Decision Support Systems for Sales and Operations Planning in a Chemical Process Industry.

An AIMMS' optimization-based application was developed to automate the sales & operations planning (S&OP) process of a polymer manufacturer with multiple sites supplying global markets. The application generates a global plan that takes into account local manufacturing and supply constraints. Decisions on plant closures/expansions, production, warehousing, and distribution of intermediates and products are now based on a rigorous supply chain model. Savings on the order of US$4 Million/yr are being seen as a result of deploying these models. Cycle time for plan creation has also gone down from weeks to hours – allowing management personnel to focus on analysis as opposed to plan creation.

Business description & background

A polymer business with global manufacturing assets, and serving customers globally, is interested in streamlining and automating their sales and operations planning (S&OP) process. The following business aspects are relevant to this project:

Multiple and global locations of manufacturing and distribution facilities;
Large number of products;
Volatile demand;
High sensitivity to cost (both operating and capital);
An environment that swings between over-capacity & sold-out situations very quickly.

The existing S&OP plan creation process is carried out individually by each product line and manufacturing site using homegrown spreadsheets and rules of thumb. The current S&OP model does not depict the complexities of the business realistically, and so is unable to generate a globally optimal plan. The high dimensionality of the problem arising from the number of products, plants, and destinations involved make it impossible to manually create a financially optimal and executable plan. In the current process, the planners spend a majority of their time in plan creation and thus have very little time to do business scenario analysis and take strategic decisions.

The challenge

Optimal Solutions Inc., was charged with the task of developing a realistic S&OP plan creation application that:

Generated cost-optimal and implement-able plans;
Honored all business constraints;
Provided easy over-ride capabilities;
Provided a user-friendly interface;
Fit in the business workflow of the overall S&OP process in the business.

The solution

After analyzing the problem thoroughly, Optimal Solutions determined that an MILP model would provide the most efficient means of generating optimal sales & operation plans. Of the several platforms available, AIMMS was chosen for developing the application because of its class-leading GUI capability and its ability to interface with a variety of MILP solvers. The MILP model developed by Optimal Solutions was validated with the planners, and the results were verified for feasibility and optimality. A notable achievement was that, during this process, at a very early stage in the project, several new and highly beneficial business rules were discovered which had significant financial impact. These findings kept the project team very much engaged and supportive. Tools in AIMMS also facilitated interactive GUI development resulting in rich features for the user.

The benefits

By installing Optimal Solutions' sales & operations planning application, for the first time a method was available to the client to make rigorously optimal decisions intimately tied to the financial goals of the business. Among the benefits realized are:

Internal S&OP business process improved and institutionalized – plan creation cycle time went from weeks to hours;
Significant financial benefits were realized by making globally optimal production and distribution decisions;
Planners are freed up from the “drudgery” of plan creation and now focus on analysis of plan results and strategic decision-making.

How did AIMMS add value

Overall we were very happy with our decision to use AIMMS as the development platform of choice for this application. The tutorials and manuals available provided great insights into the powerful features of the package, which we were able to exploit to simplify the formulation of the problem. In particular, AIMMS’ ability to deal with different time granularities is worthy of mention here. Some of the other features of particular value to us were

Powerful GUI-building capabilities- allowed us to tailor the GUI to our clients’ needs
Licensing- AIMMS allows direct licensing to the end-user
Multi-solver capability- proof of concept was carried out using a simpler solver, and it was found that the problem could be handled without going to the more expensive solvers. In this way we were able to save our client some money.

About Optimal Solutions Inc.

Optimal Solutions Inc was established specifically to serve the need of the process industry for advanced decision support systems, including Sales & Operations Planning (S&OP), Advanced Planning & Scheduling (APS), & process optimization. With over 25 years of experience in process and operations research within the process industry, Optimal Solutions develops cost-effective decision support applications incorporating state-of-the-art technology, such as AIMMS.

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Optimal Solutions - Decision Support Systems for Sales and Operations Planning