Turnitin Originality Report

Report: by Hamza Farooq   Similarity by Source

Similarity Index
From paper2 (2022) Internet Sources: 22%

23%
Publications: 11%
Student Papers: 4%
Processed on 23-Dec-2022 16:38 PKT
ID: 1986160419
Word Count: 3589

sources:

21% match (Internet from 15-Apr-2007)

1
http://www.hbs.edu/research/pdf/07-001.pdf

2% match (Rogelio Oliva, Noel Watson. "Cross-functional alignment in supply chain

2
planning: A case study of sales and operations planning", Journal of Operations
Management, 2011)
Rogelio Oliva, Noel Watson. "Cross-functional alignment in supply chain planning: A case study of
sales and operations planning", Journal of Operations Management, 2011

paper text:
Leitax Case Study Analysis:

1Leitax, a specialized consumer electronics company, made significant supply

chain planning

mistakes in 2002 as a result of a lack of

1cross-functional integration in the supply/demand planning procedures. The

company's capacity to satisfy client requests was hampered by these errors. The subsequent insufficient
integration was the result of a simple approach to integration. The roles inside the organization were distinct
from one another. The issues that occurred throughout the planning phase forced the organization to make
significant revisions. Coordination system and Coordination Problems in Company: In order

1to improve forecasting and planning, Fowler made organizational changes

that supported the required cross-functional activities and their coordination.
These

adjustments were required. The analysis of the elements that contributed to the failure of planning at Leitax,
which was carried out prior to the construction of the coordinating system, sheds insight on these processes.
The sales force was in charge of delivering forecast-based coordination signals prior to the start of Project
Redesign. The functional groups then developed their own projections and supply or demand control
mechanisms based on these signals (see Figure 1). Because other functional areas did not accept the
original prediction, there was misalignment between functions, and there was insufficient intertemporal
coordination of plans, this technique did not succeed at Leitax. We will go into more detail about each of
these underlying causes in the paragraphs that follow. The forecasts provided by the sales department were
thought to be inaccurate, and in some instances this was shown to be the case. Some of the potential
reasons of the faulty estimates or the perception that they were wrong

1were the effect of sales incentives, a lack of motivation to generate accurate

forecasts, and defective forecasting techniques. Commissions on sell-in may
have

had an impact on estimates that placed

1excess inventory in the chain to prevent stockouts

. It's conceivable that

1a history of poor demand and supply planning contributed to predicting

complacency

, but it's very improbable. Last but not least, false estimations might have resulted from forecasting errors
that incorrectly focused on anticipated shortages rather than limitless demand. Even though disbelief in the
sales organization's estimations was the main driver for the creation of 9 separate forecasts, it wasn't the
only element that contributed to the mismatch. Another thing that made alignment challenging was the
functions' naturally different orientations. At Leitax, certain biases developed as a result of the difference in
objectives that resulted from the inherent variations in the objectives of the various functions. For example,
the sales organization was pushed by incentives

1to want enough inventory to prevent stockouts, but the operations group,
which was

in charge of managing shortages and surplus inventory as well as connections with suppliers, desired more
measured, steady inventory levels. These two teams were in charge of overseeing interactions with
suppliers. Sales may place more emphasis on short-term sales opportunities, while operations may place
more attention on

1medium- to long-term demands for inventory and capacity planning. These two
objectives are
essential. Different levels of formality in the organization were seen in

1terms of formal reporting ties, incentive criteria, and control systems. For
example, Operations had more established procedures and a stronger requirement
for specific

information than Sales, which was in charge of keeping Sales Accounts,

1in order to properly convey manufacturing orders to its contract

manufacturers. In the

end, synchronizing the plan's supporting actions throughout time is necessary to properly implement a
demand and supply strategy for the medium to long term, especially one that is dynamic. Even the best-
intentioned strategy for aggregate supply and demand would fall short if there is inadequate intertemporal
coordination of the supporting activities and plans. Leitax's environment did not support effective inter-
temporal coordination since there were no defined procedures in place to guarantee the transmission and
reception of coordinating signals at the appropriate times. This was made worse by the lack of confidence in

1sales forecasts and the natural separation of tasks, particularly with regard to
time, which

makes it more challenging to create and receive intertemporal coordinating signals. DMO responsibilities
and Organizational Structure: The task of assuming organizational control over

1the forecasting and planning process was delegated to the newly formed
operations unit known as the Demand Management Organization

. To coordinate foreign operations, the DMO was tasked with collecting the necessary information, directing

1the planning process, resolving conflicts, and challenging, creating, and

disseminating demand

predictions. This obligation still stands today. In the past, when Fowler had formed a team to estimate
demand, he had mainly relied on simulation and statistical models. The consensus forecasting approach at
Leitax was created as a consequence of his insight that the support of several

1functional groups was crucial to the enhancement of demand planning

. Through this technique, future events are predicted using the views of the vast majority of people engaged.
Fowler promised that members of the different groups would have their ideas and perspectives taken into
consideration while he was seeking to get functional support for the suggested new forecasting approach.

1Fowler took the time to explain to each group the company's forecast and
inventory performance

so far, emphasizing that the issue wasn't specific to any one group but rather was one that affected all of
them.

1Even though there was general consensus that the forecasting procedure
needed to be

altered, this was nonetheless done. Instead of creating another stream of forecasting that was based on
statistics, he established procedures that would ensure that a single prediction would be the company's
driving force. Fowler emphasized that eliminating bias from the planning process was one of the DMO's
responsibilities. This was one of the duties that fell within the purview of the DMO. Fowler started combining
the many information streams that Leitax uses

1in May 2002, but he was soon promoted to senior director of Planning and
Fulfillment and given responsibility for managing both supply and demand. He
was given the

opportunity to integrate an even wider variety of activities because of his new job. Fowler elevated Brian
McMillan, a worker he had hired for the DMO, to the role of business leader and charged him with
overseeing the demand planning and forecasting procedures. Sales and Operation Planning in Leitax: The
construction of a consensus prediction, which served as the foundation for all decisions about the
management of supply and demand, was the process' most significant output. The vice presidents of all
departments worked with the directors of sales to create the monthly consensus prediction. The group
gathered to debate and discuss the information. We will first provide a summary

1of the Sales and Operations Planning (S&OP) process

in this section before delving further into each stage (see Figure 2). Making a packet of information known
as the business assumptions package was the first task that needed to be accomplished (BAP). The
development of the BAP had two functions: first, it was the process step in charge of strategic planning;
second, it included the

1supply and demand plans for the supply chain

as they were at the time. The choices made for each product line's pricing, 11 product options, promotions,
debut dates, and end-of-life dates formed the basis for these programs. Following the BAP, the strategic
plan was thoroughly validated utilizing functional predictions, consensus forecasting, as well as

1financial and supply chain validation of the suggested forecast

. This was carried out to see if the proposals described

1in the BAP are both feasible and lucrative. Through the consensus forecasting
process, the projected demand was ascertained using the strategic decisions
established in the BAP

as a foundation. Whether or whether there was capacity to satisfy that demand was assessed by the
operations validation, and the financial attractiveness of the strategic plans was evaluated by the finance
validation. The BAP's assumptions were changed, more precisely,

1the strategic plan was changed, and the validation process was repeated

, in the case that there were issues with capacity or funds. The consensus forecasting meeting's structure
allowed for directed interaction, which allowed for more planning, feedback, and learning. Strategic planning
and information gathering using the

1Business Assumptions Package: The BAP primarily used two types of data:
the current plans for product offerings, which included marketing campaigns,
price plans for each SKU, and dates for product end-of-life and new product
introduction; and information that reflected the market environment

, which included knowledge of

1market trends, competitors' products and marketing strategies, as well as

other data that was pertinent for the industry

as a whole. Every month, the forecasting group had a meeting that normally lasted two hours to discuss and
reach an agreement on the whole BAP, including any active programs.

1The product planning and strategy, marketing, and DMO groups used the
data on the marketing environment to provide guidance when assessing the
 impact of the data on future business performance, and their
recommendations

were integrated

1into the BAP. Surprisingly, the BAP was not initially included into the planning
process

. Initially, the adoption of a number of assumptions about adjustments to product price and marketing
strategies contributed significantly to the difference in the predictions. The DMO invested a significant
amount of time and effort into

1developing and perfecting a package that combined promotional content as well

as details on competitors

' items after discovering

1that business assumptions were crucial to the process

as a whole. Functional Forecasts: Once a decision had been made on the BAP, the data it contained was
examined to provide three distinct functional forecasts. To assist

1standardize and improve the accuracy of projections throughout the

organization

, Fowler and McMillan determined that three methodological changes would be most helpful. First, the
forecast's focus

1switched from sell-in to sell-through, or the amounts that were shipped from the

resellers' DCs in other regions or sold from them in North America. By shifting the forecast's emphasis from
sell-in to sell-through, this was achieved. Second, while estimating demand, these predictions did not
account for capacity constraints. Third,

1forecasting and planning would be done at the level of the product family
during the planning
sessions. A three-person team called Product Planning and Strategy (PPS) supported every stage of the life
cycle of a product,

2from launch to end-of-life, assessed rival products and the effects of price
changes on demand, and gave a top-down prediction of expected global
demand for Leitax products

. A worldwide evaluation of the demand for Leitax's products was used to develop the PPS forecast. Using

2historical and current patterns in market share

, predictions for individual products and geographic areas were created from this assessment.

1The sales directors (SDs) adopted a bottom-up process while creating their

prediction. In order to give a prediction that was

1based on knowledge about what was happening in the distribution channel,

SDs

from all over the globe utilized the information that their account managers and they themselves had

1about channel holdings, current sales, and expected promotions

1The SDs' bottom-up projection was first referred to as a sell-in

prediction; however, by retaining

1for each SKU a maximum amount of channel inventory

, it was eventually transformed into a sell-through forecast (inventory at downstream DCs and resellers). The
first thirteen weeks of the master production plan were chosen based in large part on the bottom-up
projection that SDs created, which was influenced by feedback from retail and distribution partners. The
DMO created a third estimate of sell-through by region solely based on statistical assumptions made from
prior sales. This forecast's main goal was to act as a benchmark for the other two predictions. The other
forecasting groups were forced to analyze and justify their assumptions because to the notable differences
from the statistical estimate. Consensus Forecast: A formulaic procedure created by the DMO was used to
combine the projections of the three groups into a recommended consensus forecast. The top-down
prediction was given greater weight as time progressed, while the bottom-up forecast of the SDs was given
more weight in the near term. Excel templates were used to submit the projections. The forecasting
committee examined and debated three independent predictions in addition to the proposed consensus
forecast during their regularly scheduled meeting. It was vital to acquaint everyone with the underlying
assumptions that were guiding the different predictions in order to reach a result that was acceptable to all
parties. The most frequent topic of discourse was the two neighboring quarters.

2By the fall of 2003, consensus meetings lasted two to four hours and were

polite, as opposed to the early meetings, which often lasted all day and were characterized by acrimonious
arguments. McMillan focused the participants' attention on learning about the elements that lead to the
significant discrepancies in the functional predictions. Different estimates would be examined and their
underlying reasons would be identified via open conversation, and the suggested consensus prediction
would be revised in light of what was discovered. Since the SDs had firsthand

1knowledge of upcoming sales agreements or prospects, bottom-up sales

predictions that were

just a little bit

1higher than the PPS's or DMO's were often

authorized. When bottom-up sales estimates exceeded PPS or DMO projections by a little margin, this was
the situation. Despite the fact that they did not submit their own prediction since they were aware of the
possible revenue at risk, the finance group commented on and voiced reservations about the estimations.

1The PPS group tended to be loud, objective, and unemotional while discussing
the predictions and demand planning

since they had little to no

1functional stake in the outcomes of the meetings. The

finance department received the final forecast to be financially wrapped up based on the consensus of all
analysts. Finance arrived at a figure to evaluate future sales using the consensus estimate and data from
the BAP on pricing and promotions. This made it possible for Finance to convert anticipated amounts into
revenue equivalents. The company's financial objectives and anticipated future revenues were put side by
side.

2If gaps were discovered, the finance team would first make sure that the sales
team had not drastically underestimated the market's potential

for the product. The forecasting team would go back

1to the business assumptions and, working with the marketing department,
revise the pricing and promotion strategies in order to meet the financial goals
and analyst expectations

if the adjustments made up to this point had not produced a satisfactory financial performance. These
exercises, also known as gap-filling exercises, often

1occurred at the end of each quarter and

had the ability to significantly alter the projection. The official forecast was made available to the public, and
it was

1used to develop the master production schedule (MPS). Operations were

regularly verifying the

conclusion reached by the final consensus.

1Suppliers would strengthen the accuracy of the information flows to Leitax

regarding the state of the supply chain and their willingness to fulfill approved
orders in response to MPSs

that are more reliable and consistent. Additionally, more trustworthy MPSs meant suppliers that were better
equipped to meet the expected future demand. Throughout the conversations aimed at achieving
agreement, issues about capacity were also brought up and discussed. Synchronizing the demand and
supply plans and guaranteeing their compatibility required input from the planning group that was provided
through the validation of operations. Consensus Meetings Planning were place during the meetings for
achieving an agreement on the forecast. The introduction of new goods was discussed by the committee,
and beginning stock levels for forthcoming product launches were agreed.

1The consensus forecasting meeting was used to examine the projected

inventory status at launch, update regional requests, and seek agreement on
 regional allocations while keeping any

anticipated shortcomings in mind. The launch date was drawing near, thus it was important to address these
topics. Products that will be phased out during the current quarter were also taken into consideration at the
meetings where a consensus prediction was formed. Sales data up to that point, sales projections for the
remaining stages

2of the product's life cycle, and inventory that was presently on

hand were presented alongside the suggested drop dates. An attempt was made to come to a decision on
how to handle products that have reached the end of their useful lives. The findings of analyses of

1sell-in and sell-through rates, as well as channel stocks, were compared to the
projected sales

of ongoing products. Finance gathered data on channel sales and stocks from the weekly EDI reports that
resellers produced. The

1discrepancies between reported stocks and calculated inventories based on

sell-in and sell-through data have been resolved, and the consensus sales
projections have been updated based on the most current information

that has become available. Choices concerning price changes or promotions were also reassessed in light
of this information. Throughout all of

1these tactical discussions, the group was in fact simultaneously planning

supply and demand activities. The

strategic alignment between demand and supply plans may be seen in the consensus projection, as well as
in

1derived sales plans and master production schedules. The

extensive discussion of product 15 launches, retractions, and replenishment also made sure that everything
was in sync at

1the technical and operational levels (e.g., shipping schedules). The

consensus forecasting conference also provided feedback on the effectiveness of
 forecasting

, highlighting in particular biases shown by functional forecasts in earlier sessions. The DMO routinely
examined this data

1and used it to improve the algorithms and heuristics

it employs for forecasting, as well as to help functional areas improve the forecasting methods that they use.
This was done since the DMO was responsible for the prediction's accuracy. For instance, at recent
meetings, the DMO presented data demonstrating how

2sales forecasts tended to overestimate short-term sales while underestimating

long-term sales

. This is a typical issue. Improvements by Leitax: By the autumn of 2003, astonishing advances in weather
prediction had been accomplished. From 58% (49%) in the summer of 2002 to 88% (84%) more recently,
the accuracy of the three-month ahead sell-through (sell-in) estimate rose. DMO used a technique that
expressed the fractional variation of the forecast error to determine the sell-in and sell-through projections'
13-week forecasting accuracy. As

1the longest lead-time for a key component in Leitax's supply chain

is thirteen weeks, this was done. Better forecasts resulted in significant operational improvements, including
an increase in

1inventory turns from 12 in the prior year to 26 in

the fourth quarter of 2003; a decrease in the average amount of inventory on hand from $55 million to $23
million (see Figure 4); and a decrease in the costs related to

1excess and obsolescence, which decreased from an average of $3 million for

the financial years 2000-2002 to practically zero in the financial year 2003

. Summary and Closing Remarks: The information used, the conclusions drawn from the data (such as
projections

1and plans), and the organization's adherence to the plans

OP process's designers were preoccupied

 1with ensuring consistency in information flows, the caliber of decisions, the
validation of the decision- making process, and the capacity to convert
decisions into actionable plans

that could dynamically adapt to changes in supply or demand. Not all claimed advancements are the result
of a methodical and effective method of information processing. By involving participants,

1the coordination system (responsibilities, practices, and structures)

encouraged organizational alignment

OP resulted in the creation of effective and integrated

1functional plans and strategic plans that reflected not only the interests of
the many stakeholders in the organization, but also the

OP process

1was open, transparent, and participatory, enabling all participants to

OP evolved into a highly integrated collaborative strategy via transparent communication and the
unambiguous accommodation of competing functional goals. The aim and execution alignment of this
planning approach has two benefits. First, when action plans communicate corporate objectives in a
trustworthy and correct way, the organization's reputation improves, giving it more power via reliable
relationships. Second, if the business is successful in achieving its objectives, it will be easier to pursue
continuous improvement as dependable and predictable procedures are necessary for accurately evaluating
historical data and drawing conclusions for growth and development. If the process achieves plan alignment,
an organization may

2be willing to forego information accuracy or

processing effectiveness

1given the benefits of alignment and buy-in to the created plan

. The DMO's

1statistical forecast was more precise than the group's consensus estimate for
 the

second half of 2003. If speeding up the process meant limiting opportunities for participant engagement via
dispute and plan validation, Fowler was reticent to do so. The statistical estimate could be suspect without a
participatory approach, much as the sales prediction prior to Project Redesign. This study introduces a fresh
perspective on

1the design of coordinating systems that goes beyond simple action

coordination and information

sharing to achieve organizational alignment.