Balanced S&OP: Sunsweet Growers’ story
In most supply chains, the key constraint lies either on the supply side or the demand side. But for dried-fruit
producer Sunsweet Growers, both supply and demand are determined by factors beyond the company’s
control. To operate more effectively in this doubly constrained environment, Sunsweet updated its old sales
and operations planning (S&OP) program with new tools and processes. The new S&OP program helps not
only to balance supply and demand but also to sustain that balance.
By Harold Upton and Harpal Singh -- Supply Chain Management Review, 3/1/2007
The supply chain today is becoming increasingly complex. Outsourcing and contract manufacturing are
increasing, while at the same time, more and more companies are striving to achieve higher levels of customer
service. Because of these new challenges, more large and small companies are recognizing that a successful
sales and operations planning (S&OP) program can be the key to managing an effective supply chain. In
simple terms, S&OP can be viewed as a process to bring together the business organization on a regular basis
to make effective decisions on how to reconcile conflicts and develop a profitable game plan.
S&OP has been a supply chain discipline for more than a decade. In the
past, however, not many companies had the tools or knowledge to
implement it effectively. After 2000, however, companies became better
educated and realized that the S&OP process is not entirely an information
technology implementation program.
The following case study from Sunsweet Growers, a California-based dried
fruit producer, shows the results of implementing a successful S&OP
program. The key to Sunsweet’s S&OP program was bringing together its
organization around one set of data to develop a profitable plan.
A Look at the Challenges
Sunsweet Growers has many of the same supply chain management
challenges as other manufacturing environments. (For more on Sunsweet
Growers, see sidebar.) Yet these challenges are compounded by a number
of variables that can affect production, including weather and crop yield.
Unlike most industries where production can be controlled, the dried fruit
industry has little control over how much inventory it produces.
As a cooperative, Sunsweet’s access to raw materials is limited by its
network of growers, and the planning process must take this into account.
When there is a bumper crop, Sunsweet has to manage the sales
throughout the year to utilize the crop. Conversely, when there is limited
supply, Sunsweet has to fairly meet the demand.
In the past, members of Sunsweet’s grower cooperative had typically
produced an overabundance of plums used for making prunes. To address
the oversupply situation, farmers began cutting down some of the plum
trees in 2003. With fewer trees to harvest, California experienced two
unusually cold and wet growing seasons, causing crop yields to fall to only
24 percent of a normal harvest in 2004 and 50 percent in 2005. Sunsweet,