What are the constraints on Sun sweet Growers’s supply chain?
Your assignment is to read the case on the use of IT in supply chain management, and answer the questions given in the end of the case in a report format. Your report should be no more than 2-3 pages long (max 700 words). You may cite references, but not mandatory. The inference from the case and answering the questions depends on your understanding of the case, the utility of IT, and coherent critical thinking.
Sunsweet Growers Cultivates Its Supply Chain
Sunsweet Growers Inc. is an agricultural cooperative headquartered in Yuba City, California, and is the largest handler of dried tree fruits in the world. Sunsweet processes and markets 40,000 cases of dried fruit every day. In addition to dried cranberries, apricots, pineapples, and many other fruits, Sunsweet produces more than 50,000 tons of prunes annually for over one-third of the global market. With 400 member-owners of orchards located primarily in the Sacramento and San Joaquin valleys of central California, Sunsweet has unique supply chain management issues. Most companies are constrained by either demand or supply, but not both. But in Sunsweet’s case, both demand and supply are determined by factors that the company does not control. Sunsweet cannot control its supply, which is determined by the weather and growing season, or its demand, which is set by the market.
Like many manufacturers, Sunsweet sees spikes in demand for its products around holidays, such as Christmas and Easter. The growers harvest their fruit in August, September, and October, triggering a furious effort at the processing plant to dry, store, and package the fruit for delivery to retail stores. However, with the source limited to 400 growers in one geographic area, the supply of fruit varies significantly from year to year. When demand peaked around the holidays, Sunsweet often found itself shelling out extra money to pay workers overtime in order to fulfill its orders. Scheduling and planning the production and distribution of dozens of varieties and sizes of fruits in packaging bearing 20 different languages was a complex operation.
Sunsweet needed to improve scheduling and line utilization while reducing inventory, transportation costs, and order lead time. To address these supply chain management issues, Sunsweet adopted a sales and operations planning (S&OP) program, which seeks to balance demand and supply on a regular and formal basis and keep them balanced as conditions change. S&OP helps businesses routinely handle unexpected events such as unanticipated demand, shortages in supply, and production disruptions. Prior to implementing S&OP, Sunsweet managed its supply chain with a paper-based spreadsheet system. That system became increasingly inadequate as the business grew more complex due to outdated data, difficulty in supporting collaboration, and a lack of powerful tools for representing the business problem. Sunsweet’s planners spent too much managing the spreadsheets, and performing tasks such as cost analysis often required up to three days of work. The company wanted to perform planning and analysis tasks in hours, not days, and the ability to model multiple versions of a production plan to schedule its plant production resources more efficiently. Sunsweet found the solution in the Zemeter S&OP supply chain management suite from Supply Chain Consultants.
With Zemeter replacing the old Excel-based system, Sunsweet revamped its forecast meetings. Previously, each group involved in the supply chain went to those monthly meetings with their own set of data and little understanding of any other department’s data. One of the first, and most important, steps that Sunsweet took under its new S&OP project was to scrub all of its data and unify them in one database. Using one set of data was key to getting all supply chain participants to work most effectively with each other for the good of the whole cooperative. Of course, getting line manufacturing supervisors, customer service representatives, schedulers, salespeople, engineers, and others on board with the new program required careful change management. Sunsweet’s managers realized that it was important to show the value of S&OP early in the transformation. Such value would be demonstrated in the first phase of a five-phase implementation—demand visibility. By its very nature, improving demand visibility necessitated better communication and decision making at every level. It was also during this phase that all of Sunsweet’s various groups first gained access to the same data and each other’s goals.
Sunsweet needed just four weeks to implement the demand visibility phase. By its end, Sunsweet had also established parameters for training users, tested the scalability of the program, and initiated the program without disrupting the existing workflow. The next phase of the S&OP project was demand planning. This phase provided Sunsweet’s complete forecasting solution, which, in addition to providing a demand plan routinely, tracked and maintained improvements to the plan. Specific capabilities included creating and updating statistical forecasts, preparing plans for price changes and promotions, and analyzing demand data such as orders and shipments. Zemeter’s Demand Planner module analyzes input from multiple sources and outputs the best plan from the proposals. Sunsweet gained an objective method of balancing sales forecasts and operational plans. Demand Planner also helped Sunsweet improve the accuracy of its operational budget.
The demand planning phase included implementation of an early-warning system that dispenses e-mail alerts to the proper employees under various circumstances. The alerts give departments a head start in reviewing metrics when events dictate that plans might need to be altered to keep operations in sync. For example, an increase in new customers or a change in the most popular items for a particular customer would be cause for a review. Continuous planning taking into account the latest available data became a key element of the company’s business processes.
Inventory planning was the third phase of the S&OP project. The new inventory systems calculated current inventory and used data about inventory history to detect trends and predict problems before they caused significant losses. In phase four, Sunsweet addressed supply planning. The cooperative added a Supply Planner module to raise the effectiveness of planning across its network of suppliers, with particular attention to maintaining a uniform labor force throughout the year. By taking into consideration the limits on production and supply in conjunction with a 15-month rolling forecast, Sunsweet evened out its production requirements instead of basing them on seasonal demands. The fifth phase of the implementation was finite scheduling, which had to do with the daily operational activities at the cooperative’s plant headquarters. Finite scheduling handles fruit-size issues, material availability, overtime and downtime, changeover times on the packing lines, and other shift and workday oriented issues.
Prior to implementing the S&OP program, Sunsweet left tasks such as sales forecasting, operational planning, inventory planning, and finite scheduling to monthly meetings using summarized sales information. These meetings resulted in a tendency to meet sales forecasts and customer requirements with little consideration for operational costs. With Zemeter in place, Sunsweet moved its planning processes to weekly meetings using the latest information. With everyone sharing the most up-to-date information about finite scheduling, daily production, and inventory levels, Sunsweet was better positioned to meet customer demands without throwing off operational costs and long-term production plans.
Sunsweet achieved its return on investment in its S&OP system in about half the time it anticipated—six and a half months—while the implementation was still ongoing. Sunsweet improved the accuracy of its forecasts by 15 to 20 percent while reducing the amount of time necessary to make forecasts. The early warning e-mail alert system moved up responses to problems such as supply shortages and order discrepancies by two to three weeks. Planning and cost analysis tasks that used to take days using spreadsheets are now completed in four to five hours. Information from the system enabled Sunsweet to reduce the number of production lines, production line changeovers, inventory, and transportation costs, and cut overtime from 30 percent down to 10 percent. Another by-product of the program was a more efficient and collaborative environment. The integration of data across the company ushered in cross-functional metrics, such as measurements of how well current inventory supports forecasts.
Once the S&OP program was implemented, several obstacles remained. In some cases, the problem was modern supply chain software, which is very liberal in permitting custom configurations. As the circumstances surrounding an organization’s business processes change, workers may find it difficult to make the necessary changes in the custom-configured software. Instead, with easy access to desktop productivity tools, they introduce ad-hoc solutions into the process, thereby weakening the mainstream system. Sunsweet mitigated this concern by incorporating the desktop into the integrated S&OP system. Employees were still able to work with data on their desktops, but the scrubbed and validated data on the system remained reliable. In some supply chain planning implementations, only a few planners are responsible for the bulk of the application setup. When these planners move on to other tasks or other jobs, they take the knowledge of the initial setup methodology with them. Sunsweet avoided this complication by involving a wide swath of the organization in the planning phases. Furthermore, a large portion of the organization maintains access to the integrated data.
Another complexity of S&OP is that it addresses problems in the supply chain before they surface. This can create a false sense of security and lead to the conclusion that planning is no longer a critical issue.
Rather than remaining dedicated to continuous planning, an organization may drop it as a high priority and begin to streamline the process. Sunsweet still confronts this issue regularly, looking for ways to stress that continuous refinement and improvement are paramount to a successful S&OP. Successful S&OP programs include processes to sustain them. Among these are continuing education and training for departments whose decisions impact the sup- ply chain; encouragement of management training; ensuring transparency of decisions affecting the supply chain and supply chain data; development of a structure and budget that leave room for responding to crises; and recognition of achievements.
Today, Sunsweet is more successful at deploying its assets to satisfy demand projections. The cooperative has reduced inventory and transportations costs.
Harold Upton and Harpal Singh, “Balanced S&OP: Sunsweet Growers’s Story,” Supply Chain Management Review, March 1, 2007; Jane Lee,
“Making Your Supply Chain a Competitive Advantage: Implementing S&OP,” www.supplychainbrain.com, accessed June 6, 2007; Amy Roach Partridge,
“Unwrapping Seasonality Challenges,” www.inboundlogistics.com, November 2006;
Chris Chiappinelli, “Sales and Operations Planning: The New Crystal Ball,”
www.managingautomation.com, January 22, 2007; “About Sunsweet,”
www.sunsweet.com, accessed June 6, 2007; and Jim Wasserman, “Growing Globally,” The Sacramento Bee, December 4, 2005.
1. What are the constraints on Sun sweet Growers’s supply chain?
2. What problems did Sun sweet Growers encounter as a result of these constraints? What was their business impact?
4. How did S&OP software help Sun sweet Growers better manage its supply chain?
5. What additional ways can you think of for Sun sweet Growers to ease its supply chain concerns?