JOURNAL OF BLOOD SERVICES MANAGEMENT

Benets to blood banks of a sales and operations planning process

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Donald A. Keal and Phil Hebert

A formal sales and operations planning (S&OP) process is a decision making and communication process that balances supply and demand while integrating all business operational components with customer-focused business plans that links high level strategic plans to day-to-day operations. Furthermore, S&OP can assist in managing change across the organization as it provides the opportunity to be proactive in the face of problems and opportunities while establishing a plan for everyone to follow. Some of the key outcomes from a robust S&OP process in blood banking would include: higher customer satisfaction (donors and health care providers), balanced inventory across product lines and customers, more stable production rates and higher productivity, more cooperation across the entire operation, and timely updates to the business plan resulting in better forecasting and fewer surprises that negatively impact the bottom line.

formal sales and operations planning (S&OP) process, which has been utilized in many manufacturing companies for years, is basically a decision-making and communication process that balances supply and demand while integrating all business operational components with customerfocused business plans that links high-level strategic plans to day-to-day operations. It also establishes formal management reviews that result in approved product production plans. These reviews assist management in understanding current performance and what to expect in the future. In the world of blood banking, S&OP is particularly important because blood banks have customers at both ends of their supply chainblood donors on the

From Joshua Jordan Associates. Address reprint requests to: Donald A. Keal, 173 Regal Court, Monroeville, PA 15146; e-mail: dkeal405@aol.com. Received for publication September 1, 2010; accepted September 21, 2010. doi: 10.1111/j.1537-2995.2010.02945.x TRANSFUSION 2010;50:2785-2787.

front end and health care providers and their patients at the back end. Furthermore, S&OP can assist in managing change across the organization, as it provides the opportunity to be proactive in the face of problems and opportunities while establishing a plan for everyone to follow. Having consulted in blood banking at numerous venues across North America and the United Kingdom, along with various types of large and small manufactures, we often faced the objection that blood banking is different from other manufactures and therefore a process such as S&OP would not be necessary. Or, we are told that we have our own way of doing things because we are highly regulated. To be sure, the Food and Drug Administration does highly regulate blood banks just as it identies them as manufactures in 21CFR600.3 & 606.3 and we would agree that blood banks are different from most manufacturing operations since, as noted earlier, they have customers at both ends of their supply chain and they cannot purchase their raw materials. From our perspective, these conditions make S&OP even more important in blood banking. Some of the key outcomes from a robust S&OP process in blood banking would include: higher customer satisfaction (donors and health care providers), balanced inventory across product lines and customers, more stable production rates and higher productivity, more cooperation across the entire operation, and timely updates to the business plan resulting in better forecasting and fewer surprises that negatively impact the bottom line. Although many manufacturers around the world embraced the concept of lean manufacturing (simply put, taking waste out of the manufacturing process) in the 1990s, blood banks, for the most part, came to this concept rather late in the game. Some blood banks have hired consultants to assist them in implementation of lean concepts, or they have made their own efforts. To take performance improvement to the next level blood banks should implement S&OP, which is a process that makes improvements that do not cost anything except discipline while improving communication and co-ordination across the organization. However, most blood banks have probably never heard of S&OP, much less implemented it. Our belief is that S&OP is the natural next step in
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continuous improvement. S&OP originally focused on matching supply and demand, but now its aim is to facilitate organizational alignment between business plans and goals while enabling quick responses to frequently changing conditions. Consistent increases in return on net assets (RONA) can only be achieved if there is a single version of the truth represented in the strategic and operational plans where performance to the plans are frequently measured and monitored. To accomplish this, the plans need to be translated into execution prolesthe anticipated rates of the execution of the plan. For example, a strategic plan for a blood center might look out over 2 to 3 years, with one of its goals being to increase its RONA by 3% each year. The operational plan to meet that strategic plan would establish the means and more detailed timelines to reach this goal. Then, as the year progresses, the metrics that measure performance to the plan need to be matched with this prole to identify deviations and the need for any plan adjustments. For example, assume that there is a monthly demand plan in place in a blood center for 500 single-donor platelets (SDPs). Again, with customers at both ends of the supply chain, the plans objective must shape the behavior of donors and health care providers to meet that demand and address deviations from the plan. In this instance, because of the relatively short shelf life of SDPs, to dynamically respond to demand the blood center would need to get into the details minimally each week, but most likely daily. By details, we mean factors such as: forecast SDP usage and outdate rates by health care provider on the demand side, and specic donor show rate, deferral rates, split rate, testing failure rate, and so forth on the supply side. In order to shape supply and demand, the blood center should understand any deviations from the anticipated donation and consumption proles and take timely and appropriate action to mitigate any negative effects of the deviations. If the consumption is less than anticipated, the excess SDPs may be exported if they have sufcient shelf life remaining, or donors may be rescheduled to reduce supply. If SDP demand spikes, recruitment and collections may have to work overtime to recruit more donors and collect more SDPs. Now, this may seem like Blood Banking 101; however, too many times, we have seen blood centers that have no regular or formal process to address deviations in supply and demand. Instead, they address these situations on the y in a reactive and ad hoc mode. With an effective S&OP process in place blood banks would be in a more proactive mode, which reduces the confusion that contributes to the sense of Were ghting res all the time. Leading manufactures, recognizing the need to transition from disparate, decentralized business decisions, are rethinking the role that S&OP can play in managing their businesses. They are moving beyond purely tactical
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approaches of using S&OP as a means of balancing supply and demand within their supply chains, and instead using it to align product launches, marketing and sales programs, production plans, and resource allocations to ensure their investments are being made appropriately to achieve business objectives. Again, consider how this applies to blood banking. Regardless of what individual blood banks call these activities, all blood banks, under the umbrella of quality control and FDA regulations, perform six major activities: recruiting donors, collecting blood, processing the various blood components, testing the components, distributing the components, and keeping track of every component with a blood management system. To be sure, there are myriad methods of performing these activities and there are other major business components used in support of these activities. Transportation springs immediately to mind. Nevertheless, would it not be better if all of these activities were operating with the same truth before them? So, how is that truth disclosed? Data. It has been said so often that it has become a clich when someone says, You cannot improve what you cannot measure. Even companies with very informal S&OP practices must measure performance. Historically, metrics have been specic to a single function; for example, blood-drive goal achievement or donor show rates. However, the drive for competitive advantage in other manufacturing arenas has spurred a rethinking of which metrics should be used to determine the success of the S&OP program. The emerging best metrics, such as RONA, encompass the two-way impact of demand and supply decisions, rather than having separate and unrelated metrics for each. For example, in blood banking this could amount to meeting your hospital demand, but having a negative RONA while doing it. We have frequently observed mobile blood drives being scheduled where the cost per unit (CPU) collected is higher than the sales cost of a unit to the health care provider or what an imported unit would cost. This is merely one component of how a center can have a negative RONA. That being said, we have noticed that in many blood banks, there is often another difculty that contributes to problems with metricsdata accuracy. The most common data deviations we see come from the blood management system and the nancial system; that is, they are frequently out of balance. Add in another software system, such as Hemasphere, and getting numbers to balance can be further complicated, or not. This leads to other difculties such as inaccurate and untimely reports that can be misinterpreted or create skepticism about their reliability, which, in turn, can pit one part of the organization against another or everyone. Think recruitment versus collections, for example. Therefore, a key to a successful S&OP process is reliable, current, and accurate data.

S&OP FOR BLOOD BANKS

Today, business intelligence systems and data warehouses can offer decision makers an accurate, up-to-theminute operational picture based on pre-dened key performance indicators (KPIs). The frequency of reports, amount of detail in the reports, analysis, and action steps are dependent on the management structure of a blood center. For example, the CEO might look at three or four KPIs daily, the COO might look at ve or six that would include those of the CEO but three others, the Director of Recruitment would look at ve or six that may or may not overlap with ve or six for the Director of Collections and so forth. These various KPIs would be related to valuechain processes, product and customer protability, order ll rates, customer satisfaction or retention (again, donors and health care providers), labor hours per unit collected, percent volume growth, and gross RONA. The metrics could all be delivered through highly exible role-based portals and executive S&OP dashboards. For a S&OP program to succeed over the long term, blood banks must consider how performance measurement itself must change. This means putting new metrics into place as business conditions change as well as increasing the frequency of reporting and analysis.

Experience tells us that plans to install an effective S&OP process are often slowed down by the effort of gathering data that has minimal importance to the overall project. Consequently, it is important to ensure that organizations know exactly what business issues they are trying to address and understand the minimum data necessary for the project so that they do not become bogged down in minutiae. We suggest, therefore, that the 80-20 rule is very much alive when it comes to S&OP, dashboarding, and KPIs.
AUTHOR IDENTIFICATION Mr. Keal is the President of Joshua Jordan Associates and has worked as a consultant to blood banks for over 15 years in the United States, Canada, and the United Kingdom. Mr. Hebert is a Professional Certied Materials Manager, Certied Distribution Manager, and a Certied Lead Auditor having spent over 35 years in all aspects of supply chain and operations. CONFLICT OF INTEREST The authors have declared no conict of interest.

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