Decision support for S&OP coordination under asymmetric decision-making power: A case study from the agrochemical industry

Loeffel, Christoph ; Fleischmann, Moritz ; Klosterhalfen, Steffen ; Hausen, Tobias

Document Type: Conference presentation
Year of publication: 2022
Conference title: OR 2022, Jahrestagung der Gesellschaft für Operations Research (GOR)
Location of the conference venue: Karlsruhe, Germany
Date of the conference: 06.- 09.09.2022
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Publication language: English
Institution: Business School > ABWL u. Logistik (Fleischmann 2009-)
Subject: 330 Economics
Abstract: To serve the seasonal demand for crop protection products by farmers around the globe, agrochemical companies must operate multiechelon, long lead time supply chains. In order to prepare for an uncertain season, integrated planning across functions is key. At the case company, cross-functional coordination is reached through annual S&OP budget meetings hosted by the business unit head together with senior management of relevant functions such as sales and supply chain. Through the budgeting process, a shared plan is developed to coordinate commercial plans of the sales department and production plans of the supply chain organization, both of which need to react to short-term market signals. Sales and supply chain therefore agree on a set of volume guarantees for the available supply throughout the planning horizon. The guarantees are subject to a maximum inventory level imposed by the business unit head. Our project focuses on the choice of these volume guarantees. Specifically, we support the iterative and unstructured negotiation process currently in place at the case company, by developing an optimization-based budget planning model. Importantly, the model reflects existing differences in decision making scope and power of the relevant actors. In addition, the model captures the available flexibility of future plan adjustments. To this end, we use an affine adjustable robust optimization (AARO) approach. In a numerical study, we empirically evaluate our model against simple benchmarks and study the solution structure of the obtained guarantee allocations.

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