Antecedents to effective sales and operations planning
| Date | 11 July 2016 |
| Published date | 11 July 2016 |
| Pages | 1279-1294 |
| DOI | https://doi.org/10.1108/IMDS-11-2015-0461 |
| Author | James Anthony Swaim,Michael Maloni,Patrick Bower,John Mello |
| Subject Matter | Information & knowledge management,Information systems,Data management systems |
Antecedents to effective sales
and operations planning
James Anthony Swaim and Michael Maloni
Coles College of Business, Kennesaw State University,
Kennesaw, Georgia, USA
Patrick Bower
Combe Incorporated, White Plains, New York, USA, and
John Mello
The Department of Management and Marketing,
Arkansas State University, Jonesboro, Arkansas, USA
Abstract
Purpose –Sales and Operations Planning (S&OP) serves as the essential cross-functional process for
organizations to match supply in the form of production, inventory, and procurement with customer
demand. Given recent studies revealing that S&OP is ineffective for most firms, the purpose of this
paper is to investigate the critical antecedents of effective S&OP.
Design/methodology/approach –Drawing on agency theory and stewardship theory, the authors
develop and test a conceptual model that includes organizational integration, organizational priorities,
standardized processes, and organizational engagement. The authors apply partial least squares
structural equation modeling of survey data from S&OP practitioners to test the model.
Findings –The results confirm the relationships among S&OP antecedents. Organizational
integration positively influences a standardized S&OP process, and both the S&OP process and
prioritization lead to stronger organizational S&OP engagement. Ultimately, organizational S&OP
engagement is positively linked to enhanced operational, market, and profitability outcomes.
Practical implications –The findings create a strong practical foundation for executing S&OP.
The results also reveal a formal process for operationalizing the link between organizational
integration and firm performance that is espoused but not detailed in existing literature.
Originality/value –Existing research supports the potential performance impacts of S&OP but has
yet to validate how to specifically operationalize S&OP.
Keywords Sales and operations planning, Market orientation, Organizational integration,
Supply chain orientation
Paper type Research paper
1. Introduction
Regardless of targeted strategic goals, desired performance outcomes such as market
share, customer satisfaction, and profitability are ultimately driven by successful
integrated planning and execution of supply and demand (Dougherty and Gray, 1987).
Sales and Operations Planning (S&OP) represents the internal cross-functional process
to tactically balance demand (forecast and sales) with supply (procurement, production,
and distribution) while serving the organization’s strategic plan (Feng et al., 2008;
Ivert and Jonsson, 2010; Thomé et al., 2014a). In doing so, S&OP helps the organization
overcome the silo effect wherein individual departments operate independently an d
often contradictory to one another. S&OP therefore represents a vital process for all
businesses, coordinating and synchronizing processes such as demand planning,
production scheduling, and supply management to improve forecasting
accuracy, fill rates, customer satisfaction, and profitability (Ling and Goddard, 1988;
Wallace and Stahl, 2008).
Industrial Management & Data
Systems
Vol. 116 No. 6, 2016
pp. 1279-1294
©Emerald Group Publis hing Limited
0263-5577
DOI 10.1108/IMDS-11-2015-0461
Received 9 November 2015
Revised 25 January 2016
Accepted 27 February 2016
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/0263-5577.htm
1279
Antecedents
to effective
S&OP
Despite its importance, S&OP has largely been overlooked in existing
literature (Grimson and Pyke, 2007; Tuomikangas and Kaipia, 2014). Most operations
and supply chain research still focusses on individual processes (e.g. forecasting, production
planning) without considering the interaction of these functions needed to coordinate
supply and demand. Despite the sophisticationofresearchininterfirmsupplychain
integration (Daugherty, 2011), literature addressing such intrafirm integration requires
significant further development to sufficiently consider the breadth and complexity of
organizational integration and subsequent effects on performance (Frankel and Mollenkopf,
2015; Rosado Feger, 2014; Swink and Schoenherr, 2015; Turkulainen and Ketokivi, 2012).
Existing research often models a direct relationship between integration and performance
without developing intermediary processes needed to operationalize the integration. S&OP
represents one such process. Yet, the few recent studies that do investigate coordination of
sales and operations lack holistic assessment of the entire S&OP process, and limited
studies empirically test the components of the S&OP process and subsequent effects on
firm performance (Thomé et al., 2014b; Tuomikangas and Kaipia, 2014).
Consequently, Tuomikangas and Kaipia (2014) identify empirical S&OP studies as a
major research opportunity, finding that S&OP challenges from practice are virtually
ignored in academic literature. This dearth of S&OP research has neglected the needs
of industry, stopping short of fully divulging antecedents for implementing S&OP.
As such, industry literature reveals current pervasive S&OP ineffectiveness in
improving operations, sales, and profitability (Barrett and Steutermann, 2010).
So, despite the elementary, evident objectives of S&OP, existing research ultimately
fails to validate the S&OP process or explain the reasons for S&OP ineffectiveness.
The research herein attempts to help fill this gap by validating the antecedents of
effective S&OP, including the relationship among these antecedents:
RQ1. What are the antecedents leading to effective S&OP?
RQ2. What are the relationships among these S&OP antecedents?
To study these questions, we develop a conceptual model with theoretical support from
existing literature for construct development and survey scales. The model includes
organizational integration, a standardized S&OP process, S&OP prioritization, and
organizational engagement. We test the model with survey data from S&OP
practitioners. The results fill the above research gap to empirically test S&OP
antecedents to provide industry with a more detailed, thorough roadmap of how to both
implement and benefit from S&OP. The results also provide a springboard for
academia to further fill the gap with additional research.
2. S&OP
Organizations must consistently meet customer expectations. The marketing concept
elevates customers as the focal point to unite marketing activities with all
organizational functions (Felton, 1959). Kohli and Jaworski (1990) propose the term
market orientation to reflect how every employee must become customer-centric in
their specific job duties (Fugate et al., 2008), representing reduction of traditional
departmental boundaries and emergence of cross-functional integration ( Jaworski and
Kohli, 1993; Kirca et al., 2005). Still, cross-functional integration, including links with
operations and supply chain, is difficult to achieve given independent and sometime
adversarial departments in the organization. Limited coordination between sales and
operations leads to isolated decisions where one functional area benefits at the expense
1280
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