Table 4 Risk management activities... | Emerald Publishing

Table 4

Risk management activities during S&OP execution

Case	Identification	Assessment	Treatment	Monitoring	Examples of risks
A	Demand review: Detailed identification of risks enabled by the SKU as planning objective	Pre-S&OP: Assessment of the impact of risks and potential options to address gaps in the plan	S&OP meeting: Decisions on expensive mitigation measures in the global S&OP meeting and on less expensive measures in the regional S&OP meeting	Demand review: Challenge each market's forecasts	Impact of change in European legislation (packaging sizes) on capacity supply (new machinery) and demand (new sizes come with new prices limiting the value of historical data) Impact of new product introductions on demand and capacity supply
A	Supply review: Identification of gaps between demand and capacity supply		Examples of treatment options: Extend shifts from three to five, outsource production, invest in new production lines	Demand review: Challenge each market's forecasts
B	Supply review: Identification of gaps between material supply and capacity supply	All S&OP activities: Quantitative and qualitative assessment, if possible with financial consequences	S&OP meeting: Decisions regarding mitigation measures	S&OP meeting: Monitor (and adapt) risk treatment of a major legislative change throughout the year	Impact of change in European legislation (quota limiting maximum amount of raw materials from suppliers) on material and capacity supply Impact of by-product oversupply exceeding market demand on demand and capacity supply
B	Pre-S&OP: Identification of gaps between capacity supply and demand		Examples of treatment options: Postpone maintenance, sell semi-finished products, build up inventories of low-margin products, invest in new capacity, increase shifts	Demand review: Challenge S&OP inputs regarding demand and capacity supply
C	Demand review: Identification of risks through highly detailed discussion of deviations in the plan and forecast bias in 30 local markets	Supply review: Assessment of gaps in the plan; capacity supply and demand scenarios are combined and a financial dimension is added	All S&OP activities: Decisions on smaller mitigation measures during demand or supply review; postpone costlier measures to final S&OP meeting	–	Impact of volume at risk (inventory, obsoletes) on demand Impact of (small) demand uncertainties in many markets on demand Impact of merger (process integration) on capacity supply Impact of winning a high-volume tender on capacity supply
C			Examples of treatment options: Cancel promotion, not bid for a tender, increase shifts, redistribute promotions over time, rearrange new product introduction-phases to better distribute the uncertain capacity impact, change pricing policy	–
D	Supply review: Identification of capacity supply risks early in the process (supply review is the first S&OP activity)	Supply review: Assessment based on experience, “gut feeling” [D1]	–	S&OP meeting: Evaluation of deviation from plan; depending on the outcome, the linear programming model is adapted	Impact of breakdown of production capacity (furnaces or storage) on capacity supply Impact of large maintenance of storage capacity on capacity supply
E	Supply review: Identification of capacity supply risks through supply review for each individual plant	Pre-S&OP: Assessment using scenarios generated during demand and supply reviews	S&OP meeting: Decisions based on scenarios	–	Impact of lower production capacity utilization on capacity and demand Impact of maintenance of bottleneck installation on capacity
E			Examples of risk-treatment options: Postpone maintenance, create capacity buffers, build up inventory	–
F	All S&OP activities: identification of material supply risk through a business unit dedicated to matching material supply with capacity supply Pre-S&OP meeting: identification of risks during discussion of input data (inventory levels, capacity utilization and forecasts)	Pre-S&OP meeting: assessment based on experience and potential financial impact (if available)	Pre-S&OP and S&OP meeting: consideration and comparison of different risk-treatment options based on financial implications; decisions depending on the cost of measures	–	Impact of supply disruption due to a flood on material supply Impact of lower production capacity utilization on capacity supply and demand
F			Examples of risk-treatment options: build up inventories (after the primary process as semi-finished products or after the secondary process as market-specific products)	–
G	Demand review: Detailed identification of demand risks through two demand review activities Supply review: Identification of risks in matching capacity supply and demand	All S&OP activities: Assessment of risks and opportunities based on an internal tool in each process step	Pre-S&OP meeting: Decisions based on scenarios for smaller risks	–	Impact of volume at risk (obsolete inventories) on demand Impact of major recall due to product quality on capacity supply and demand
			S&OP meeting: Decisions based on scenarios for costly risk-treatment options
			Examples of risk-treatment options: Build up inventories, spare capacity, switch production lines, require minimum batch sizes for seasonal products

Case	Identification	Assessment	Treatment	Monitoring	Examples of risks
A	Demand review: Detailed identification of risks enabled by the SKU as planning objective	Pre-S&OP: Assessment of the impact of risks and potential options to address gaps in the plan	S&OP meeting: Decisions on expensive mitigation measures in the global S&OP meeting and on less expensive measures in the regional S&OP meeting	Demand review: Challenge each market's forecasts	Impact of change in European legislation (packaging sizes) on capacity supply (new machinery) and demand (new sizes come with new prices limiting the value of historical data) Impact of new product introductions on demand and capacity supply
A	Supply review: Identification of gaps between demand and capacity supply		Examples of treatment options: Extend shifts from three to five, outsource production, invest in new production lines	Demand review: Challenge each market's forecasts
B	Supply review: Identification of gaps between material supply and capacity supply	All S&OP activities: Quantitative and qualitative assessment, if possible with financial consequences	S&OP meeting: Decisions regarding mitigation measures	S&OP meeting: Monitor (and adapt) risk treatment of a major legislative change throughout the year	Impact of change in European legislation (quota limiting maximum amount of raw materials from suppliers) on material and capacity supply Impact of by-product oversupply exceeding market demand on demand and capacity supply
B	Pre-S&OP: Identification of gaps between capacity supply and demand		Examples of treatment options: Postpone maintenance, sell semi-finished products, build up inventories of low-margin products, invest in new capacity, increase shifts	Demand review: Challenge S&OP inputs regarding demand and capacity supply
C	Demand review: Identification of risks through highly detailed discussion of deviations in the plan and forecast bias in 30 local markets	Supply review: Assessment of gaps in the plan; capacity supply and demand scenarios are combined and a financial dimension is added	All S&OP activities: Decisions on smaller mitigation measures during demand or supply review; postpone costlier measures to final S&OP meeting	–	Impact of volume at risk (inventory, obsoletes) on demand Impact of (small) demand uncertainties in many markets on demand Impact of merger (process integration) on capacity supply Impact of winning a high-volume tender on capacity supply
C			Examples of treatment options: Cancel promotion, not bid for a tender, increase shifts, redistribute promotions over time, rearrange new product introduction-phases to better distribute the uncertain capacity impact, change pricing policy	–
D	Supply review: Identification of capacity supply risks early in the process (supply review is the first S&OP activity)	Supply review: Assessment based on experience, “gut feeling” [D1]	–	S&OP meeting: Evaluation of deviation from plan; depending on the outcome, the linear programming model is adapted	Impact of breakdown of production capacity (furnaces or storage) on capacity supply Impact of large maintenance of storage capacity on capacity supply
E	Supply review: Identification of capacity supply risks through supply review for each individual plant	Pre-S&OP: Assessment using scenarios generated during demand and supply reviews	S&OP meeting: Decisions based on scenarios	–	Impact of lower production capacity utilization on capacity and demand Impact of maintenance of bottleneck installation on capacity
E			Examples of risk-treatment options: Postpone maintenance, create capacity buffers, build up inventory	–
F	All S&OP activities: identification of material supply risk through a business unit dedicated to matching material supply with capacity supplyPre-S&OP meeting: identification of risks during discussion of input data (inventory levels, capacity utilization and forecasts)	Pre-S&OP meeting: assessment based on experience and potential financial impact (if available)	Pre-S&OP and S&OP meeting: consideration and comparison of different risk-treatment options based on financial implications; decisions depending on the cost of measures	–	Impact of supply disruption due to a flood on material supply Impact of lower production capacity utilization on capacity supply and demand
F			Examples of risk-treatment options: build up inventories (after the primary process as semi-finished products or after the secondary process as market-specific products)	–
G	Demand review: Detailed identification of demand risks through two demand review activitiesSupply review: Identification of risks in matching capacity supply and demand	All S&OP activities: Assessment of risks and opportunities based on an internal tool in each process step	Pre-S&OP meeting: Decisions based on scenarios for smaller risks	–	Impact of volume at risk (obsolete inventories) on demand Impact of major recall due to product quality on capacity supply and demand
			S&OP meeting: Decisions based on scenarios for costly risk-treatment options
			Examples of risk-treatment options: Build up inventories, spare capacity, switch production lines, require minimum batch sizes for seasonal products