S&OP Case Study: $650 Million Specialty Chemical Company

Company ProfilePublic specialty chemical industrial products company with operations in the US, Germany, Korea, and Mexico. More than 1 Billion pounds produced and supplied annually to 1800 customer locations worldwide for a wide variety of industrial applications. Company was the market leader in a capital intensive industry.

ChallengeThe Company just went live on SAP, with new processes, tools, and data sources. The Planning processes were loosely integrated with poor visibility of demand/supply balance. There were numerous service issues and late deliveries. Communication gaps between business, finance, and supply chain were common, and there was no linkage between volume forecasts for supply chain and financial forecast. The company desired to improve supply chain performance, reduce costs, and increase business profitability.

SolutionSales and Operations Planning was implemented along with designing new demand planning, supply planning, and capacity planning processes. Advanced Planning software (APO) was implemented to enable demand and supply planning. With the implementation of S&OP, all business plans were integrated into one single plan. The time horizon for these plans was extended to 18 months. Demand and supply plans were reconciled at the detailed and aggregate level and linked to the operating plan. S&OP was used to execute the business plan and plan for the resources and investments needed. Functional leaders were empowered to make critical decisions aligned to the integrated S&OP plan.

ResultsOver the next 3 years, business profitability increased by 80%. There was improved teamwork and alignment between functional areas doing what was in the best interest of the business. Other benefits realized include:

Forecast accuracy increased from 50% to 85% Supply Planning accuracy increased from 60% to 90% Revenue forecast accuracy increased from 50% to 97% On-Time delivery increased from 80% to 98%. Inventory level reduced by 40% Costs reduced by $53 MM over 3 years Net asset investment decreased by 25% ORONA increased from 5% to 13%