Part 3: A Crown Crisis

We’re at a crossroads: should we purchase larger batches from a Cape Town supplier at
standard prices, or should we opt for smaller, more expensive batches to meet urgent
production needs?

This decision is crucial as it impacts several aspects including cost, inventory, and supplier
reliability. To navigate this, we need to enhance our Sales and Operations Planning (S&OP)
maturity. This involves adopting advanced forecasting techniques, negotiating flexible
supplier terms, leveraging decision support systems, and improving inventory management
and contingency planning."

Slide 2: How Would This New Information Affect the Trade-Off Decisions Being Faced
by the Supply Chain Team?

"Let’s delve into how the new information affects our trade-off decisions. The Cape Town
supplier offers a cost-effective solution for quick warehouse restocking. However, smaller
batch sizes come with a potential 25% premium.

On the flip side, purchasing smaller batches helps us avoid stockouts and meet immediate
demand. It also reduces reliance on Johannesburg, saves on transportation costs, and
mitigates the risk of supply chain disruptions. Ultimately, this could lead to expanded
supplier base and reduce the premium charge. Balancing these factors is key to making an
informed decision."

Slide 3: What Pieces of Information Would You Provide to the Planning Manager to
Help Her Make a Decision?

"To assist the planning manager, we need to present comprehensive information:

1. Cost Comparison: Compare the cost of expedited shipping from Johannesburg with
the premium for smaller batches from Cape Town.
2. Estimated Time Savings: Highlight potential revenue from avoiding stockouts.
3. Long-Term Benefits: Discuss the advantages of establishing a relationship with the
local supplier for future flexibility.
4. Customer Impact: Analyze how stockouts could affect customer satisfaction and
brand reputation.
5. Strategic Planning: Consider the benefits of buying large quantities and planning
ahead to save costs and storage space.

This data will help in making an informed decision balancing immediate needs and long-term
goals."

Slide 4: Comment on the Overall S&OP Maturity of This Business

"Reviewing the current S&OP maturity, it’s evident that SAB Breweries is at a moderate
level. The company excels in quality control and supplier management but faces challenges
with batch sizes and flexibility during critical times.

To improve S&OP maturity, we need to:

 Enhance capacity and inventory management.

 Implement integrated decision-support systems.
 Develop adaptable backup plans.
 Optimize cost and logistics.

Addressing these areas will streamline decision-making and boost overall operational
effectiveness."

Slide 5: Suggestions with Implementation Guidelines to Improve S&OP Maturity

"Here are some actionable suggestions to elevate our S&OP maturity:

1. Adopt Advanced Tools: Invest in advanced planning and forecasting software to

increase accuracy and integration with current systems.
2. Boost Supplier Flexibility: Build stronger relationships with suppliers to negotiate
better terms on pricing and batch sizes.
3. Integrate Decision Support Systems: Utilize these systems for thorough scenario
planning and cost analysis.
4. Boost Contingency Plans: Develop robust backup plans to handle disruptions and
urgent production needs.
5. Improve Inventory Management: Implement procedures to manage inventory
efficiently and reduce surplus.
6. Enhance Team Collaboration: Foster better communication and teamwork among
supply chain, planning, and procurement teams.

Implementing these strategies will lead to better resource optimization, productivity, and
efficiency."

Slide 6: Conclusion: Navigating the Green Crown Conundrum

"In conclusion, addressing the green crown conundrum requires us to leverage advanced tools
and strategies to turn supply chain challenges into opportunities. By enhancing supplier
flexibility, integrating decision support systems, and improving backup plans, we can
streamline inventory control and drive productivity.

This approach will not only help in cost reduction but also in achieving operational
excellence. Thank you for your attention, and I’m open to any questions or further
discussion."
Q1: Can you elaborate on the criteria you would use to compare the cost-effectiveness of
the Cape Town supplier versus Johannesburg?

Response: "Absolutely. To compare cost-effectiveness, we need to evaluate several factors:

1. Unit Cost Comparison: Compare the cost per unit of smaller batches from Cape
Town with the cost of larger batches plus expedited shipping from Johannesburg.
2. Premium Analysis: Assess the 25% premium for smaller batches from Cape Town
and weigh it against potential cost savings from avoiding stockouts and reducing
transportation expenses.
3. Total Cost of Ownership: Consider additional costs such as potential losses from
stockouts, customer dissatisfaction, and the impact on brand reputation.
4. Revenue Impact: Estimate the revenue implications of preventing stockouts and
meeting immediate demand versus the additional costs incurred.

This comprehensive cost comparison will help determine the most cost-effective option."

Q2: How do you suggest we enhance our forecasting techniques as part of improving
S&OP maturity?

Response: "Improving forecasting techniques involves several steps:

1. Invest in Advanced Software: Utilize advanced forecasting tools that integrate with
current systems to enhance accuracy.
2. Incorporate Historical Data: Use historical data and trend analysis to predict future
demand more accurately.
3. Leverage Machine Learning: Implement machine learning algorithms to identify
patterns and refine forecasts.
4. Adjust for Seasonality: Account for seasonal variations and market trends to
improve prediction accuracy.
5. Regular Reviews: Continuously review and adjust forecasts based on actual
performance and market changes.

These measures will lead to more accurate forecasting and better alignment between supply
and demand."

Q3: What specific steps would you recommend to improve supplier flexibility?

Response: "To enhance supplier flexibility, consider the following steps:

1. Build Strong Relationships: Develop closer partnerships with suppliers through

regular communication and collaboration.
2. Negotiate Terms: Work on negotiating more accommodating terms related to
pricing, batch sizes, and lead times.
3. Performance Metrics: Establish performance metrics and regularly review supplier
performance to ensure reliability and flexibility.
 4. Diversify Suppliers: Expand the supplier base to reduce dependency on any single
supplier and increase negotiation leverage.
5. Create Flexibility Clauses: Include flexibility clauses in contracts to allow for
adjustments in response to demand fluctuations.

These steps will help ensure that suppliers can meet varying production needs and reduce
supply chain disruptions."

Q4: Can you provide examples of how decision support systems can be utilized in this
scenario?

Response: "Certainly. Decision support systems (DSS) can be used in several ways:

1. Scenario Analysis: Utilize DSS to model different scenarios and evaluate the impact
of various decisions on cost, inventory, and supply chain performance.
2. Cost-Benefit Analysis: Perform detailed cost-benefit analyses to compare the
financial implications of purchasing larger versus smaller batches.
3. Risk Assessment: Assess risks associated with each decision, such as potential
stockouts or supplier delays, and identify mitigation strategies.
4. Optimized Planning: Use DSS to optimize inventory levels and procurement
strategies based on real-time data and forecasts.
5. What-If Analysis: Conduct what-if analyses to understand potential outcomes and
make more informed decisions.

These applications of DSS will provide valuable insights and support data-driven decision-
making."

Q5: How would you address the challenge of managing inventory and preventing
surplus?

Response: "To manage inventory and prevent surplus, you can implement the following
strategies:

1. Just-in-Time Inventory: Adopt just-in-time (JIT) inventory practices to align

inventory levels closely with actual demand, reducing surplus.
2. Inventory Tracking: Use inventory management systems to track inventory levels in
real-time and adjust orders accordingly.
3. Demand Forecasting: Improve demand forecasting to better align inventory with
expected sales and reduce excess stock.
4. Regular Audits: Conduct regular inventory audits to identify and address overstock
issues promptly.
5. Supplier Collaboration: Work closely with suppliers to adjust order quantities and
delivery schedules based on current inventory levels and demand forecasts.

These practices will help maintain optimal inventory levels and minimize surplus."
Q6: What would be the long-term benefits of improving S&OP maturity for SAB
Breweries?

Response: "Enhancing S&OP maturity offers several long-term benefits:

1. Increased Efficiency: Streamlined processes and better alignment between supply

and demand lead to greater operational efficiency.
2. Cost Reduction: Improved inventory management and supplier flexibility help
reduce costs associated with stockouts and excess inventory.
3. Enhanced Customer Service: Reliable inventory levels and timely deliveries
improve customer satisfaction and brand reputation.
4. Better Decision-Making: Advanced forecasting and decision support systems lead to
more informed and strategic decision-making.
5. Scalability: A mature S&OP process supports scalability and adaptability, allowing
the company to respond effectively to market changes and growth opportunities.

Overall, these improvements will contribute to sustained competitive advantage and

operational excellence."