Development of the S&OP process at Seco Tools AB - Aligned with today´s supply chain planning processes Samuel Jerlström Hultqvist Sofia Wikberg Examensarbete LIU-IEI-TEK-A--14/01850--SE Institutionen för ekonomisk och industriell utveckling Produktionsekonomi Development of the S&OP process at Seco Tools AB - Aligned with today´s supply chain planning processes Samuel Jerlström Hultqvist Sofia Wikberg Handledare vid LiU: Sayeh Noroozi Examinator vid LiU: Joakim Wikner Handledare hos Seco Tools AB: Richard Jansson Handledare hos Seco Tools AB: Suzann Ackesten Examensarbete LIU-IEI-TEK-A--14/01850--SE Institutionen för ekonomisk och industriell utveckling Produktionsekonomi ACKNOWLEDGEMENTS This thesis has been the final part of five years of studies at Linköping’s University. We will therefore like to take the opportunity to say thank you to our teachers and students for making those five years valuable, filled with joy, and worth remembering. The thesis has been conducted at the company Seco Tools AB during 20 weeks with start in January 2014. We will like to thank everyone involved who have participated with their time and knowledge to make this thesis possible to accomplish. Thanks are directed towards the supervisors Suzann Ackesten and Richard Jansson for helping us conduct the thesis and for the feedback you have given. Also, thanks to Weronicka Widén for driving us to work every morning. Not to forget is the time Håkan Nilsson at AstraZeneca in Södertälje was able to make available in his busy schedule. The information you shared with us was very much needed to understand S&OP even more. Thank you Håkan. Especially, thanks goes to Sayeh Noroozi, our supervisor at Linköping’s University, who has been guiding us through the thesis and provided us with valuable feedback and opinions. Also for the great deal of patience and passion you have shown. Without your feedback we would not be where we are today and the thesis would not have been the same without your input and reflections. We also want to thank our examiner, Joakim Wikner. You have provided us with valuable opinions of a greater perspective. We also like to thank our opponents Henrik Håkansson and Anton Heyl. You guys have helped making sure the thesis can be well understood by people without advanced S&OP knowledge. It has been a challenging and yet fun part to write this thesis. We hope it will come to use at Seco Tools and that any other readers find it as interesting as we do. Linköping, 2014-06-09 ______________________________ ______________________________ Samuel Jerlström Hultqvist Sofia Wikberg I II EXECUTIVE SUMMARY Title: Development of the S&OP process at Seco Tools AB – Aligned with today´s supply chain planning processes Background: Companies strive to produce as close to customer demand as possible to reduce the cost, inventories, etc. One process that deals with this issue of balancing demand and supply is Sales & Operations Planning (S&OP). Seco Tools is a company with their head-office located in Fagersta, Sweden, which is experiencing high inventory levels and a need of cutting cost. The ongoing project Supply Chain Planning at Seco Tools resulted in the implementation of a new software which enables them to improve demand, inventory, and supply planning. As a result of the improved planning ability, a new S&OP process is developed and in need for improvement. Purpose: The purpose of this thesis is to evaluate the current S&OP process from the Supply Chain Planning project and to suggest future improvements for Seco Tools AB. Research objectives: 1. Study and describe the current S&OP process at Seco Tools. 2. Analyse and identify differences in Seco Tools’ S&OP process compared to the literature and a benchmark company. 3. Perform deeper analyses within financial integration and the use of KPIs in Seco Tools´ S&OP process. 4. Suggest future improvements to Seco Tools regarding their S&OP process based on the identified differences from research objective 2 and the deeper analysis from research objective 3. Method: The planning report set the framework for the carrying through of the thesis. A literature study regarding S&OP and a case study performed at Seco Tools regarding their S&OP have been done in parallel. Seco Tools’ S&OP process has been studied and described with the help of interviews, observations, and internal documents. Analysis was made where Seco Tools S&OP was compared to the theoretical S&OP and the S&OP at AstraZeneca. The analysis led to recommendations to Seco Tools regarding improvements in their S&OP process. Conclusions: Two opportunities for improvement were highlighted during the analysis of Seco Tools S&OP. They were financial integration and the use of cross-functional KPIs covering all the departments that were suggested to be involved in S&OP at Seco Tools. Seco Tools should integrate their finance in the process to compare S&OP against the business plan, and the company’s strategy should be well understood by the participants in S&OP. The knowledge of the company’s strategy together with the right authorities in the process will improve the decision making in Seco Tools’ S&OP. Seco Tools also need to implement an S&OP scorecard with KPIs that covers all departments in the company and the strategy as well. This helps to further develop cross-functionality and to early on make root cause analysis of identified problems. Cross-functionality and KPIs are believed to be general recommendations that all companies can use as well, not only something that Seco Tools can take advantage of. A template for an S&OP scorecard especially for Seco Tools has been made. It contains 16 cross-functional KPIs covering all steps and departments involved in S&OP at Seco Tools. III IV SAMMANFATTNING Titel: Utveckling av Seco Tools AB:s process för sälj- och verksamhetsplanering (SVP) – i linje med dagens logistikplanerings-processer Bakgrund: Moderna företag strävar efter att styra deras produktion så nära kundernas efterfrågan som möjligt. Detta för att till exempel skära ner på kostnader och lagernivåer. SVP är en process som syftar att anpassa produktionen efter efterfrågan. Seco Tools med huvudkontor i Fagersta har haft höga lagernivåer och ser ett behov av att skära ner på kostnader. Seco Tools pågående projekt Supply Chain Planning har resulterat i en implementering av en ny programvara som möjliggör effektivare efterfråge-, distributionslager- samt produktionsplanering. Den förbättrade planeringsförmågan har gjort att deras SVP-process är i behov av att uppdateras och vidareutvecklas. Syfte: Syftet med examensarbetet är att utvärdera SVP-processen som framtogs genom projektet Supply Chain Planning för att sedan föreslå förbättringsåtgärder åt Seco Tools AB. Forskningsmål: 1. Undersök och beskriv Seco Tools nuvarande SVP-process. 2. Analysera och identifiera de skillnader Seco Tools SVP-process har i jämförelse med den teoretiska och den hos benchmarkföretaget. 3. Utför djupare analys inom finansiell integration och användandet av KPI: er i Seco Tools SVP- process. 4. Föreslå förbättringar för Seco Tools gällande deras SVP-process baserat på skillnaderna identifierade i forskningsmål 2 och den djupare analysen i forskningsmål 3. Metodik: Planeringsrapporten satte ramarna för genomförandet av examensarbetet. Litteraturstudier och en fallstudie på Seco Tools, båda gällande SVP, utfördes parallellt. Seco Tools SVP-process undersöktes och beskrevs med hjälp av intervjuer, observationer och Seco Tools interna dokument. En analys gjordes där Seco Tools SVP jämfördes mot en teoretisk SVP och AstraZenecas SVP. Förbättringsförslag kunde sedermera ges till Seco Tools angående deras SVP-process utifrån analysen. Slutsatser: Analysen synliggjorde två förbättringsmöjligheter för Seco Tools SVP. Dessa var finansiell integration och användning av tvärfunktionella KPI: er som spänner över de funktioner som föreslogs skulle vara involverade i Seco Tools SVP. Seco Tools bör ha finansiell integration i processen för att ha möjlighet att jämföra deras SVP med affärsplanen samtidigt som företagets strategi borde vara kommunicerad ut till medarbetarna som arbetar med SVP. Kunskaperna om strategin tillsammans med rätt befogenheter att fatta beslut enligt strategin skulle förbättra beslutsprocessen i Seco Tools SVP. Seco Tools behöver även implementera ett SVP-scorecard med tvärfunktionella nyckeltal som täcker alla avdelningar och även strategin. Det skulle förbättra tvärfunktionaliteten och göra att de snabbare kan hitta problem och göra grundorsaksanalyser. Tvärfunktionalitet och nyckeltal är något som alla företag skulle kunna ha nytta av och inte bara av de 16 tvärfunktionella nyckeltal som föreslagits. V VI