Market. Recourse. Yan Feng

Transcription

1 The Value o Sale and Operaion Planning in Oriened Srand Board Indury wih Make-o-Order Manuauring Syem: Cro Funional Inegraion under Deerminii Demand and Spo Marke Reoure Yan Feng Sophie D Amour Rober Beauregard Deember 2007 CIRRELT

2 The Value o Sale and Operaion Planning in Oriened Srand Board Indury wih Make-o-Order Manuauring Syem: Cro Funional Inegraion under Deerminii Demand and Spo Marke Reoure Yan Feng 1,*, Sophie D Amour 1, Rober Beauregard 1 1 Ineruniveriy Reearh Cenre on Enerprie Nework, Logii and Tranporaion (CIRRELT), and FORAC Reearh Conoriu Pavillon Adrien-Poulio, Univerié Laval, Québe, Canada G1K 7P4 Abra. Sale and Operaion Planning (S&OP) ha beome a widely reognized proe o upply hain planning. However, unil he preen ime, he evaluaion o i benei ha been ondued mainly hrough po implemenaion ae udie. Thi paper explore he undamenal o he S&OP proe and preen a modeling approah o evaluae i impa beore implemenaion. A mixed ineger programming baed model i propoed o repreen he ro unional inegraion o he upply hain aleproduion-diribuion-prouremen planning. I i evaluaed again he radiional deoupled planning approah in a make-o-order manuauring environmen. An indurial appliaion o he S&OP model i provided uing ield daa o an Oriened Srand Board (OSB) manuauring ompany in Quebe, Canada. Keyword. Sale and operaion planning, upply hain managemen, opimizaion, make-o-order, oriened rand board indury. Aknowledgemen. The auhor would like o aknowledge he inanial uppor provided by he Fore E-buine Reearh Conorium (FOR@), Univeriy Laval, Québe, Canada, and would like o hank he reearh parner, Forinek Canada Corp. and our indurial parner Norbord In. Canada. Reul and view expreed in hi publiaion are he ole reponibiliy o he auhor and do no neearily rele hoe o CIRRELT. Le réula e opinion onenu dan ee publiaion ne relèen pa néeairemen la poiion du CIRRELT e n'engagen pa a reponabilié. * Correponding auhor : [email protected] Dépô légal Bibliohèque naionale du Québe, Bibliohèque naionale du Canada, 2007 Copyrigh Feng, D Amour, Beauregard and CIRRELT, 2007

3 The Value o Sale and Operaion Planning in Oriened Srand Board Indury wih Make-o-Order Manuauring Syem: Cro Funional Inegraion under Deerminii Demand and Spo Marke Reoure 1.0 Inroduion Faed wih inreaingly ompeiive marke wihin a dynami eonomi environmen, more and more enerprie have urned heir aenion o upply hain managemen. The onep o upply hain managemen i o bring he radiionally non-oordinaed buine uni ino a uniied inegraed organizaional uni along he upply hain o eeively oordinae he buine proe rom he upplier o he uomer. Along wih upply hain managemen and upply hain planning, S&OP ha gained inreaing reogniion. S&OP i a monhly-baed aial planning proe led by enior managemen oriened oward balaning demand and all he upply apabiliie o produion, diribuion, prouremen, and inane o enure he plan and perormane o all buine union are aligned o uppor he buine plan. I i an inegraed planning proe ha gaher all he plan rom dieren unional uni, evaluae, revie, and bring o onenu o any onli o generae a unique e o plan o orherae and onrol he perormane (Ling, 2002; Aberdeen Group, 2004; Bower, 2005). Sine he 1990, an inreaing number o ompanie have ared implemening S&OP proe. Aberdeen Group (2004) preen a benhmark analyi o more han 200 enerprie o variou ize. The analyi reveal ha S&OP program generaed igniian improvemen in gro margin, omplee order ill rae, and uomer reenion. Aberdeen Group (2005) repor ix be praie ae udie on how dieren S&OP raegie and ehnologie improved he perormane o eah udied ompany. Palmaier and Crum (2003) ae ha ompanie adoping S&OP no only ahieved improvemen in operaing perormane and uomer ervie, bu alo redued manuauring o, purhaed maerial o and inih produ invenory/uomer order baklog. Ye, in many ae, he S&OP eor ail o mee i poenial expeaion due o variou reaon ha raie erain rik o he ompanie who implemen i (Muzumdar and Fonanella, 2006). Unil preen ime, mo reearhe on S&OP have oued on i deiniion, proee and aiviie, implemenaion proedure, and ae udie ha addre he benei eiher qualiaively or quaniaively aer he implemenaion. Very ew onribuion have addreed he S&OP problem uing modeling approah o reveal i value reaion opporuniie beore he implemenaion. The aim o our reearh i o ill in hi gap by preening a modeling approah ha repreen he undamenal o he S&OP proe o quaniaively evaluae he impa o S&OP program beore he implemenaion. In hi arile, we ir explore wo main dimenion o S&OP: (i) he horizonal ro unional inegraion o ale, produion, diribuion and prouremen; and (ii) he verial oordinaion beween he aial and operaional planning deiion. Then, we propoe an S&OP ramework ha inegrae he variou planning uni in a oordinaed and uniied ahion. Following he ramework, an opimizaion baed S&OP model a well a a e o radiional non-oordinaed model are ormulaed. The S&OP problem aim o maximize, over a planning horizon o one year, he oal ne proi o a muli-ie ompany produing variou produ erving a divere marke hrough dieren markeing hannel. Our problem i enred in a make-o-order environmen. The evaluaion i oued on omparing he perormane o S&OP wih he nonoordinaed planning model under deerminii demand and po marke prie ondiion. A numerial udy and eniiviy analyi i arried ou baed on a ae udy o an OSB manuauring ompany. CIRRELT

4 The Value o Sale and Operaion Planning in Oriened Srand Board Indury wih Make-o-Order Manuauring Syem: Cro Funional Inegraion under Deerminii Demand and Spo Marke Reoure The main onribuion o hi paper i (i) he mahemaial expreion o he S&OP model whih expliily inorporae all he upply hain union o ale, produion, diribuion and prouremen o a muli-ie organizaion in a make-o-order environmen under deerminii demand and po marke ondiion; and (ii) he indurial appliaion, whih preen ome o he inigh knowledge o he value o S&OP beore i implemenaion. 2.0 Lieraure review S&OP i a relaively new onep. Originally developed rom produion planning, early udie regard S&OP a a planning proe ha verially link he raegi and buine plan wih he deailed operaional plan and horizonally link and balane demand wih upply apabiliie wih an emphai on produion apaiy managemen (Ling and Goddard, 1988; Wallae, 2004). In order o provide a oundaion or hi reearh, we preen he deiniion o S&OP rom he APICS Diionary (2002): Sale and operaion planning i he proe wih whih we bring ogeher all he plan or he buine (uomer, ale, markeing, developmen, manuauring, ouring, and inanial) ino one inegraed e o plan. I i done a lea one a monh and reviewed by managemen a an aggregae (produ amily) level. The proe mu reonile all upply, demand, and new produ plan a boh he deail and aggregae level and ie o he buine plan. I i a deiniive aemen o wha he ompany plan o do or he near o inermediae erm overing a horizon uiien o plan reoure and uppor he annual buine planning proe. Exeued properly, he ale and operaion planning proe link he raegi plan or he buine wih exeuion and review perormane meaure or oninuou improvemen. (Ling, 2002; Maier and Thoreon, 2002; Taunon, 2002). The preened deiniion deine expliily wha S&OP i rom a proe poin o view. Noe ha he erm reonile, mean o bring o a ae ha i ree o onli, inonienie, or dierene, baed on Merriam-Weber diionary. Thu, he deiniion implie ha S&OP i he proe o developing an inegraed aggregaed plan, i.e. he S&OP plan ha oni o a e o plan or eah o he unional deparmen, inorporaing he deailed level behavior, and overing an inermediae erm planning horizon. More preiely, i addree he wo dimenion o S&OP: (i) he horizonal ro unional inegraion, and (ii) he verial oordinaion o he aggregaed and deailed plan. Reen udie preen he rend o applying S&OP ino he upply hain managemen onex in oordinaing upply hain value reaion aiviie in order o proiably mah he demand wih he upply hain apabiliie o produion, diribuion, prouremen, and inane (Croxon e al., 2002; Ceere e al., 2006). Croxon e al. (2002) regard S&OP a a ynhronizaion mehanim in he upply hain ha mahe he demand orea o upply hain apabiliie hrough oordinaion o markeing, manuauring, purhaing, logii and inaning deiion and aiviie. The impliaion o ynhronizaion i a wae ree ye whih redue he yem waiing ime, reoure, invenorie o he minimum level while aiying he uomer demand wih he righ quaniy a he righ ime. Ceere e al. (2006) regard S&OP a a CIRRELT

5 The Value o Sale and Operaion Planning in Oriened Srand Board Indury wih Make-o-Order Manuauring Syem: Cro Funional Inegraion under Deerminii Demand and Spo Marke Reoure ollaboraive proe ha proiably align he uomer demand wih he upplie again a deined buine raegy. A uh, he auhor ugge ha he S&OP plan hould rele upply hain onrain o moving, making and buying apabiliie o he ompany. Thee onrain need o be ied wih he aoun raegie or demand haping and produ alloaion raegie. I implie ha organizaion hould evolve rom he eor o merely mahing demand wih upply o volume apabiliie o he eor o deermining he be and mo proiable demand repone wih he available apabiliie. The goal o he proe i hu o reae a realii S&OP plan ha be ideniie he opporuniie and eeively oordinae upply hain apabiliie o ahieve he ompany objeive. Alhough hee lieraure addre he direion or S&OP, no reearh on S&OP, o he knowledge o he auhor, ha been arried ou ha yemaially explore he undamenal o he S&OP proe uing a modeling approah in a pre-implemenaion analyi. Thi imulae u o udy he lieraure ha addre he oordinaion and inegraion o upply hain planning o diover he poibiliie o applying operaional reearh ehnique and modeling approah ino he S&OP proe. In a broad ene, he upply hain oni o hree undamenal age, produion, diribuion, and prouremen (Thoma and Griin, 1996). Tradiionally, hee age have been managed independenly, buered wih invenorie. In hi deoupled approah, deiion are made wihin eah o he unional deparmen independenly rom one oher. Alhough hi approah redue he omplexiy o he deiion proe, i ignore he ineraion o he dieren age, limi he poenial o urher o reduion and, in he wor ae enario, reul in ineaible oluion. Faing he inreaing ompeiion, ompanie are moving rom deoupled deiion making proee oward more oordinaed and inegraed planning and onrol or heir upply hain aiviie in order o redue oal o, improve perormane, and inreae ervie level. Alhough he onep o Supply Chain Managemen (SCM) and S&OP are relaively new, he idea o oordinaed planning an be raed bak o a early a 1960 by Clark and Sar (1960), who udied muli-ehelon invenory/diribuion yem. Sine ha ime, reearh on oordinaion o variou parial eion o he upply hain ha been ondued. However, very ew model have aemped o addre he inegraion o ale, produion, diribuion and prouremen imulaneouly. The reaon are probably owing o ehnologial limiaion, a uh a omplee inegraion o he upply hain problem i diiul o olve. Mo arile ound o ar ou on he inegraion o parially eleed union in he upply hain a planning or heduling level. William (1981) udie he oordinaed heduling o produion and diribuion uing a dynami programming approah whih imulaneouly deermine he produion and diribuion bah ize ha minimize he o in an aembly and diribuion nework. Chandra and Fiher (1994) inveigae he value o oordinaing produion heduling and muli-op vehile rouing o minimize e-up, invenorie and ranporaion o. Youe and Mahmoud (1996) propoe a non-linear programming model onidering produion eonomie o ale o udy he rade-o beween produion and ranporaion o and i impa on he ailiy enralizaion-deenralizaion deiion. Fumero and Verelli (1999) propoe a mixedineger programming model or inegraed produion and diribuion planning in order o opimally o-ordinae he apaiy managemen, invenory alloaion, and vehile rouing in a CIRRELT

6 The Value o Sale and Operaion Planning in Oriened Srand Board Indury wih Make-o-Order Manuauring Syem: Cro Funional Inegraion under Deerminii Demand and Spo Marke Reoure apaiaed lo-izing and muli-period vehile rouing problem. The eaible oluion i ompared o he oluion generaed by an alernaive deoupled approah in whih he produion plan i developed ir and he diribuion hedule i derived onequenly. The reearh indiae a ubanial advanage o he inegraed approah over he deoupled approah. Park (2005) ue a mixed-ineger programming model inveigae he eeivene o he inegraed produion-diribuion planning in a muli-plan, muli-reailer, and muliperiod logii environmen under apaiy onrain in order o maximize he oal ne proi. The reul onirm ha he inegraed planning approah perorm uperior o he deoupled one. Dai and Verer (2001) addre he produion-diribuion yem deign problem and preen a oninuou approximaion modeling ramework, baed on he ue o oninuou union o repreen paial diribuion o o and uomer demand. Cohen and Lee (1988) preen a modeling ramework and an analyi proedure ha addre he operaing poliie o maerial onrol, produion, and diribuion baed on a hierarhial heurii approah. The appliaion o oordinaed and inegraed produion-diribuion planning in indurial environmen have been doumened in variou publiaion. Klingman e al. (1988) develop an opimizaion programming baed produion-diribuion planning yem or he W.R. Grae ompany, making muli-ommodiy hemial produ. Haq e al. (1991) propoe an inegraed produion-invenory-diribuion model in a muli-age manuauring yem uing mixed ineger programming and applied o a real ae o a ompany manuauring urea erilizer. Marin e al. (1993) preen a large ale linear programming model o he produion, diribuion and invenory operaion or a la gla buine o Libbey-Owen-Ford, in a muliailiy muli-produ, muli-demand enre, and muli-period environmen. The ae udy again how a igniian aving rom he inegraed planning approah. Chen and Wang (1997) developed a linear programming model o olve he inegraed, prouremen, produion and diribuion planning problem o a ingle planning period or a Canadian eel-making ompany in a muli-ehelon logii nework under deerminii demand. The oordinaion and inegraion o upply hain planning in he ore produ indury have been udied inenively in reen year. Mane and Noron (2002) arry ou reearh on he inegraion o lumber ale, awing, invenory, and boom uage planning in awmill. They develop a linear programming baed muli-period planning model or he problem and eed i in a prooype awmill auming mill apaiy, lumber prie, marke demand, raw maerial upply are ai over he planning period. Rizk e al. (2006) udy he dynami produion-diribuion planning problem in pulp and paper indury beween a paper mill and a diribuion enre wih ranporaion o ubje o eonomie o ale ollowing general pieewie linear union. Ouhimmou e al. (2007) preen an inegraed planning model or he urniure indury ha addree he muli-ie and muli-period planning o prouremen, awing, drying, and ranporaion. The MIP baed model i olved boh opimally uing a CPLEX engine and approximaely uing ime deompoiion heurii auming a known and dynami demand over he planning horizon. Building on hee previou work, we apply he onep o S&OP, inorporae ale deiion o inveigae he opporuniie o proiably mahing and aiying demand wih he given upply hain apabiliie o produion, diribuion, and prouremen. More preiely, we propoe a erie o mahemaial programming model o evaluae he benei o he inegraed S&OP CIRRELT

7 The Value o Sale and Operaion Planning in Oriened Srand Board Indury wih Make-o-Order Manuauring Syem: Cro Funional Inegraion under Deerminii Demand and Spo Marke Reoure again he radiional deoupled planning proe in a onex o a real OSB manuauring upply hain yem wihin a make-o-order environmen. 3.0 S&OP modeling ramework From he lieraure review o S&OP, hree undamenal elemen an be ideniied. Fir, S&OP i a ro unional inegraed planning proe; eond, i ailiae he hierarhial oordinaion wih he buine plan and wih he deailed heduling; and hird, i i a periodial on-going planning, reviewing and evaluaion proe ha over a planning horizon o one o wo year. To ueully model he S&OP proe, hee hree elemen mu be expliily repreened. We preen a ramework ha deribe he S&OP a an inegraed aial planning whih inegrae he upply hain deiion o ale, produion, diribuion and prouremen ino a uniied planning yem a hown in Figure 1. Figure 1. A generi hemai diagram o Sale and Operaion Planning. In he ramework, he inegraed S&OP erve a a bridging union ha link he ompany buine plan and he deailed operaion heduling. The buine plan provide he guideline or inruion IN(T) ha e he onrain or he inegraed S&OP or a planning horizon T. Inegraed S&OP, embedded wih an opimizaion algorih inorporaing marke inelligene, diribuion o, produion onrain, produiviie, raw maerial prouremen onrain, e., generae a e o eaible periodi plan or ale, produion, diribuion, and prouremen ha uppor he buine plan in a imely and o eeive manner. Sale deiion play an imporan role in a ompany. They inorporae demand managemen ha erve a a gaeway whih link he demand wih upply hain aiviie o produion, diribuion, raw maerial prouremen and upply. I deiion no only ae revenue bu alo oal o. Thu, eeive ale deiion require a ro unional upply hain analyi ha balane revenue and oal o wihin he apabiliie o he upply hain. From he lieraure review we noe ha ale deiion have been inuiienly udied. A he oher end, S&OP plan, in urn, e he rule and ondiion, IN(), or he deiion o order aepane, reoure alloaion, lo izing, invenory loaion, and invenory quaniie ha oordinae he deailed level heduling. The deailed order aepane deiion deide, in real ime, wha order o aep given he apaiy availabiliy (apable-o-promie) ha omplie CIRRELT

8 The Value o Sale and Operaion Planning in Oriened Srand Board Indury wih Make-o-Order Manuauring Syem: Cro Funional Inegraion under Deerminii Demand and Spo Marke Reoure wih he order aepane rule. The deailed produion, diribuion, and prouremen heduling deine expliily wha, when, where, and how many o buy, make and hip. The deailed heduling ouline he exa operaion equene ha guide he upply hain exeuion in a ynhronized manner. The hierarhial oordinaion beween inegraed S&OP and deailed level heduling i illuraed by aniipaion AF(IN) o he S&OP model and periodi inormaion eed bak FB() rom he deailed level heduling. Aniipaion i a planning raegy ha an be ued in he S&OP model ha ake ino aoun ome o he relevan haraerii o he heduling model in order o ind eaible and opimal oluion. For inane, one o he ommon iue aed in aial planning and operaional heduling in a proe indury wih onrained apaiy i apaiy planning. Taial planning plan apaiy and make deiion baed on he aggregaed monhly demand and apaiy availabiliy. The plan, however, may reul in an ineaible oluion or a eaible oluion wih inreaed o a he heduling level due o varying weekly demand and ixed weekly apaiy. In hi ae, an aniipaion union AF(IN) an be embedded in he aial planning model o aniipae he apaiy reaion o he deailed level heduling oward he aial plan, IN(). Aniipaion i an imporan mehanim in hierarhial deiion oordinaion wihin a diribued deiion-making environmen. The onep and modeling approah o aniipaion i well addreed by Shneewei (2003). Feedbak i he proe where inormaion regarding he ae o operaion a he end o he period, uh a invenory level or bak order, a well a he exeuion perormane meaure or he period are ed bak o he inegraed S&OP. I permi he inegraed S&OP o updae deiion or he ollowing period. The dynami o he S&OP proe i modeled uing a imulaion model ha enapulae he inegraed S&OP model a well a he deailed level heduling model wih linked daabae or daa inpu, deiion oupu and perormane evaluaion. I permi ompanie o emulae real planning aiviie in an indury aing ohai demand and po marke prie. The inegraed S&OP model an alo be ued independenly o heduling model o uppor deiion a he aggregaed aial level. The propoed ramework allow uer o e dieren enario, uh a demand hange and/or po marke prie hange, by modiying one or everal inpu parameer and o aniipae yem perormane. I an alo be ued a a deiion uppor yem o ai he ompany in making opimal deiion. The ramework i no limied o a ingle plan ompany. I an be applied o a muli-ie enerprie where he inegraed S&OP model uppor he orporae wih ollaboraive eor on enralized ale, produion, diribuion and prouremen deiion inorporaing demand and ailiy alloaion (Figure 2). Thi enralized S&OP model will hen generae a e o plan peii or eah plan. Baed on he orporae S&OP plan, eah plan develop hedule loally or i own operaion. CIRRELT

9 The Value o Sale and Operaion Planning in Oriened Srand Board Indury wih Make-o-Order Manuauring Syem: Cro Funional Inegraion under Deerminii Demand and Spo Marke Reoure Figure 2. Sale and Operaion Planning in muli-ie enerprie environmen. I i believed ha S&OP improve upply hain perormane no only hrough ro unional inegraion and opimizaion, bu alo hrough hierarhial oordinaion proee. The inegraed S&OP enable he ynhronizaion o upply hain aiviie while he hierarhial oordinaion permi he yem o rea o he downream hange quikly wih opimal eaible oluion. In hi paper we develop an inegraed S&OP model uing mixed ineger programming (MIP) or a general ae o a muli-ie manuauring upply hain nework wih muli-uomer and upplier produing muliple produ wihin a make-o-order environmen. We alo develop a e o non-oordinaed MIP model o repreen he radiional deoupled ale, produion, diribuion, and prouremen planning on a ingle ie bai. Boh planning proee are hen applied o an OSB manuauring ompany ha manuaure a broad range o produ aiying he demand in divere Norh Amerian marke uing dieren markeing hannel o onra, non-onra, and po marke. An evaluaion i given in eion 6.0 o ompare he wo planning approahe under deerminii demand and po marke prie. 4.0 Model ormulaion The S&OP problem onidered in hi paper oni o an enerprie in he proeing indury wih make-o-order operaion. I ha many mill (Figure 3) manuauring muliple produ and ell o i onra and non-onra uomer, inluding po marke, in dieren region whih are ubje o dieren regional marke prie. A onra demand i one reeived rom a long-erm uomer wih whom a onra i igned or an agreed prie and quaniy. Alhough he mill mu aiy he onra demand, hey reerve he righ o no aiying he par ha i beyond he agreed quaniy, upon apaiy horage. A non-onra demand, inluding po marke, i one reeived rom non-onra uomer. Thi demand may no be aiied, or no aiied ully, when apaiy i no available. The po marke, in he orm o non-onra uomer, erve a a buer o aborb remaining apaiie in a looely puh mode baed on lexible demand. Boh onra and non-onra demand are deerminii and dynami wih eaonaliy over he planning horizon. Unaiied demand i onidered a lo in he model CIRRELT

10 The Value o Sale and Operaion Planning in Oriened Srand Board Indury wih Make-o-Order Manuauring Syem: Cro Funional Inegraion under Deerminii Demand and Spo Marke Reoure (bu may re-appear a new demand in he ollowing period in praie). Bakorder i no allowed. Figure 3. The upply hain nework o he OSB manuauring ompany. Eah mill i a el-managed buine uni oniing o dieren unional uni reponible or ale, produion, diribuion and prouremen. Produion i arried ou in bah on a ingle mahine wih limied apaiy. Eah mill produe a number o produ amilie. Eah produ amily i produed uing dieren raw maerial a a peii quaniy mix and produion rae. Changing produ amilie rom one o anoher require a equene dependen e-up ime whih i independen rom he volume produed. However, due o he mall and inigniian dierene a he aggregaed level, he e-up ime will be approximaed a ixed and a ixed eup o will be onidered. From eah produ amily, dieren produ iem an be produed. Limied warehoue apaiy i available a eah mill o emporarily ore he inihed produ. Shipping i arried ou by a number o hird pary logii ompanie uing dieren ranporaion mode (rail and ruk) and dieren vehile ype and ize. A ixed rukload o per deinaion i harged or he rail, and a variable rae, or ruk. Final produ are hipped o he uomer eiher direly or indirely via diribuion enre (DC). The enerprie ha ae o a e o DC rom he hird pary whih are aumed o have unlimied apaiy. The enerprie proure raw maerial rom a e o onra and non-onra raw maerial upplier. Wih a onra upplier, a minimum purhaing quaniy mu be omplied under he agreed prie over a planning horizon T. Some raw maerial upplie are ubje o long leadime, eaonaliy, and variabiliy. Large raw maerial invenory apaiy i available a eah ie o aborb he eaonaliy and variabiliy o he upply. The raw maerial invenory i mainained and managed inernally omplying wih aey ok and end o eaon invenory poliie. Inbound raw maerial hipping o i inluded in he prouremen o. 4.1 Modeling he ro unional S&OP yem Our problem i o develop an inegraed S&OP model a aggregaed produ amily level, ha ollaboraively unie he dieren manuauring ie, oordinae he enerprie wide apaiie, and inegrae he ro unional planning o ale, produion, diribuion, and CIRRELT

11 The Value o Sale and Operaion Planning in Oriened Srand Board Indury wih Make-o-Order Manuauring Syem: Cro Funional Inegraion under Deerminii Demand and Spo Marke Reoure prouremen or he enire enerprie. The aim i o maximize he oal ne proi over a planning horizon T. We ormulae he inegraed S&OP model uing mixed ineger programming. The indexe, e, and parameer ued in he model are lied below, ollowed by he deiion variable: Indexe and e T: Planning horizon, where i a period ( T ) C: Se o onra uomer where i a onra uomer ( C) F: Se o non-onra uomer where i a non-onra uomer, inluding po marke ( F) M: Se o manuauring mill, where m i a mill ( m M ) I: Se o produ amilie, where i i a produ amily ( i I) S: Se o raw maerial upplier, where i a upplier ( S) G: Se o onra raw maerial upplier ( G) and ( G S) RMC: Se o raw maerial aegorie, where rm i a raw maerial aegory ( rm RMC) RM: Se o raw maerial, where rm i a raw maerial ( rm RM ) and ( rm rm) DC: Se o diribuion enre, where d i a diribuion enre ( d DC) SH: Se o oubound hipping upplier, where h i a hipper ( h SH) V: Se o vehile ype, where v i a vehile ype (v V) R d, : Se o roue rom mill m o diribuion enre d R : Se o roue rom mill m o uomer R : Se o roue rom mill m o uomer R d, : Se o roue rom d o uomer R d, : Se o roue rom d o uomer R: Se o all roue where r i a roue R) R = R d U R U R U Rd, U Rd, Parameer Sale: d i: demand rom uomer or produ amily i in period dmin i: minimum onra demand quaniy rom uomer or produ amily i in period d i: demand rom uomer or produ amily i in period b i: ale prie o produ amily i o uomer in period ale prie o produ amily i o uomer in period b i: Produion: K m : apaiy o mill m in period p im : apaiy onumpion or produing one bah o produ amily i a mill m β im : produion bah ize o produ amily i a mill m im : uni produion o o produe produ amily i a mill m m : expeed e-up o a mill m m : expeed e-up ime a mill m h im : invenory holding o or uni quaniy o produ amily i a mill m I im0 : iniial invenory o produ amily i in warehoue o mill m a = 0 KI m : warehoue invenory apaiy o mill m CIRRELT

12 The Value o Sale and Operaion Planning in Oriened Srand Board Indury wih Make-o-Order Manuauring Syem: Cro Funional Inegraion under Deerminii Demand and Spo Marke Reoure G i : big number, G i max d i + d i C T F T Diribuion: : hipping ixed o o upplier h on roue r uing vehile ype v h rv h e irv : hipping variable o o upplier h or produ amily i on roue r uing vehile ype v a i : vehile apaiy aborpion oeiien per uni o produ amily i h id : invenory holding o or uni quaniy o produ amily i a diribuion enre d I id0 : iniial invenory o produ amily i in diribuion enre d a = 0 r id : ranhipmen o o uni quaniy o produ amily i hrough diribuion enre d h KSH : hipping apaiy o upplier h wih vehile v during period v KV v : vehile apaiy o vehile ype v KD mv : expediion apaiy o mill m or vehile ype v in period Prouremen: u rm i, m, : onumpion o raw maerial rm or produing uni volume o produ amily i a mill m I : raw maerial invenory o rm a mill m a he beginning o planning horizon = 0 rm, m, 0 I r e : raw maerial invenory arge o rm a mill m a he end o period e, repreening he invenory poliy or he end o eaon and end o planning period KI, : invenory apaiy o raw maerial aegory rm a mill m rm m KS : upply apaiy o upplier in period q min : minimum onra purhae quaniy rom upplier ( G) r : aey ok o raw maerial aegory rm a mill m in period m rm, : uni purhae o o raw maerial rm rom upplier in period, inluding ranporaion o : eup o o purhaing raw maerial rm rom upplier rm h, : invenory holding o o raw maerial rm a mill m rm m L rm : lead ime o prouring raw maerial rm rom upplier G rm : big number, Grm max KS S T Deiion variable Sale: S i: ale quaniy o produ amily i o onra uomer in period ale quaniy o produ amily i o non-onra uomer in period S i: Produion: X im : produion quaniy o produ amily i a mill m in period N im : number o produion bahe o produ amily i a mill m in period I im : invenory quaniy o produ amily i in mill m a he end o period 1 i e up i required o produe produ amily i in period, i.e., i X im > 0, im = 0 oherwie. CIRRELT

13 The Value o Sale and Operaion Planning in Oriened Srand Board Indury wih Make-o-Order Manuauring Syem: Cro Funional Inegraion under Deerminii Demand and Spo Marke Reoure Diribuion: h X irv : hipping quaniy o produ amily i by hipper h on roue r uing vehile v in period h N rv : number o rukload required rom upplier h delivering on roue r uing vehile v in period I : invenory o produ amily i in d a he end o period id Prouremen: Q rm m,, : purhaing quaniy o raw maerial rm rom upplier by mill m in period I r : invenory o raw maerial rm a mill m a he end o period y r 1 i a purhae i made or maerial rm rom upplier, i.e. Qr > 0, = 0 oherwie. The objeive union o he model i o maximize he ne proi o he onra and non-onra ale aking ino onideraion o he oal o o produion, diribuion and prouremen or a muli-ie enerprie over he planning horizon T. Max C i i I m b S + i i I T F i I T X b i S i + m im + h im im M T i I m M T i I m M T im h h h h h ( e + ) + + irv X irv rv N rv rid X irv hid I id h SH i I r R v V T h SH i I r Rm, d v V T i I d DC T I im Q rm m + rm y rm + hrm m I rm m (1),,,,,, rm RM S T rm m M T m rm, rm RM S m M T RM The ir brake repreen he oal revenue rom he oal ale. The eond brake ae he produion, e up, and invenory o. The hird brake deribe he variable and ixed ranporaion o, he d ranhipmen and d invenory o. The invenory in DC i inluded in he inegraed model in order o provide he lexibiliy o he apaiy managemen upon dynami demand. I an be e o zero o repreen ri make-o-order operaion wih DC being ued a ranhipmen enre only. The la brake preen he o o purhaing, order e-up, and raw maerial invenory. The inbound ranporaion o i inluded in he prouremen o ha rele he normal praie o he indury. Conrain (2) and (3) deribe he ale deiion or onra demand aing ha a onra demand ha i above he bae amoun or he period may no be ully aiied beaue o he lak o apaiy rom he mill. They alo imply ha he ompany ha he opion, upon aiaion o he bae amoun, o oninue erving he onra demand up o he apaiy limi, or o wih o erve non-onra demand, whihever i more proiable. CIRRELT

14 The Value o Sale and Operaion Planning in Oriened Srand Board Indury wih Make-o-Order Manuauring Syem: Cro Funional Inegraion under Deerminii Demand and Spo Marke Reoure S i d min, i, (2) i Si di, i, (3) Conrain (4) preen he non-onra ale deiion ha a non-onraed demand may no be aiied or aiied ully. S i d i, i, (4) Conrain (5) and (6) are he oupling onrain ha onne he ale and diribuion deiion ogeher, aing ha ale quaniie mu be equal o he oal hipmen o uomer. h Si = X irv, i, (5) h SH r ( R R ) v V d, h S i = X irv, i, (6) h SH r ( Rm, Rd, ) v V The e o produion onrain are illuraed by (7) o (11). Conrain (7) enure ha he produion i alway in ull bahe. Conrain (8) are he produion apaiy onrain aing ha he oal produion and e-up ime hould no exeed he oal available ime in he planning period. Conrain (9) are he invenory apaiy onrain deribing ha he oal produ invenorie mu no exeed warehoue apaiy. Conrain (10) imply ha i here i a produion o produ amily i, here mu be a e-up or i. Conrain (11) are he oupling onrain ha onne he produion and diribuion deiion ogeher. They ae ha he oal produion quaniy rom a mill m plu he beginning invenory minu he ending invenory mu be equal o he oal hipmen delivered ou o he mill in ha period. X = β i, (7) i I i I i im N im im p N + K (8) im im i I m im m I KI (9) im im m G X i, (10) X im + I im h im 1 -I im = X irv i, h SH r v V ( R R R ) m, m, m, d (11) The diribuion onrain are deribed by onrain (12) o (15) in whih onrain (12) are he low onervaion onrain or he DC. They ae ha he oal hipmen delivered o a DC plu he beginning invenory minu he ending invenory mu be equal o hipmen delivered ou o he DC in period. Conrain (13) alulae he number o rukload required o eah vehile ype rom eah upplier o mee he need o oal hipmen. They deribe ha eah load may onain muliple produ or he ame deinaion, and a le han ruk load i poible, however, he objeive union ore hi variable o ake he malle ineger value ha aiie he onrain. Conrain (14) are he hipping upplier apaiy onrain, and (15), he mill dipah apaiy onrain. h SH r R m, d v V i I X h irv + I I = h id 1 id irv i, d, h SH r ( Rd, R d, ) v V X (12) h h ai X irv N rv h, r, v, (13) KV v CIRRELT

15 The Value o Sale and Operaion Planning in Oriened Srand Board Indury wih Make-o-Order Manuauring Syem: Cro Funional Inegraion under Deerminii Demand and Spo Marke Reoure h N rv r R h SH r KSH h v ( R R R ) d v V h N rv KDm h, v, (14) (15) Conrain (16) o (22) preen he prouremen onrain where onrain (16) are he oupling onrain ha onne he raw maerial deliverie and invenory balane wih he maerial uage in he produion. The delivery quaniy i he purhaing quaniy ha wa ordered in period L rm. Conrain (17) ae ha he maerial proured rom a onra upplier mu aiy he onra quaniy ommimen. The maerial upply apaiy onrain are deribed by onrain (18). Supplier apaiy i preened a a union o in order o inorporae he eaonal variabiliy o he upply. Conrain (19) are he order e-up onrain. I i aumed ha order or muliple plan an be oordinaed o redue he order e-up o. The raw maerial invenory apaiy onrain are illuraed in onrain (20) and he aey ok onrain are deribed in onrain (21). Conrain (22) repreen he poliy he ompany may have or he eaon ending invenory. Finally, he non-negaive variable and binary variable onrain are preened in onrain (23) ha deine he domain or he variable. rm, m, L S Q + I = rm m u rm r -1,, rm, i, m i I Qr q min m M rm RM T Q rm RM m M I X im rm, m, = 1 L,..., rm T (16) KS r, m M I r KI r m rm, rm rm I r r rm, rm rm I r = I e r e rm, e G (17) (18) G rm y rm, Q r, r (19) (20) (21) (22) h h h Si, Si, X im, Nim, I im, X irv, N rv, I id, Qr, I r 0, Nim and N rv are ineger 0,1,, 0,1,, i,, h, r, v, d,, rm (23) { } { } im y rm 4.2 Modeling he deoupled planning yem In hi eion, he deoupled planning model are developed in whih eah mill i an independen buine eniy. Eah mill reeive i own demand, d im and d im and make i own ale deiion, S im and S im, a well a produion, diribuion, and prouremen deiion. The deiion are made eparaely by dieren unional uni wihin he mill. Eah unional uni eek opimal deiion loally. In diribuion planning, alhough all mill have ae o he ommon DC, eah mill manage i own hipmen hrough DC whih are ued a CIRRELT

16 The Value o Sale and Operaion Planning in Oriened Srand Board Indury wih Make-o-Order Manuauring Syem: Cro Funional Inegraion under Deerminii Demand and Spo Marke Reoure ranhipmen enre only. Global perormane a an enerprie i he ombined perormane o eah mill. The e o deoupled planning model or eah mill i repreened a ollow. Sale-Produion model: In he make-o-order environmen, ale planning and produion apaiy planning are oen onneed and an be onidered a a join model. Sale deiion are inended o maximize proi under he apaiy onrain hrough onra and non-onra ale, while aking onideraion o he produion, e-up, and invenory o. The model i: Max: b isim + b i Sim imxim + m im + himiim m (S1) C i I T F i I T i I T i I T i I T Subje o onrain: (7), (8), (9), and (10) plu Sim d min im, i, (S2) Sim dim, i, (S3) S im d im, i, (S4) X + I 1 -I = S S i, (S11) S im im im im + im C F im, Sim, X im, N im, I im 0, N im i ineger, and im { 0,1},, i, (S23) Conrain (S2), (S3), and (S4) are he modiied onrain o (2), (3), and (4) where demand and ale deiion are limied o eah individual mill. Conrain (S11) modiied onrain (11) ha remove he oupling variable o hipmen and replaed by he ale deiion variable. Conrain (S23) are he modiied non-negaive onrain peraining only o he ale and produion deiion variable. The problem an be olved o opimaliy. The ale and produion plan derived rom he model are erved a inpu parameer in he ollowing diribuion and he prouremen model, repeively. Diribuion model: The diribuion model make deiion onerning he hipping upplier, he number o vehile required, and he roue (dire hipping or indire hipping hrough a DC) or he mill m wih he objeive union being o minimize he oal diribuion o. The model i: Min: h h h h ( eirv X irv + rv N rv ) id h SH i I v V T r R r Rm, d + r X h irv m (D1) Subje o onrain: (13), (14), and (15) plu (D5), (D6), (D12) and he non-negaive onrain (D23). Conrain (D5) and (D6) are he modiied onrain o (5) and (6) where he ale deiion are rom a ingle mill. Conrain (D12) modiy onrain (12) by removing he DC invenorie. Conrain (D23) are he modiied non-negaive onrain ha only ake he diribuion deiion variable ino onideraion. I i imporan o noe ha he ale, produion, and invenory quaniie in onrain (D5), (D6), and (11) are he parameer CIRRELT

17 The Value o Sale and Operaion Planning in Oriened Srand Board Indury wih Make-o-Order Manuauring Syem: Cro Funional Inegraion under Deerminii Demand and Spo Marke Reoure deermined previouly by he ale-produion model o whih he diribuion model ha no urher inluene. S S im im = = h SH r ( R R ) d, ( R R ) v V h SH r h SH r Rm, d v V X h irv d, = v V X X h irv h irv h SH r ( R R ) d, d, v V X h irv, i, (D5), i, (D6) i, d, (D12) h h h X irv, N rv 0, and N rv i ineger, h, i, r, v, (D23) Prouremen model: The prouremen model deide whih maerial, rom whih upplier, a wha quaniie o purhae and how many invenorie o keep or he mill m wih he objeive union being o minimize he prouremen o Min: m r Qr + rm yr + hr mi r m (B1) rm RM S T rm RM S T rm RM T ubje o onrain (16), (20), (21), and (22) plu (B17), (B18), (B19) and non-negaive onrain (B23). Conrain (B17), (B18) and (B19) modiy onrain (17), (18), and (19) o illurae he prouremen deiion o a ingle mill. The parameer qmin in onrain (17) now beome q min m repreening an eimaed hare o he onra ommimen o mill m. The maerial upply onrain (18) are now deribed by (18B) having he prouremen quaniy alulaed on a ingle mill bai. The order e-up o in onrain (B19) are now harged or any purhae order made rom a ingle mill. Conrain (B23) are he modiied onrain (23) ha inlude only he variable relevan o he prouremen deiion. Similar o he diribuion model, he produion quaniie in onrain (16) are now he parameer deermined previouly by he ale-produion model o whih he prouremen model ha no urher inluene. The problem an hen be olved o opimaliy. Qr q minm G, rm RM T Qr KS, rm RM r Q r, r r, I r 0, and yr { 0,1}, r m (17B) (18B) Gy (B19) Q (B23) CIRRELT

18 The Value o Sale and Operaion Planning in Oriened Srand Board Indury wih Make-o-Order Manuauring Syem: Cro Funional Inegraion under Deerminii Demand and Spo Marke Reoure 5.0 Appliaion o an OSB indury ae 5.1 Cae deripion The model deribed in eion 4 were developed in he onex o a proje ha wa arried ou in ollaboraion wih a large OSB panel manuauring ompany having 11 manuauring mill aro Norh Ameria and Europe. Alhough he inegraed S&OP model i or he muliple ie, i an eaily be adoped in a ingle ie enerprie environmen. Thi eion preen a ae where he S&OP onep and model have been applied o one o i OSB mill, in Quebe, Canada. The problem ope oni o one manuauring mill produing 11 produ amilie uing 8 raw maerial upplied by 19 raw maerial upplier. Produ are hipped o 140 uomer aro 5 dieren region by 8 hipping ompanie uing 5 dieren vehile ype via 2 diribuion enre. The perormane o he inegraed S&OP model i ompared wih he non-oordinaed planning model baed on he daa obained rom he ompany. OSB i a wood ompoie produ made rom wood rand, ynhei rein and wax. I i primarily ued a building maerial or wall, roo, and loor heahing a well a I-joi. The mill in he udy produe produ mainly or wall and roo heahing a well a web ok ued or making I-Joi. I ha a ingle produion line wih a bolenek mahine, alled mulidayligh ho pre, whih operae around he lok, hroughou he year. In he produion line, he wood log o dieren peie (Apen, Birh, and Balam Poplar) are ed ino he yem aording o peii proporion. Thee log are debarked and randed. The wood rand are eparaed ino wo ream o ae and ore maerial ha are dried o dieren moiure onen peiiaion, repeively. The dried wood rand are mixed wih wax and dieren rein, in liquid and powder or peially ormulaed or uing in he ae and ore layer, repeively. The mixure o he wood rand i hen ormed ino maree ha are preed under high emperaure and preure in he ho pre o produe well bonded and onolidaed ruural panel. In eah preing yle, a bah o ull pre load panel o he ame produ amily mu be produed. Thee panel are hen u ino dieren ize, paked and ored in warehoue o be hipped o he uomer. The ompany ha an inernal warehoue wih limied invenory apaiy. The invenory i onidered a par o he proe o ool down he produ and a emporary orage plae or produ waiing o be hipped. Thu, he invenory o i inluded in he produion o. The produion line produe 11 dieren produ amilie. Eah ha peii phyial and mehanial properie a well a jumbo panel dimenion. A a reul, eah produ amily require a unique quaniy mix o raw maerial (u r i, m ) and i produed baed on a deined preing equene and yle ime (p im ), a hown in Figure 4. A hange o produ amily rom one o anoher require a e-up ime whih varie depending on he produ amily being produed beore and immediaely aer. The e-up o i eimaed baed on he produion lo due o he e-up ime and i expeed marke value. A weighed average o produ marke value i ued o deermine he e-up o. From eah produ amily, depending on he uing paern ued, dieren u-o-ize panel (produ iem) an be produed ha are paked and old o uomer in dieren region a dieren prie b i and b i (Figure 4). Conequenly, he ale deiion play an imporan role, ine i no only impa he revenue, bu alo he produiviy, a well a he oal o o produion, diribuion and prouremen. CIRRELT

19 The Value o Sale and Operaion Planning in Oriened Srand Board Indury wih Make-o-Order Manuauring Syem: Cro Funional Inegraion under Deerminii Demand and Spo Marke Reoure Figure 4. Produ ruure. The ompany ha wo aegorie o demand, onra and non-onra. In hi indury, ompanie generally ign annual onra or agreemen or ommimen or a perenage o annual apaiy. Remaining ale are made by elling o non-onra uomer and he po marke in dieren geographial region a dynami regional marke prie. Conra ale provide ongoing ale a a pre-negoiaed prie. However, i lok he apaiy and he prie whih limi he ompany rom geing greaer revenue when he marke prie i high. Nononra and po marke ale, on he oher hand, alhough uually wih higher prie, are rikier, ine prie may ubanially dereae and quaniie are no guaraneed. In hi indury, boh onra and non-onra demand are highly eaonal whih inluene po marke prie. Thereore, i i imporan o deide wha perenage o he apaiy hould be alloaed o onra ale and wha perenage o he non-onra ale, wih he aim being o eure he marke ye have he lexibiliy o aking advanage o he avourable po marke prie. Shipmen are made uing boh rail and ruk o dieren vehile ype, by a number o hird pary hipping ompanie. For he purpoe o hi numerial udy, a la rukload rae i ued or all hipmen. Order are hipped eiher direly o he uomer or hrough DC. The DC are ued or reloading purpoe i.e., o divide large load ino maller load or ombine maller load ino large one. Wood upply or produion i oured rom variou oure. Approximaely 50% o he wood upply i rom Canadian rown land hrough an agreemen alled CAAF (Conra d'approviionnemen e d'aménagemen oreier). A CAAF gran he righ or he ompany o harve he agreed volume o em rom he rown land or a period o one year a an agreed prie. The ompany mu omply wih he agreemen. Harveing operaion and inbound ranporaion are arried ou by onraor. The oher 50% i rom privae imberland owner a well a he po marke. Wood upply rom rown land and privae imber land generally ha a long lead ime o one monh on average, while rom he po marke he delivery an be made immediaely aer he purhae. Alhough he po marke generally ha lower prie and horer lead-ime, availabiliy i no alway guaraneed. Wood upply in Quebe i aeed by eaonaliy ha varie oniderably over he year due o hange in he weaher. In he ore, more wood i harveed during winer eaon beaue during hi ime, he ground i rozen ha here i no need or road onruion and here i lile rik o damaging when hauling log ou o he ore. In April and May, wood upply i are beaue log ranporaion in ore i prohibied due o hawing. During ummer, operaion are oued on ilviulural managemen and relaively le wood i harveed (Carlon e al., 2007). Rein and wax upplie are no aeed by eaonaliy and have hor lead ime. They are alo purhaed rom onra and CIRRELT

20 The Value o Sale and Operaion Planning in Oriened Srand Board Indury wih Make-o-Order Manuauring Syem: Cro Funional Inegraion under Deerminii Demand and Spo Marke Reoure non-onra upplier. While he onra upply provide he guaranee or he maerial availabiliy, he non-onra upply help o balane he prie and provide volume lexibiliie. We onider ha all raw maerial inbound ranporaion are provided by he upplier. The hipping o i inluded in he prouremen o. 5.2 Experimenal deign Thi eion deribe he plan ued or evaluaing he perormane o an inegraed S&OP again he non-oordinaed planning approahe. The evaluaion i ir ondued baed on he aual yem daa obained rom he ompany or 2005 in order o validae boh he inegraed and non-oordinaed model. Following he validaion, boh planning model were evaluaed uing generaed demand and po marke prie under 54 dieren enario wih 6 aor a hown in Table (1) and (2). The igure 0% repreen he bae level o he aor, while he - 10%, -20%, 10% or 20% repreen he aor being redued by 10%, 20% or inreaed by 10% or 20% repeively. Table 1. Experimenal deign. (1) Wih dieren level o po marke prie, demand, and uni prouremen uni o. Faor Senario Spo marke prie Demand Uni prouremen o 1, 2, 3, -20% -10% -10%, 0%, 10% 4, 5, 6, 0% -10%, 0%, 10% 7, 8, 9, 10% -10%, 0%, 10% 10, 11, 12, -10% -10% -10%, 0%, 10% 13, 14, 15, 0% -10%, 0%, 10% 16, 17, 18, 10% -10%, 0%, 10% 19, 20, 21, 0% -10% -10%, 0%, 10% 22, 23, 24, 0% -10%, 0%, 10% 25, 26, 27, 10% -10%, 0%, 10% 28, 29, 30, 10% -10% -10%, 0%, 10% 31, 32, 33, 0% -10%, 0%, 10% 34, 35, 36 10% -10%, 0%, 10% (2) Wih dieren level o hipping apaiy, produion yle ime and invenory apaiy. Faor Senario Shipping apaiy Produion yle ime Invenory apaiy 37, 38, 39, 0% -10% -20%, 0%, 20% 40, 41, 42, -5% -20%, 0%, 20% 43, 44, 45, 0% -20%, 0%, 20% 46, 47, 48, 20% -10% -20%, 0%, 20% 49, 50, 51, -5% -20%, 0%, 20% 52, 53, 54 0% -20%, 0%, 20% Seniiviy analyi i arried ou uing he generaed daa o udy how individual parameer ae he benei o inegraed S&OP. The parameer examined inlude dieren level o po marke prie, demand, uni produion o, uni prouremen o, uni hipping o, raw maerial invenory holding o, produ invenory apaiy, produion yle ime, and hipping apaiy a hown in Table 2. CIRRELT

21 The Value o Sale and Operaion Planning in Oriened Srand Board Indury wih Make-o-Order Manuauring Syem: Cro Funional Inegraion under Deerminii Demand and Spo Marke Reoure Table 2. Seniiviy analyi eing plan. Faor Level Spo marke uni prie -20% -10% 0% 10% 20% Demand -20% -10% 0% 10% 20% Uni produion o -20% -10% 0% 10% 20% Uni prouremen o -20% -10% 0% 10% 20% Uni hipping o -20% -10% 0% 10% 20% Raw maerial invenory holding o -20% -10% 0% 10% 20% Produ invenory apaiy -20% -10% 0% 10% 20% Produion yle ime -10% -5% 0% Shipping apaiy % 10% 20% 5.3 Demand generaion algorihm Wih he lak o hiorial real demand reord in he ye aual weekly hipping daa i ued o approximae uomer ordering inormaion and o derive heir ordering behaviour. We hen generae uomer demand baed on heir ordering behaviour. Boh onra and non-onra uomer exhibied eaonaliy in heir ordering. However, hey ollowed dieren behaviour. Conra demand uually arrive regularly a a ixed ordering inerval. Alhough he expeed oal annual demand i known wih high erainy, he exa periodi demand varie randomly and i inluened by eaonaliy. The demand generaion algorihm or onra demand i preened a ollow: Algorihm A: Sep 1. deermine he ordering inerval I i or produ amily i rom uomer, aring week τ 0 and ending week τ e. Sep 2. e τ τ 0. Sep 3. generae an ordering quaniy d i τ ' or week τ rom uomer ordering produ amily i, ollowing normal diribuion N iτ ( μ iτ, σ iτ ). Sep 4. inremen τ o τ τ + I i and hek i τ τ e, i ye, go o ep 3, i no, go o ep 5. Sep 5. apply eaonaliy aor i τ o he generaed ordering quaniie o deermine he eaonal demand d iτ = i τ d iτ '. For uomer having no eaonaliy, heir eaonal aor i τ = 1. Sep 6. aggregae he weekly ordering quaniy d i τ o derive he monhly demand quaniie d i o be ued a he demand inpu or he model. Sep 7. repea he proedure rom ep 1 o 6 or every uomer C and produ amily i I. The non-onra demand, on he oher hand, arrive irregularly wih ome inluene rom eaonaliy. The order quaniy i alo inluened by eaonaliy. Thu, he demand generaion ollow dieren algorihm preened a: CIRRELT

22 The Value o Sale and Operaion Planning in Oriened Srand Board Indury wih Make-o-Order Manuauring Syem: Cro Funional Inegraion under Deerminii Demand and Spo Marke Reoure Algorihm B: Sep 1. generae a oal ordering quaniy d it or produ amily i rom a uomer or he N μ, σ, and e remaining planning horizon T ollowing normal diribuion ( ) quaniy R d it. Sep 2. deermine he ordering eaonaliy probabiliy or uomer ordering produ amily i in P τ, aring week τ 0 and ending week τ e. For order wihou eaonaliy, eah week τ, ( ) i a uniorm diribuion U (0,1) i ued. i Sep 3. lip an ordering week τ ollowing he eaonaliy probabiliy ( τ ) he planning horizon T[τ 0, τ e ]. Sep 4. Generae an ordering quaniy ollowing normal diribuion ( ) d i τ it it i it P or U (0,1) wihin d i τ or week τ rom uomer ordering produ amily i N μ, σ. Calulae he remaining quaniy iτ R R, and hek i R 0. I ye, go o Sep 5, oherwie go o Sep 3. Sep 5. aggregae he weekly ordering quaniy o be ued a he demand inpu or he model. Sep 6. repea he proedure rom ep 1 o 6 or every uomer. iτ iτ d i τ o derive he monhly demand quaniie i d i F and produ amily i I Uing hee demand generaion mehod, non-onra demand doe no arrive every week, epeially in low eaon period. In high eaon period, demand may arrive everal ime in he ame week rom he ame uomer or he ame produ amily. When hi happen, he muliorder are ummed o derive he weekly order quaniy o rele one order per week praie. Moreover, i i poible ha more order (boh onra and non-onra) are generaed in one period, auing apaiy horage, while ewer order are generaed in anoher auing apaiy urplu. I rele he real demand iuaion aed by he ompanie in hi indury. 5.4 Spo marke prie generaion The po marke prie analyi i arried ou baed on he Random Lengh Panel Prie or he year 2005 provided by he ompany. Random Lengh prie provide a guideline or ommodiy produ elling o non-onra uomer. The generaion o he po marke prie ollow he r onra demand generaion proedure in algorihm A wih a ixed weekly inerval I i. The uneaonalized weekly prie bi τ r ' or produ amily i in region r week τ i generaed ollowing r r r normal diribuion N iτ ( μ iτ σ iτ ). A e o eaonaliy aor are hen applied o he weekly r r r r prie o derive he eaonal prie biτ = i τ biτ '. Baed on he weekly eaonal prie bi τ, he r monhly po marke prie b i i alulaed by averaging he weekly prie o region r wihin he monh. The monhly po marke prie or a non-onra uomer in region r or produ amily i i derived a b. i The onra prie i deermined baed on he mo urren hree monh rolling average o he po marke prie or he region where he uomer belong. The onra prie or uomer, CIRRELT

23 The Value o Sale and Operaion Planning in Oriened Srand Board Indury wih Make-o-Order Manuauring Syem: Cro Funional Inegraion under Deerminii Demand and Spo Marke Reoure 1 r produ amily i, in monh an be expreed by he ormula b = b + Δa, where Δa i a i i 3 = 2 oeiien repreening any addiional adjumen o he prie or peialy produ wih peial reamen. I i zero or andard produ. All demand and po marke prie are generaed uing he FOR@C experimenal plaorm. The model are olved uing CPLEX 10.0 opimizaion engine wih branh and bound algorihm hrough opimizaion programming language OPL5.0. The program are run on Window Plaorm uing Inel Penium 4 workaion wih CPU 2.40 GHz, 512 MB o RAM, and Window XP Home Ediion Verion Compuaional reul and diuion 6.1 Model validaion Boh inegraed and deoupled model are preliminarily validaed uing ield daa obained rom he ompany. Table 3 how he validaion reul o he deoupled model. The nominal apaiy i he deigned apaiy o he mill and he demand ued i he ompany aual hipping quaniy a explained earlier in eion 5.3. From he reul, we an ee ha he oal ale and produion quaniie derived rom he deoupled model are very loe o he nominal apaiy and demand, reuling in a ervie level o 99.8%. The apaiy uilizaion i 91.8% indiaing 8% o apaiy i no ued whih i in agreemen wih he expeed perenage o unplanned downime. Thee reul onirm he validiy o he model. Table 3. Validaion reul Value (q. 1/16 bai) Nominal apaiy: 2,100,000,000 Demand in 2005: 2,127,882,660 Toal ale quaniy rom he deoupled model: 2,123,737,250 Toal produion quaniy rom he deoupled model: 2,123,746,800 Servie level rom he deoupled model: 99.8% Capaiy uilizaion rom he deoupled model: 91.8% 6.2 Reul and diuion The evaluaion o he benei o he inegraed model again he deoupled model i made by omparing he ollowing perormane rieria: annual proi, revenue, revenue rom he onra ale, revenue rom he non-onra ale, produion o, ranporaion o, prouremen o, ervie level and apaiy uilizaion. Due o he onidenialiy agreemen, he evaluaion preened here i baed on imulaed demand and po marke prie generaed uing algorihm A and B. Table 4 how he benei o he inegraed model, alulaed by 100*(value o inegraed model value o deoupled model)/value o deoupled model. A expeed, he inegraed model generae higher annual proi han he deoupled model. The higher annual proi i reuled rom he a ha he inegraed model dropped ome non-onra ale while adding ome onra ale. Alhough hi aued a oal revenue reduion, i redued oal produion, diribuion and prouremen o, and reuled in a ne proi improvemen. In oher word, i hee unjuiied ale had been aeped, i would have reuled in a oal ne CIRRELT

24 The Value o Sale and Operaion Planning in Oriened Srand Board Indury wih Make-o-Order Manuauring Syem: Cro Funional Inegraion under Deerminii Demand and Spo Marke Reoure proi lo. The redued ale quaniy o he inegraed model reul in a ligh reduion in uomer ervie level (Table 4) and apaiy uilizaion. To mainain he ame ervie level or inreae i oen ha o impliaion. The modeling approah allow he ompany o make beer o-benei analyi in aeing dieren deiion. The relaively maller benei beween he inegraed and deoupled approahe i owing o he rong marke ondiion during whih he ae wa ondued and he a ha boh he inegraed and deoupled model are opimizaion baed model. Table 4. The benei o he inegraed S&OP model. Perormane rieria Benei (%) Benei ($CAD) Annual proi 0.8% 548,080 Toal revenue -0.5% -694,000 Revenue rom onra ale 0.9% 1,057,600 Revenue rom non-onra ale -10.3% -1,751,490 Produion o -0.4% -97,810 Tranporaion o -8.9% -871,561 Prouremen o -0.8% -273,920 Servie level % Capaiy uilizaion % Table A-1 and Table A-2 in appendixe preen he benei o he inegraed model, in perenage and CAD value repeively, under dieren enario ollowing he experimenal plan hown in Table 1, ogeher wih he oluion gap and CPU ime or olving he inegraed model. In all ae, he inegraed model generae greaer proi han he deoupled planning model. The greaer proi i largely owing o he o reduion, epeially he ranporaion o reduion, ranging rom 5.7 o 19.2% and valuing rom $528,565 CAD o $1,928,706 CAD. Thi reul i in agreemen wih many previou publiaion addreing he oordinaion and inegraion o produion-diribuion planning (Chandra and Fiher, 1994; Fumero and Verelli, 1999). In our ae however, due o he omplexiy o he proble he inegraed produion-diribuion model addreing parial upply hain problem would no be uiien. In many iuaion, he prouremen o reduion anno be ignored. A hown in Table A-1 and Table A-2, he inegraed S&OP model provide ar riher inormaion han he parial upply hain planning model. The benei o he inegraed S&OP model varie in relaion o he marke ondiion and upply hain o. Figure 5 demonrae he impa o marke demand, prie, and raw maerial uni prouremen o on he proi inreae. Spo marke prie ha he greae impa on he benei o he inegraed S&OP model, pariularly when prie i low and uni prouremen o i high (Figure 5). When prie i low, he deoupled ale-produion model would make he ale deiion ha maximize proi aking only he produion apaiy and o ino he onideraion, wihou expliily onidering he ee o down ream diribuion and prouremen o. Oen, uh a deiion would eaily onribue o he un-juiied ale ha inreae revenue, bu alo he down-ream o o a greaer exen, reuling in a oal ne proi lo. The inegraed model, on he oher hand, make he ale deiion aking onideraion o he revenue i generae and alo o he oal upply hain o, hu minimizing he unjuiied ale. A imilar rend i oberved a all demand level. The greae benei our when he po marke prie i low and he uni prouremen o i high wih a higher level o demand (Figure 5). A higher demand level inreae he demand populaion ize ha allow greaer reedom in ale CIRRELT

25 The Value o Sale and Operaion Planning in Oriened Srand Board Indury wih Make-o-Order Manuauring Syem: Cro Funional Inegraion under Deerminii Demand and Spo Marke Reoure deiion or boh inegraed and deoupled model. However, when he po marke prie i low, he inegraed model would have greaer benei omparaively due o i inegraed approah. The ineraion o po marke prie, uni hipping o and uni prouremen o a dieren level are hown in Figure 6. A expeed, he benei o he inegraed model inreae a he uni hipping o inreae wih he greae benei ouring when he po marke prie i low, he uni hipping and prouremen o are high. Pariular aenion i paid o he uni prouremen o in he analyi due o i greaer weighing in hi indury. A hown in Figure 7, prouremen o aoun or over 50% o he oal annual o. Figure 5. The benei o he inegraed model a dieren level o po marke prie, demand and raw maerial prouremen o. Figure 6. The benei o he inegraed model a dieren level o po marke prie, uni hipping and prouremen o. Figure 7. Co breakdown in perenage. CIRRELT

26 The Value o Sale and Operaion Planning in Oriened Srand Board Indury wih Make-o-Order Manuauring Syem: Cro Funional Inegraion under Deerminii Demand and Spo Marke Reoure The benei o he inegraed model in relaion o dieren upply hain apaiie i hown in Figure 8. The apaiie udied are apaiie o produion (by mean o preing yle ime), produ invenory, and hipping. Preing yle ime i a ehnology dependen aor ha relae o he ombinaion o equipmen apabiliie, produion onrol and produ deign. Due o he limied apaiy o he ho pre, greaer eor are plaed on reduing he preing yle ime a i direly inreae produiviy. A a reul, reduing preing yle ime ha been regarded a an alernaive approah o inreae produion apaiy. Reduing preing yle ime may reul in down ream apaiy deiienie. In our ae, when preing yle ime i redued by 10%, exiing hipping apaiy beome inuiien auing deoupled diribuion model having ineaible oluion. Addiional hipping apaiy ha o be added in order o have eaible oluion, a hown in he doed bar in Figure 8. From Figure 8, we an oberve ha when preing yle ime i a i bae level, he benei o he inegraed model hange raher inigniianly a invenory and hipping apaiie hange. Thi i beaue when he preing yle ime i a i bae level, he invenory and hipping apaiie are uiien o mee he produion and hipping requiremen in boh inegraed and deoupled model. Varying he invenory and hipping apaiie a he given range ha lile impa o urher benei inreae. A he preing yle ime dereae, he benei o he inegraed model dereae when invenory apaiy i high and inreae when invenory apaiy i low. Thi i beaue when preing yle ime dereae, he inreaed produiviy relaxe ome apaiy onrain, epeially in high demand period, allowing more demand quaniie being aiied in boh he inegraed and deoupled model. During low demand period, high invenory apaiy allow more produion quaniie o be ored a invenory (or he ollowing high demand period) reuling in higher ale quaniie in boh he inegraed and deoupled model, hu a redued gap. When invenory apaiy i low, higher produiviy i reried by he low invenory apaiy in he deoupled ale-produion model, epeially during low demand period, reuling in redued ale. The inegraed model, on he oher hand, wih he lexibiliy o keeping invenorie in DC, allow high produiviy o be ully uilized, and hereore, ha more ale and benei han he deoupled model. A imilar rend i eviden in boh low and high hipping apaiy level. Figure 8. The benei o inegraed model a dieren level o produion yle ime, hipping apaiy, and produ invenory apaiy. CIRRELT

27 The Value o Sale and Operaion Planning in Oriened Srand Board Indury wih Make-o-Order Manuauring Syem: Cro Funional Inegraion under Deerminii Demand and Spo Marke Reoure 6.3 Seniiviy analyi In hi eion, we preen he eniiviy analyi reul and diu how he individual inpu parameer oulined in Table 2 ae he benei o he inegraed model. Figure 9 illurae how he benei hange a eah individual parameer hange. In hi analyi, he parameer hange i limied o he global hange, ha i, i he po marke prie inreae by 10%, he prie or all produ in all region during all period o he planning horizon inreae by 10%. Figure 9. Seniiviy analyi o he benei o an inegraed S&OP approah. From he graph, we an oberve ha he benei o he inegraed model i mo eniive o he po marke prie a repreened by he eepe lope where he benei dereae a he po marke prie inreae. Thi reul i in agreemen wih he one hown in Figure 5 and Figure 6. When he po marke prie i low, he revenue o boh onra and non-onra ale are low, wih he oal o unhanged, he inegraed model will drop he unjuiied ale ha would have been aeped by he deoupled model o redue proi lo. Thereore, when po marke prie i low, he inegraed model end o have greaer benei. A he po marke prie inreae, he unjuiied ale quaniy dereae. The proi o he inegraed model i geing loe o ha o he deoupled model, hereore, a redued benei. The benei o he inegraed model i alo eniive o hipping and prouremen o, bu no a eniive o produion o. Thi i beaue boh he deoupled and inegraed model inegrae ale and produion deiion, and he hange o produion o alone make lile dierene o he benei o he inegraed model. For hipping and prouremen o however, ine deoupled ale-produion model make ale and produion deiion eparaely rom he diribuion and prouremen deiion, he down ream hipping and prouremen o inreae are no onidered in he ale-produion model. Baed on he ale and produion deiion made in he ale-produion model, he hipping and prouremen model mu aiy hem a all o. The inegraed model, on he oher hand, make deiion aking all he prieo radeo in ale, produion, diribuion and prouremen ino onideraion, whih in ee, ind oluion ha maximize proi. A a reul, he benei o he inegraed model inreae a he uni hipping and prouremen o inreae. CIRRELT

28 The Value o Sale and Operaion Planning in Oriened Srand Board Indury wih Make-o-Order Manuauring Syem: Cro Funional Inegraion under Deerminii Demand and Spo Marke Reoure Comparing o po marke prie, hipping and prouremen o, he benei o he inegraed model i le eniive o demand, produion o, raw maerial invenory o, yle ime, hipping and invenory apaiie. In oher word, he benei o he inegraed model i relaively onan a eah o hee parameer hange individually. 7.0 Conluion In hi arile, he onep o S&OP i diued ouing on he ro unional inegraion and hierarhial oordinaion o he aggregaed aial planning and operaional heduling. An S&OP modeling ramework i developed or a ingle-plan organizaion, whih i hen exended o a muli-plan organizaion. A generalized mixed ineger programming ormulaion i developed o model he inegraed S&OP o ale, produion, diribuion, and prouremen or a muli-plan organizaional upply hain nework. The radiional deoupled and nonoordinaed planning approah i alo modeled under he muli-plan organizaion onex. Boh planning model are applied o an indurial ae o an OSB manuauring plan and evaluaed uing ield daa obained rom he plan. The goal i o develop he S&OP ramework and model, whih will allow ompanie o evaluae he benei o he S&OP proe beore i implemenaion. The ompuaional reul rom 54 enario how ha he inegraed planning ouperorm he deoupled planning in all ae. The benei varie a marke ondiion and upply hain o hange. The benei range rom 0.5% o 3.1% valuing rom $372,000 o $1,200,000 (Table A-1 and Table A-2). Our enibiliy analyi reveal ha he benei o he inegraed S&OP model i eniive o po marke prie, and uni hipping and prouremen o. Thereore, hee parameer need o be eimaed wih greaer preiion. Thi arile preen he perormane evaluaion uing only a mall number o enario where eah parameer hange globally. However, i i poible ha hee parameer hange loally, i.e. prie inreae in one region, or demand inreae or one pariular produ only, e. Thee are ome example ha one oen ae in real buine environmen. The model provide ompanie wih he abiliy o analye dieren enario in real lie and uppor hem in making eaible and opimal upply hain deiion. Aknowledgemen The auhor would like o aknowledge he inanial uppor provided by he Fore E-buine Reearh Conorium (FOR@C), Univeriy Laval, Quebe, Canada, and would like o hank he reearh parner, Forinek Canada Corp. and our indurial parner Norbord In. Canada. CIRRELT

29 The Value o Sale and Operaion Planning in Oriened Srand Board Indury wih Make-o-Order Manuauring Syem: Cro Funional Inegraion under Deerminii Demand and Spo Marke Reoure Reerene Aberdeen Group, The ale and operaion planning benhmark repor Copyrigh Aberdeen Group, In., Boon, USA. Aberdeen Group, Be praie in S&OP a benhmark repor Copyrigh 2005 Aberdeen Group, In., Boon, USA. APICS Diionary, h ediion, ISBN X. In: Taunon, C., Advane in Sale and Operaion Planning Inernaional Conerene Proeeding, APICS The Eduaional Soiey or Reoure Managemen. Bower, P., Mo ommon hrea o ale and operaion planning proe. The Journal o Buine Foreaing. Fall, Carlon, D., D'Amour, S., Marel, A., Rönnqvi, M., Supply hain planning in he pulp and paper indury. Aeped or publiaion in INFOR, peial iue on upply hain managemen in he ore produ indury. Ceere, L., Hillman, M., Maon, C., The handbook o ale and operaion planning ehnologie. AMR Reearh Repor, AMR-R-19187, Copyrigh AMR Reearh In., Boon, USA. Chandra, P., Fiher, M.L., Coordinaion o produion and diribuion planning. European Journal o Operaional Reearh, 72, Chen, M., Wang, W., A linear programming model or inegraed eel produion and diribuion planning. Inernaional Journal o Operaion & Produion Managemen, 17, Clark, A.J., Sar, H., Opimal poliie or a muli-ehelon invenory problem. Managemen Siene, 6, In: Thoma, D.J., Griin, P.M., Coordinaed upply hain managemen (Invied Review). European Journal o Operaional Reearh, 94, Cohen, M., Lee, H., Sraegi analyi o inegraed produion-diribuion yem: model and mehod. Operaion Reearh, 36, Croxon, K.L., Lamber, D.M., Garia-Daugue, S.J., Roger, D.S., The demand managemen proe. The Inernaional Journal o Logii Managemen, 13(2), Dai, A., Verer, V., A oninuou model or produion-diribuion yem deign. European Journal o Operaional Reearh, 129, Fumero, F., Verelli, C., Synhronized developmen o produion, invenory, and diribuion hedule. Tranporaion Siene, 33, CIRRELT

30 The Value o Sale and Operaion Planning in Oriened Srand Board Indury wih Make-o-Order Manuauring Syem: Cro Funional Inegraion under Deerminii Demand and Spo Marke Reoure Haq, A.N., Vra, P., Kanda, A., An inegraed produion-invenory-diribuion model or manuaure o urea: a ae. Inernaional Journal o Produion Eonomi, 39, Klingman, D., Moe, J., and Phillip, N., A logii planning yem a W.R. Grae. Operaion Reearh, 36, Ling, R. C., The uure o ale and operaion planning. Inernaional Conerene Proeeding, APICS The Eduaional Soiey or Reoure Managemen. Ling, R.C., Goddard, W.E., Orheraing ue improve onrol o he buine wih ale & operaion planning. The Oliver Wigh Companie. Oliver Wigh Limied Publiaion In. Maier, K., Thoreon, P., Sale and operaion planning rom he planner perpeive. Inernaional Conerene Proeeding, APICS The Eduaional Soiey or Reoure Managemen. Marin, C.H., Den, D.C., Ekhar, J.C., Inegraed produion, diribuion, and invenory planning a Libbey-Owen-Ford. Inerae, 23(3), Mane, T.C., Noron, S.E., Muliple period ombined opimizaion approah o ore produion planning. Sandinavian Journal o Fore Reearh, 17, Muzumdar, M., Fonanella, J., The ere o S&OP ue. Supply Chain Managemen Review. Ouhimmou, M., D'Amour, S., Beauregard, R., Aï-Kadi, D., Chauhan, S.S., Furniure upply hain aial planning opimizaion uing a ime deompoiion approah. Aeped or publiaion in European Journal o Operaional Reearh. Rizk, R., Marel, A., D Amour, S., Muli-iem dynami produion-diribuion planning in proe indurie wih divergen inihing age. Compuer & Operaion Reearh, 33, Palmaier, G.E., Cru C., Enerprie ale and operaion planning ynhronizing demand, upply and reoure or peak perormane. APICS, he eduaional oiey or reoure managemen. J.Ro Publihing. Park, Y.B., An inegraed approah or produion and diribuion planning in upply hain managemen. Inernaional Journal o Produion Reearh, 43(6), Shneewei, C., Diribued deiion making. Springer, 2 nd ediion. Taunon, C., Advane in Sale and Operaion Planning Inernaional Conerene Proeeding, APICS The Eduaional Soiey or Reoure Managemen. CIRRELT

31 The Value o Sale and Operaion Planning in Oriened Srand Board Indury wih Make-o-Order Manuauring Syem: Cro Funional Inegraion under Deerminii Demand and Spo Marke Reoure Thoma, D.J., Griin, P.M., Coordinaed upply hain managemen (Invied Review). European Journal o Operaional Reearh, 94, Wallae, T.F., Sale and operaion planning he how-o handbook. T.F. Wallae & Company. Willia J.F., A hybrid algorihm or imulaneou heduling o produion and diribuion in muli-ehelon ruure. Managemen Siene, 29(1), Youe, M.A., Mahmoud, M.M., An ieraive proedure or olving he unapaiaed produion diribuion problem under onave o union. Inernaional Journal o Operaion & Produion Managemen, 16, CIRRELT

32 The Value o Sale and Operaion Planning in Oriened Srand Board Indury wih Make-o-Order Manuauring Syem: Cro Funional Inegraion under Deerminii Demand and Spo Marke Reoure Appendixe Table A- 1. The benei o he inegraed S&OP model in % o he perormane rieria, (1) A dieren level o marke prie, demand, and uni purhae o. Level Perormane rieria Soluion meaure Senario Prie Demand Prouremen Proi Revenue Conra Non-onra Produion Tranporaion Prouremen MIP Time uni o revenue revenue o o o gap (e) 1-20% -10% -10% 1.9% -1.7% 0.1% -14.2% -2.4% -12.9% -2.5% 0.44% % -10% 0% 2.2% -2.0% 0.1% -16.1% -2.8% -13.9% -2.8% 0.46% % -10% 10% 2.7% -3.0% 0.1% -24.3% -4.1% -17.0% -4.1% 0.54% % 0% -10% 1.5% -2.2% 1.1% -25.2% -2.6% -14.9% -2.9% 0.61% % 0% 0% 2.2% -2.2% 0.8% -23.7% -2.9% -15.5% -3.0% 0.41% % 0% 10% 2.5% -3.4% 1.0% -34.4% -4.4% -19.2% -4.5% 0.58% % 10% -10% 2.1% -1.5% 1.5% -24.3% -2.1% -13.9% -2.3% 0.42% % 10% 0% 2.4% -1.8% 1.5% -26.8% -2.4% -15.0% -2.6% 0.45% % 10% 10% 3.1% -3.0% 1.6% -37.6% -4.0% -19.1% -4.3% 0.43% % -10% -10% 1.0% -0.6% 0.0% -4.4% -0.7% -7.7% -1.0% 0.42% % -10% 0% 1.0% -1.0% 0.0% -7.7% -1.3% -9.6% -1.5% 0.46% % -10% 10% 1.2% -1.5% 0.0% -11.3% -2.0% -11.4% -2.1% 0.46% % 0% -10% 0.9% -0.7% 0.9% -11.8% -0.6% -8.9% -0.9% 0.52% % 0% 0% 1.1% -1.2% 0.9% -15.7% -1.3% -11.2% -1.6% 0.45% % 0% 10% 1.4% -1.7% 0.9% -19.8% -2.1% -13.5% -2.4% 0.42% % 10% -10% 1.0% -0.7% 1.4% -15.9% -0.7% -9.5% -0.9% 0.35% % 10% 0% 1.2% -1.2% 1.5% -20.4% -1.4% -11.6% -1.6% 0.36% % 10% 10% 1.4% -1.7% 1.6% -25.6% -2.2% -14.0% -2.4% 0.34% % -10% -10% 0.8% -0.3% 0.1% -2.8% -0.3% -6.9% -0.6% 0.38% % -10% 0% 0.7% -0.4% 0.0% -3.1% -0.4% -6.7% -0.6% 0.47% % -10% 10% 0.8% -0.6% -0.1% -3.5% -0.7% -7.6% -0.9% 0.45% % 0% -10% 0.7% -0.5% 0.9% -9.8% -0.3% -8.5% -0.6% 0.38% % 0% 0% 0.8% -0.5% 0.9% -10.3% -0.4% -8.9% -0.8% 0.28% % 0% 10% 0.9% -0.6% 1.0% -11.4% -0.5% -8.9% -0.9% 0.34% % 10% -10% 0.7% -0.5% 1.4% -13.9% -0.4% -8.3% -0.6% 0.35% % 10% 0% 0.8% -0.5% 1.6% -14.7% -0.5% -8.5% -0.7% 0.32% % 10% 10% 0.9% -0.5% 1.5% -14.3% -0.5% -8.9% -0.7% 0.29% % -10% -10% 0.5% -0.2% 0.0% -1.8% -0.3% -5.7% -0.4% 0.30% % -10% 0% 0.6% -0.2% 0.1% -2.3% -0.2% -6.1% -0.4% 0.31% % -10% 10% 0.7% -0.2% 0.1% -2.5% -0.3% -6.2% -0.5% 0.32% % 0% -10% 0.5% -0.3% 0.6% -6.5% -0.1% -7.3% -0.3% 0.33% % 0% 0% 0.6% -0.4% 0.9% -9.3% -0.2% -8.5% -0.6% 0.27% % 0% 10% 0.7% -0.4% 0.8% -9.0% -0.2% -8.3% -0.7% 0.29% % 10% -10% 0.5% -0.2% 1.1% -9.5% -0.2% -6.2% -0.3% 0.35% % 10% 0% 0.5% -0.4% 1.4% -12.7% -0.3% -7.3% -0.5% 0.32% % 10% 10% 0.7% -0.3% 1.5% -12.8% -0.2% -7.5% -0.5% 0.29% 708 CIRRELT

33 The Value o Sale and Operaion Planning in Oriened Srand Board Indury wih Make-o-Order Manuauring Syem: Cro Funional Inegraion under Deerminii Demand and Spo Marke Reoure (2) A dieren level o hipping apaiy, preing yle ime, and invenory apaiy. Level Perormane rieria Soluion meaure Senario Shipping Preing Invenory Proi Revenue Conra Non-onra Produion Tranporaion Prouremen MIP Time apaiy yle ime apaiy revenue revenue o o o gap (e) 37 0% 0% -20% 0.9% -0.5% 0.9% -10.3% -0.4% -9.0% -0.8% 0.27% % 0% 0% 0.8% -0.5% 0.9% -10.3% -0.4% -8.9% -0.8% 0.28% % 0% 20% 0.9% -0.5% 0.9% -10.5% -0.4% -9.1% -0.8% 0.29% % -5% -20% 1.0% -0.4% 0.3% -5.2% -0.5% -8.6% -0.7% 0.31% % -5% 0% 0.9% -0.4% 0.3% -5.3% -0.5% -7.8% -0.7% 0.31% % -5% 20% 0.8% -0.5% 0.2% -4.9% -0.4% -7.9% -0.7% 0.58% % -10% -20% 1.1% -0.1% 0.4% -3.4% 0.0% -6.8% -0.3% 0.33% % -10% 0% 0.9% -0.4% 0.0% -2.9% -0.4% -7.7% -0.7% 0.29% % -10% 20% 0.7% -0.5% 0.0% -3.7% -0.6% -7.2% -0.7% 0.43% % 0% -20% 0.9% -0.5% 0.8% -9.7% -0.4% -9.0% -0.8% 0.29% % 0% 0% 0.8% -0.5% 0.9% -10.1% -0.4% -8.4% -0.8% 0.34% % 0% 20% 0.8% -0.5% 0.8% -9.9% -0.4% -8.8% -0.8% 0.31% % -5% -20% 0.9% -0.4% 0.3% -5.2% -0.4% -7.9% -0.7% 0.31% % -5% 0% 0.7% -0.5% 0.3% -5.8% -0.5% -7.0% -0.8% 0.55% % -5% 20% 0.8% -0.4% 0.2% -5.0% -0.4% -7.4% -0.7% 0.40% % -10% -20% 1.1% -0.2% 0.4% -3.7% -0.1% -7.6% -0.4% 0.43% % -10% 0% 0.7% -0.6% -0.2% -2.7% -0.6% -7.8% -0.8% 0.47% % -10% 20% 0.7% -0.5% -0.1% -3.2% -0.5% -7.1% -0.7% 0.47% 660 CIRRELT

34 The Value o Sale and Operaion Planning in Oriened Srand Board Indury wih Make-o-Order Manuauring Syem: Cro Funional Inegraion under Deerminii Demand and Spo Marke Reoure Table A- 2. The benei o he inegraed S&OP model in $CAD o he perormane rieria, (1) A dieren level o marke prie, demand, and uni purhae o. Level Perormane rieria Senario Prie Demand Prouremen Proi Revenue Conra Non-onra Produion Tranporaion Prouremen uni o revenue revenue o o o 1-20% -10% -10% 745,564-1,751, ,430-1,871, ,510-1,199, , % -10% 0% 798,164-2,057,970 60,330-2,118, ,900-1,288, , % -10% 10% 894,104-3,088, ,550-3,200, ,340-1,583,509-1,472, % 0% -10% 657,475-2,358,580 1,063,570-3,422, ,550-1,465, , % 0% 0% 851,465-2,438, ,640-3,223, ,040-1,526,870-1,077, % 0% 10% 921,055-3,715, ,350-4,668,333-1,042,890-1,885,655-1,718, % 10% -10% 939,432-1,754,670 1,519,400-3,274, ,830-1,396, , % 10% 0% 1,023,122-2,077,058 1,535,100-3,612, ,480-1,506, , % 10% 10% 1,195,162-3,465,653 1,600,100-5,065,753-1,015,160-1,928,706-1,720, % -10% -10% 512, ,930-24, , , , , % -10% 0% 504,692-1,178,370-39,840-1,138, , , , % -10% 10% 562,282-1,704,390-37,490-1,666, ,380-1,059, , % 0% -10% 501, , ,800-1,797, , , , % 0% 0% 565,905-1,404, ,900-2,390, ,440-1,105, , % 0% 10% 684,855-2,039, ,200-3,017, ,460-1,325, , % 10% -10% 562, ,310 1,608,800-2,511, , , , % 10% 0% 641,024-1,493,940 1,729,700-3,223, ,950-1,179, , % 10% 10% 736,254-2,209,060 1,835,000-4,044, ,730-1,423, , % -10% -10% 501, ,760 69, ,160-75, , , % -10% 0% 404, ,470 8, ,070-88, , , % -10% 10% 474, , , , , , , % 0% -10% 446, , ,800-1,666,860-74, , , % 0% 0% 548, ,890 1,057,600-1,751,490-97, , , % 0% 10% 574, ,170 1,155,600-1,928, , , , % 10% -10% 472, ,820 1,783,800-2,451,620-90, , , % 10% 0% 570, ,130 1,940,300-2,593, , , , % 10% 10% 620, ,020 1,812,000-2,527, , , , % -10% -10% 371, ,490-10, ,690-57, , , % -10% 0% 445, , , ,920-49, , , % -10% 10% 484, , , ,030-64, , , % 0% -10% 436, , ,300-1,218,060-29, ,369-94, % 0% 0% 496, ,970 1,138,600-1,730,570-50, , , % 0% 10% 509, ,210 1,069,500-1,684,710-55, , , % 10% -10% 392, ,050 1,482,600-1,859,650-45, ,597-97, % 10% 0% 427, ,180 1,907,400-2,477,580-67, , , % 10% 10% 526, ,780 2,020,200-2,490,980-56, , ,180 CIRRELT

35 The Value o Sale and Operaion Planning in Oriened Srand Board Indury wih Make-o-Order Manuauring Syem: Cro Funional Inegraion under Deerminii Demand and Spo Marke Reoure (2) A dieren level o hipping apaiy, preing yle ime, and invenory apaiy. Level Perormane rieria Senario Shipping Preing Invenory Proi Revenue Conra Non-onra Produion Tranporaion Prouremen apaiy yle ime apaiy revenue revenue o o o 37 0% 0% -20% 573, ,210 1,044,100-1,740, , , , % 0% 0% 548, ,890 1,057,600-1,751,490-97, , , % 0% 20% 568, ,750 1,087,200-1,783,950-98, , , % -5% -20% 635, , , , , , , % -5% 0% 571, , , , , , , % -5% 20% 535, , , , , , , % -10% -20% 712, , , ,260 10, , , % -10% 0% 619, ,660-2, , , , , % -10% 20% 438, ,520-33, , , , , % 0% -20% 569, , ,692-1,651, , , , % 0% 0% 510, ,970 1,038,000-1,711,970-94, , , % 0% 20% 532, , ,744-1,682,632-95, , , % -5% -20% 573, , , , , , , % -5% 0% 434, , ,100-1,003, , , , % -5% 20% 500, , , , , , , % -10% -20% 703, , , ,410-13, , , % -10% 0% 452, , , , , , , % -10% 20% 439, , , , , , ,400 CIRRELT