Having these multiple sources of evidence (interviews, documentation, movie) helps to guarantee data triangulation (Yin, 2009).
3.4 Qualitative data analysis
Respondents Employees in
organization Method Users position Role of organization Interview time User 1
User 2 Local: 300 Worldwide: 50.000+ 2x interview, S&OP slide deck 1. Faculty Scheduling Manager/Supply Manager
2. Production/Supply Chain Director
Local 1. 99 min. 2. 86 min. User 3
User 4 Worldwide: 12.000+ 2x interview, report-out 1. Central Planning Manager Business Unit 2. IBP Manager
Global 1. 56 min. 2. 53 min. 3. 14 min. User 5
User 6 Netherlands: 1100 Worldwide: 45.000+ 2x interview, S&OP slide deck, daily KPI Excel file 1. European Supply Planner UK 2. European Supply Planner NL Regional 2. 61 min. 1. 101 min. User 7
User 8 Business unit: 10.000+ Worldwide: 40.000+ 2x interview, S&OP slide deck, report-out 1. Manager Supply & Inventory NL 2. Manager Supply & Inventory UK Regional 2. 84 min. 1. 79 min. 3. 18 min. User 9
User 10 Netherlands: 11.000 Worldwide: 40.000+ 2x interview, S&OP meeting structure documentation, S&OP slide deck, S&OP movie
1. S&OP Planner/analyst
2. Head of S&OP division Regional 2. 81 min. 1. 99 min. User 11
User 12 Worldwide: 1350 2x interview, S&OP slide deck, report-out 1. S&OP Planner Division 1 2. S&OP Planner Division 2 Global 1. 92 min. 2. 65 min. 3. 22 min. User 13
User 14 Netherlands: 1200 Worldwide: 75.000+ 2x interview, S&OP slide deck, reporting documents, e-mail 1. Supply Planner 2. Supply Planning Manager Local 2. 76 min. 1. 78 min. User 15
User 16 User 17
Worldwide: 22.000+ 2x interview, S&OP slide deck,
e-mail 1. Division Director Supply Chain 2. Enterprise S&OP Planner 3. Central demand manager
Global 1. 65 min. 2. 60 min. 3. 60 min.
19
4. RESULTS
The results derived from the analysis provide a better understanding of the user perspective in S&OP. The sections are structured in accordance with the set up that is based on the theoretical framework. In the first section the observations of procedural quality in the S&OP process are connected to the rather conceptual use of information. Thereafter, the implications of procedural quality for information quality perceptions and use is stated. Following the data structuring logic, the aggregate dimensions serve as a direction to address the main constructs of this study. Most quality aspects were found around demand forecasting, supply planning and IT systems. 4.1 Procedural quality
The general tendency of users is that S&OP should be fact driven and all the units and departments were set-up in such a way that they support this way of working. User 1 (U1): ‘S&OP should be fact driven’. U4: ‘The regular process, the standard, the drum-beat is like an iron, we just do not haggle with.’
Procedural quality in demand and supply
An important step in the ‘drum-beat’ in demand forecasting is validation. U2: ‘If you don’t challenge these guys from sales, then that is the beginning of the end’. Others confirm that validation is done on a strict basis. U4: ‘You should not underestimate that, locally there is a firm check, are we really going to reach the numbers we put in the forecast?’ U14 and U17 also confirmed this need. For U1 and U2 though, reorganization has decreased top management commitment to S&OP, resulting in staff turnover, politics, pressure and shifting priorities. Ultimately this has shifted the focus, with demand validation gaining less attention. U1: ‘It is not done very often anymore, often not at all, demand validation’. As important as challenging sales is, having more or less processes in place suppositionally to check the inputs is not always the answer. As we can see from U9 reports, account managers upload their demand for the next 3 years, the global account manager verifies it, then the sector head has a look at it, after which the demand planner checks if it is in line with their strategy. And still it happens in reality that U3 wonders how it passed these validations, arguably because steps are skipped in reality. So despite rules being in place, execution is no certainty. As U17 describes, ‘sometimes it feels a bit pointless, you can argue but sales is not inclined to change their forecasts’.
21 discussed with sales. U3 is present at the central demand review simply for notification and having background information and knowing what the developments are in the market. U14 tells about the supply chain manager that is present in the local demand reviews as a facilitator to challenge sales directly. Some users recognize the added value but are not at the level required, U9: ‘We are supply chain and now belong to the sales department. It used to be separated. It used to be such that “we are demand planning and you are supply chain, you get our information and.. Good luck.” But it is of course very important to understand ideas and strategies. We do it more often, but we should be involved in those meetings to understand which direction we are heading’. Some responds knew little about the discussions that lead to their input, U11: ‘Sales has their own sales review meeting. I do not know exactly what they discuss there, but we get the output from these meetings. And in this sales review, S&OP is discussed as well, which I believe is a standard topic on the agenda.’ It is remarkable that the S&OP process in which U11 is situated is slightly different from that of the others as well. Starting with the pre-S&OP meeting as a first step where supply and demand is balanced, sales and supply chain are responsible for their own meetings.
A procedural attribute that could disorganize information quality are KPI’s. Where most companies discuss forecast accuracy or forecast bias in their S&OP, U11 reported that they solely assesses forecast realization on product level, which he admits is not the most reliable KPI as it does not allow them to assess demonstrated sales volumes per item, but only the total volume. Suggestions for improvement are using MAPE forecasting in the future. U2 admitted that since the reorganization, he was not happy with the degree of significance of each KPI. If he was still part of general management he would put forecast accuracy as number one KPI, not sales results, profits or margins. ‘If your forecast accuracy deviates so much you should not get any bonus, maybe no salary. It has caused so much damage, it is absurd. We buy machines of over 5 million euro, that go into the basement hardly ever used, only because people promise to sell things they cannot guarantee.’ The quality preferences and decisions of the user in this situation are subordinate to the procedural pressures that a large reorganization entails.
22 Common interpretation and validation can also be improved at the operations side. Three users (U7,U8,U10) physically visit a production plant as a matter of comprehension, lowering the doorstep and remaining the right ‘feel’ with operations by picking up the data personally, but also to provide feedback. Since S&OP has all the data, they are able to identify risks in the longer term with greater accuracy. For U7&U8, a large risk was looming in the long-term at their operations capacity. U7: ‘We put it on the agenda as supply chain and made everyone aware. It was easiest to convince business, but the people at manufacturing that were operating the entire system, it was surprising how little feeling they had for it’.
Rules and procedures for conceptual information use
The procedural quality in the S&OP process appears predominantly related to the common interpretation and validation procedures. Recapitulating the above steps, this can lead directly to information use mainly in a conceptual form. This means that demand validation steps and sales integration steps are established in the S&OP procedures. The S&OP process should be fact driven but obviously some steps are skipped, apparently to a certain level there is some freedom to fulfill (ability to not consider or use data) the job role. The main idea of both validation and integration though, is to better comprehend the sales view and their logic. This is mainly a form of conceptual information use, taking steps towards instrumental use at a later stage with regards to supply and demand balancing decisions. The demand validation steps and integrative efforts are part of the procedures. Site visits to get the information for U7&8 were also captured in procedures, whereas for U10 this was more of a personal trait ‘something that I like to do, is just visit the sites to increase understanding’. The forthcomings are shown in figure 4.
4.2 Perceptions of information quality and use Perceptions of information quality
23 credible and can be used without rework. The credibility of the data source is extremely valuable. Even to the level that this data precedes strategic supplier decisions, U2: ‘based on those numbers we provided they built a new factory near to us, that is how important it can be’. Despite these procedural steps undertaken to improve information quality, this is not fully guaranteeing input that is of the right quality. A common struggle around the forecast upload by sales is the so called ‘hockey stick effect’, which is a structural issue of actual under sales compared to expected demand. 6 users explicitly acknowledged having to deal with this phenomenon at the moment. U11: ‘Sales is a daily complaint, the accuracy can improve for sure.’ Causes vary, but are mainly driven by sales targets and KPI’s that do not necessarily support the S&OP target of balancing supply and demand. U2 framed this as ‘political influences’. U7 has suggested to improve the information quality from sales: We tried to make a model that is able to make a forecast with 95% reliability, based on a number of input parameters, but in the end it did not work out. It is something we can improve. So firstly, become aware of the sensitivity of the input parameters, and secondly for the ones that have large impact, being able to provide more robust input. That is the way you should close the gap between plan and actual’.
Perceptions of information quality can differ despite data being largely equal. Two users which are responsible for running the demand & supply balancing together did not share the same opinion. U8: ‘With a score of 0 to 10, I would assign sales an 8. There are always improvements for the sales manager to give more accurate or realistic forecasts, but overall I think it is really mature.’ U7: ‘But forecasting volumes well, that is something our sales force is really bad at. They are often too optimistic’. Similar things can be seen for U3&U4. U3: ‘Some countries have a behavior problem, where they structurally sell 10% less than communicated in the plan. We as supply chain have a problem because we continually have to commit to extra inventory etc.’ U4: ‘The input must be good, that is essential. I am satisfied with those inputs’.
Figure 4. Procedural quality and information use
changeovers, extra costs and not to be harassed by supply chain directly in case of small disruptions. On the other hand, there were experiences of operations being overly ambitious, i.e not able to produce as much as they would like. Two users revealed this is driven by the financial structure and budgets that are provided to these plants. Main issues in terms of quality are reliability and credibility. U2: ‘Operations is not able to produce as much as they promised or have more capacity, data is unreliable, that is the beginning of the end.’. As U7 states, the information quality perceptions are captured in both facts and numbers as well as opinions. ‘The assumptions for unplanned outages by operations, in my opinion and I think we can prove that with numbers, is too optimistic’.
Timeliness and accessibility perceptions were mainly influenced by IT systems and software runs. U11: ‘What needs improvement is our system. We have made our planning in SAP APO, but reporting of the program is very limited, which means we have to put it in Excel. That happens via SAP BW, which is a lengthy process in which things go wrong.’ As a consequence of these lengthy processes it is hard to present different scenario’s. Making these scenario’s dynamic in meetings and being able to look at different options is hardly possible due to the time it takes. Therefore it is also hard to translate changes in the plan that occur in the meantime from the pre-S&OP to the S&OP, which is a struggle for this user. Inflexibility of systems was an issue that was prevalent at five other users as well. Where inflexibility mainly relates to the inability to run scenario’s multidimensional, standardize and integrate systems at all levels of the organization and to make systems user friendly. Accessibility mainly relates to interface of the systems. U13: ‘It can occur that you are day too late, because you had an incorrect view, mainly because of the interface. We have a lot of markets with different interfaces. There are so many knots, issues can occur everywhere.’ Timeliness mainly relates to the running time. U13: ‘You cannot say, let’s load this batch quickly. No, because loading a batch takes 6 hours’.
Information quality perceptions as a lead for information use
26 weekly or even daily. Sometimes it is a call: agree or disagree, we do not trust what you tell us and we choose to outsource, some of our factories can produce the same products. It is my responsibility to act based on data-facts and reach my service-level.’
So the conceptual step of agree or disagree serves as a lead for instrumental steps such as increased monitoring or outsourcing to other factories. User 3 designates trust as a factor, and says the call is based on gut-feel as well. There is some area to take decisions based on personal understanding.
A remaining matter of interest is how the users deal instrumentally with unreliable data from a source that lacks trustworthiness. Frankly the opinions differ. U1 confessed he follows the sales forecast regardless of his doubts: ‘S&OP should be fact driven. That implies that whatever the market will upload, is the truth, and that is what we will work with’. U11: ‘You know that the sales forecasts are unreliable. And then it is the question whether you can do something with that or not. We choose to say no, we do not change these numbers’.
U3 has an opposing view: ‘A country can say they always do 110, but if we see based on behavior that it is always 100, we will act on our own demonstrated bias volumes’. U7 has a similar view as U3: ‘If we see 10 months in a row that they sell 10 kilotons and say again we can sell a maximum of 13 then we say we do not believe you, we will work with 10’. Notice that most users speak in terms of ‘we’ and not in terms of ‘I’. U17 was very surprised to hear others sometimes follow demonstrated performance bias: ‘and what if sales can actually deliver those numbers? I think supply chain will have something to explain’. U7 admits that this is something they learned from experience and there is not a set time to deviate from the sales forecast.
27 number planning, we plan based on what the forecast provides us’. Again U3 has an opposing view: ‘Rather than having a one number forecast we have sort of a probability cloud around it. Instead of 100 we know now it is between 90 and 120. As supply we can plan more accurately because we know it has a bandwidth and not merely one point. It is an illusionary accuracy I would say in the forecast to give one number, say 105.’ U7 supported this view by U3. So from these results, we can see that users that act based on a ‘probability cloud’ still use information based on gut feel and experiences, but are more inclined to deviate from unreliable sales plans in the long term. In quality dimension terms the latter finding is also a trade-off of conciseness and completeness. U1&U11 make decisions based on data they know is not complete, but their trust in sales in terms of conciseness implies no rework is required. U3&U7’s decisions require more complete data, but is not as concise and needs additional interpretation and rework and systems that support this. These results are visually presented in figure 5.
5. DISCUSSION
The findings of this research suggest that procedural quality leads to information use in two types of ways. One is via control and validation steps that lead directly to conceptual use of information, that is, steps taken to improve information for instrumental use. Secondly, the procedural steps influence the way information quality is perceived, which leads to instrumental use of information. This section will look at the dominant role of procedural quality in the S&OP process and provides preliminary motives for different ways of using information. 5.1 Procedural control in the S&OP process
Imperative role of procedural quality
28 in planning can lead to higher levels of cross-functional integration as well (Nakata & Im, 2010). This research shows that lower levels of process formalization (procedural quality) in the form of limited validation and lack of common interpretation can lead to dissatisfactory information quality perceptions by those users. Common interpretation can be aided by cross-functional integration. Cross-cross-functional integration and collaboration in the internal S&OP and its impact on performance is proven a great many times in the past (Thomé, Sousa & Scavarda do Carmo, 2014). While broader participation and accountability to forecasts across functions also ensures more commitment to act effectively in realizing operational benefits from forecasting (Doering & Suresh, 2016). The integration with sales in this study as part of procedural quality was assessed by supply being present in at least one of the demand meetings. Wallace & Stahl (2008) provide the rationale that supply is involved in the demand meetings in case of new product introductions, in that case there is more emphasis on the supply side, and companies know better what to make than what to sell. However, users that did not attend the sales meetings had new product introductions too, and users that did attend the meeting were there mostly for informative reasons or to validate the plans, in this study labeled as conceptual information use. Procedural interests in S&OP are really strong and to deviate from the drum-beat is not very common under normal circumstances. Some exceptions were found by visiting plants personally to improve data reliability, but normally personal needs for information quality that are not captured in procedures, are difficult arrive at for the common S&OP user. Improvements for reliability and credibility
It is suggested in this study that next to common interpretations, procedural validation leads to higher procedural quality as well. However, there is few organizationally-based research and little is known about whether validations make optimal use of the available information. In fact, several articles advocate that these ‘overrides’ are to be avoided in many common situations and that they do not systematically improve the forecast accuracy (Fildes & Goodwin, 2007). In many cases, collaborators are simply checking for reasonableness and are actually competing with the statistical forecasting tool for reliability, which may explain why some steps of judgmental forecasting are skipped at some organizations, or why users experience a sense of pointlessness in the validation steps.
29 (Oliva & Watson, 2009). Oliva & Watson (2012) have proposed blind spots and incentive alignment as causes for this. Where blind spots are unintentional areas of ignorance and where incentive alignment refers to power and politics. Sales has the ability to influence the forecast because they have extra resources, customer demand information in this case. To accomplish both integration and overcome such intentional biases, consensus forecasting is suggested (Oliva & Watson, 2012). This is the installment of a neutral body or team which could minimize the political influences of forecasting (Deschamps, 2004). In a former case study by Oliva & Watson (2012), this changed the silo culture of functional departments pushing their own agenda into justifying the sources of the forecasts and made the consensus forecast more acceptable for the rest of the organization. In this way incentives are provided that align with improving forecasts rather than improving sales (Singh, Raman & Wilson, 2015).
30
Figure 6. Example of a consensus forecast, adapted from Oliva & Watson (2009)
5.2 Information quality perceptions; implications for information use Perceptions of information quality
Main issues in relation to information quality perceptions were found in reliability and credibility factors. The political behavior by sales that causes these unreliable forecasts is known in literature and the fight for scarce organizational resources has been described in depth (Deschamps, 2004; Mello & Stahl, 2011). However, this study has found that these findings do not just stem from overoptimistic sales, but equally from operations. The political and opportunistic forces led operations to compensate by either over or underselling capacity. It seems that academic literature has been not been addressing the latter phenomenon in great detail (Player, 2009). In instrumental terms, users were more inclined to adapt the information to their own needs, which is to correct the operational forecast. The control at the operations side is simply larger, because the data is more reliable. IT systems offer the ability to intensify monitoring, making the data both more accessible and timely available. Accessibility and timeliness of data was not a large issue in this study, which might come as a surprise as empirical research suggests that availability of internal data is the top area for improvement in S&OP (Fildes & Petropoulos, 2015).
Instrumental information use
31 Whereas on the other side, a lack of validation and integration leads users to one-number forecasting, or use information as presented. So not only do these procedural steps aim to improve the quality of the data, indirectly it also allows the S&OP user that balances supply & demand more leeway to interpret and use the data to its favour. Because of the validation and integration, the user has more insights on trends and market developments. The political power of scarce resources, or customer demand information, shifts to the S&OP user. These extra resources can aid the S&OP user to justify decisions that are taken, and provides him or her with more flexibility to use the information.
32 5.3 Other issues for information use and prospective research
This study identified that the ability to use information should be supported by organizational resources to provide the decision maker with more flexibility to interpret and use information. One way to this is via information systems, which is found to have positive effects on flexibility (Hadaya & Cassivi, 2007). Usually advanced planning systems are required in environments where more simple types of planning methods cannot address the complex trade-offs between competing priorities well (Kjellsdotter Ivert & Jonsson, 2014). Users found that IT systems were inflexible in supporting their needs for decision making. This study also found that lack of IT support leads to low perceptions of quality in terms of timely and accessible information. This can partly be explained by the difficulty to incorporate planning and scheduling systems in a similar framework. In the planning stage, the objective is typically to minimize cost based on volumes, when in fact the scheduling stage might have aims to minimize time. While also the time phases of these systems may not always overlap (Kreipl & Pinedo, 2004). Ideas for further research in this regard are shown in figure 7.
33
Figure 7. Emergent challenges and further research
6. CONCLUSION
34 reserved than for operations. A larger sense of control for operational planning is experienced due to the ability for monitoring. To deal with situations like above, incentives can be developed to reward the presenting of most reliable information and acting accordingly. Also the company’s culture should, despite having ambitious programs, embrace and encourage trustworthy sales-forecasting.
Different perceptions of quality by users in the same organization has been identified, which may be ascribed to bounded-rational behavior. Information is partly uncertain and due to subjectivity, users can assign certain sources as more reliable than others. Bouded-rationality may explain how different users handle information. The installment of consensus forecasting and a neutral body to guide this process can be helpful. Information technology should also provide support in this regard. Quick and accessible information use was complex for most IT systems. Although the lack of IT support may not seem as a supply chain responsibility, a planning & optimization department as part of the supply chain team can be established as an assurance to fast and accessible information. A remaining and underexposed area of interest that was identified in this study is how to evaluate decision making and provide feedback. 6.1 Managerial implications
The idea of this study provides a benchmark for organizations in the process industries to see how other users react to matters of contention within the S&OP process. Some specific instrumental types of information use have been labeled as effective actions and are measures that managers can take forward in their own S&OP. In terms of S&OP advancements, best practice examples to assure high quality can be reached by means of effective demand validation, sales integration, the right personal profile, organizational identity, physically visiting plants for input, a planning & optimization team for IT systems and structural evaluation. Depending on the size of issues and particular need for improvements, it is up to the managers to consider what is beneficial in terms of investments and corresponding yields. This study offers a number of insights and ways of information management practices to handle perceived areas of discontent by users.
6.2 Limitations and further research
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41 APPENDIX A: INTERVIEW PROTOCOL
1. Kunt u kort beschrijven welke producten uw organisatie produceert en aanbied? a. Context/omgeving
b. Aantal medewerkers / grootte van de organisatie c. Netwerk waarin de organisatie zich bevindt 2. Wat is uw functie en rol binnen de organisatie?
3. Kunt u beschrijven hoe het S&OP proces eruit ziet en wat de doelen van dit proces zijn?
a. Fases
b. Betrokken partijen
c. Frequentie van de meetings d. Horizon
e. Sinds wanneer wordt S&OP gebruikt?
4. Zijn er specifieke redenen waarom het S&OP proces op deze wijze opgezet is? Hoe is het proces afgestemd op de organisatie?
a. Worden de doelen behaald?
b. Welke stappen in het proces zijn goed ontwikkeld? Waar bent u echt tevreden over?
c. Welke stappen in het proces zijn minder ontwikkeld en vergen verbeteringen? d. (Ben je op de hoogte van hoe dit proces zich weerhoudt ten opzichte van andere
organisaties?)
5. In welke meetings aangaande S&OP bent u betrokken, en welke andere partijen zijn aanwezig tijdens deze meetings?
6. Kunt u een van deze meetings in detail beschrijven? a. Betrokken partijen
b. Informatie input (intern en extern) c. Informatie overdracht/uitwisseling d. Informatie output
e. Genomen beslissingen
f. Zijn alle meetings opgezet op deze wijze?
7. a. Dragen alle betrokken partijen op dezelfde wijze bij aan de input, overdracht/uitwisseling en output van informatie?
b. S&OP is een cross-functioneel proces, in hoeverre wordt de samenwerking belemmert met
het oog op bijvoorbeeld andere doelen en cultuur op verschillende afdelingen? 8. Wat doet u met de informatie van een S&OP meeting, in uw specifieke functie en rol
42 b. Bruikbaarheid van de informatie
c. Verbetermogelijkheden met betrekking tot de kwaliteit, bruikbaarheid en aanwezigheid van de informatie.
d. Gesignaleerde issues en vervolgstappen (wanneer iets niet naar behoren is, wat voor stappen worden er dan vervolgens ondernomen, kijkend naar de kwaliteit?) e. Zijn er bepaalde richtlijnen die gevolgd moeten worden (kwaliteit, bruikbaarheid)?
(Zijn er eisen vanuit de organisatie met betrekking tot de informatie, veel controle of veel vrijheid mbt input en output?)
9. Hoe worden de uitkomsten van S&OP gedeeld met anderen (verschillende lagen) en wat doen zij met deze informatie?
10. Hoe is risicomanagement inbegrepen in S&OP? a. Methoden, bijvoorbeeld scenario planning
b. Risico types, wat is de afweging om iets mee te nemen in S&OP?
11. Zijn er onvoorziene omstandigheden (abrupte zaken) opgetreden die binnen het proces meegenomen zijn? Beschrijf de impact die deze omstandigheden hadden op de S&OP cyclus (bijvoorbeeld: weersomstandigheden, brand in een fabriek)
Denk aan een specifiek risico met een grote impact dat inbegrepen was in het S&OP proces 12. Beschrijf deze situatie in detail, en hoe dit risico het reguliere proces heeft beïnvloed
a. Veranderingen aangaande informatie overdracht, meeting en het proces b. Waarom zijn deze veranderingen gemaakt?
13. Wat was de invloed van het S&OP proces op de daadwerkelijke impact van het risico? (terugkijkend op dit risico, is er op de juiste manier geanticipeerd?)
Denk aan een specifiek risico met een medium impact dat inbegrepen was in het S&OP proces
14. Beschrijf deze situatie in detail, en hoe dit risico het reguliere proces heeft beïnvloed a. Veranderingen aangaande informatie overdracht, meeting en het proces
b. Waarom zijn deze veranderingen gemaakt?
15. Wat was de invloed van het S&OP proces op de daadwerkelijke impact van het risico? (terugkijkend op dit risico, is er op de juiste manier geanticipeerd?)
