By Jonny Lupsha, Wondrium Staff Writer
Eating burgers and fries at home has rippled through the economy. A shortage of ketchup packets has sent the restaurant industry into a frenzy, causing packet prices to soar. How do businesses ensure supply meets demand?
A high demand for ketchup packets in the food industry has caused the most recent COVID-19-related commodity shortage, leaving manufacturers struggling to “catch up.” The demand seems to come in part from staggering delivery orders and drive-thru fast food business.
This isn’t the first time food-related supply and demand have mismatched during the pandemic. Last year’s canceled NFL and NCAA games at the beginning of lockdown led to a surplus in chicken wings, while a spike in pizza delivery caused a pepperoni shortage months later.
In the video series Critical Business Skills for Success, Dr. Thomas J. Goldsby, the Harry T. Mangurian Jr. Professor of Business at The Ohio State University’s Fisher College of Business, explained sales and operations planning (S&OP).
S&OP Opera
Dr. Goldsby said that the greatest divide in an organization is likely the one between supply and demand. Sales and operation planning was founded in the 1980s by management consultants working for Oliver Wight.
“The 1980s were a time in which personal computer technology was just being harnessed to address complex everyday problems,” he said. “With a proven method, technology to support it, and successful case studies at major companies, word of S&OP spread very fast.
“Soon, businesses everywhere were pursuing the improvements in forecast accuracy, productivity, sales, on-time delivery, and inventory savings that they’d been hearing about.”
Dr. Goldsby said that S&OP is about gathering and sharing information. He said the first step is to form an S&OP team of departmental representatives from within a company and “gain the buy-in of the parties involved.” Involving the sales and operations departments is key, but it should also involve key department heads or stakeholders like people from finance, human resources (HR), and product development and have them represented in planning discussions.
Keeping Accountability in S&OP
S&OP must keep each branch of a business accountable in order to be successful. At first glance, it may seem strange to recruit members of finance, HR, and product development to deal with supply and demand issues, but their involvement can make or break the business’s supply chain.
“Finance and HR are present in consultative roles related to how financial and human resources might be deployed in the business,” Dr. Goldsby said. “New product can speak to the readiness and timing of new product launches that can be expected to siphon resources from existing products.”
According to Dr. Goldsby, monthly meetings prove far more effective in managing S&OP than circulated reading materials. He said that the face-to-face aspect of a meeting helps resolve minor discrepancies and disputes much better. Plus, everyone leaves the meeting on the same page regarding what’s expected for the next month.
The pandemic has made even the biggest companies’ supply-and-demand chains face the occasional hiccup, as America saw during the toilet paper crisis of 2020 and hand sanitizer price-gouging on eBay. However, in a normal economy, proper S&OP has helped minimize these clashes for more than 30 years.