Cross Functional Alignment in Supply Chain Planning: A Case Study of Sales & Operations Planning

Working papers are in draft form. This working paper is distributed for purposes of comment and discussion only. It may not be cited or reproduced without permission of the copyright holders. Copies of working papers are available from the authors. Abstract In 2002, Leitax, a niche consumer electronics company, suffered serious supply chain planning mishaps due to poor cross-functional integration in the supply/demand planning activities. The poor integration resulted from organizational differentiation among the functions and an unsophisticated approach to integration. In response to the planning mishaps, the organization introduced significant changes, which we examine in this case study. After highlighting the constituent responsibilities, structures, and processes, we recognize a system, as opposed to a list of mechanisms, as responsible for cross-functional integration. Operationalizing integration as functional alignment with generated plans, we find collaborative engagement of the functions to be a consistent process feature and operational norm encouraged and maintained by integrators. In particular, the information processing nature of the sales and operations planning (S&OP) process introduced at Leitax is argued effective as a result of this collaborative engagement. We argue that this collaborative engagement positively influences alignment even in the absence of an overall reduction in the level of differentiation exhibited by an organization, which stands in contrast to academic structural recommendations for changes in incentives for achieving integration. Examining a systemic tradeoff consciously acknowledged by the organization, we further argue that alignment encouraged by this collaborative engagement can be more important than achieving, superior performance along such dimensions as speed or accuracy in individual information processing steps of the S&OP process, a tradeoff which to our knowledge has not been highlighted in the supply chain management literature.