A garden-equipment maker is reconciling its third-quarter S&OP plan with the business plan (table below). Supply for powered tools is limited by motor-assembly capacity. Which action is most appropriate before the executive S&OP meeting?
| Family | Demand plan (units) | Supply plan (units) | Unit price | Business plan revenue |
|---|---|---|---|---|
| Hand tools | 10,000 | 10,000 | $50 | $500,000 |
| Powered tools | 6,000 | 4,500 | $80 | $480,000 |
Show answer & explanation
Answer: B
Lower the powered-tools demand plan to 4,500 units: Not the best choice: it hides the gap; the demand plan should stay unconstrained so executives can see the lost revenue and decide.
Bring costed gap-closing options to executives: Correct. (ECM I.D.3) The constraint leaves a $120,000 revenue gap (1,500 units × $80). Reconciliation prepares alternatives, such as overtime, outsourcing or accepting the shortfall, with their cost and revenue effects for executive decision.
Raise hand-tool prices to make up the revenue: Not the best choice: a one-sided price change in another family does not address the constraint and has not been evaluated with sales.
Cut the business plan revenue target for the quarter: Not the best choice: changing the target before evaluating ways to close the gap skips the analysis that reconciliation exists to provide.
In S&OP reconciliation, planners convert volume plans to money, quantify gaps against the business plan, and bring options with trade-offs to the executive meeting.