Tactical planning in engineer-to-order environments

Licentiate thesis, 2019

Tactical planning is implemented to balance customer demand and supply capacity within a medium-term and to avoid under- and overcapacity. In engineer-to-order (ETO) environments, under- and overcapacity lead firms to incur substantial costs that can easily wipe out profit margins. ETO-oriented markets like the construction and capital goods sectors are massive in terms of investments and have considerable impact on the gross domestic product (GDP) of nations. This makes demand-supply (DS) balancing highly important in ETO contexts.

The purpose of the thesis is to expand the knowledge about how tactical planning contributes to balancing customer demand and supply capacity in ETO settings. This purpose departed from accepting that – based on extent literature – such knowledge about tactical planning is rather generic and fragmented, which calls for further research. The results in the thesis are presented from literature studies, two single case studies and a multiple case study. Since DS balancing in principle means dealing with the complexity stemming from demand and supply, the thesis results focus on how tactical planning manages such complexity in ETO environments.

A single case study, focusing on tactical-level planning activities, together with a multiple case study, focusing on cross-functional integration, address how informal tactical-level planning processes contribute to DS balancing. Including a single case study, focusing on S&OP as a formal tactical-level planning process, the three studies form the empirical base of a framework that responds to the purpose of the thesis. The framework considers complexity, which is represented by two dimensions including detail and uncertainty.

The thesis contributes to practical aspects by providing guidance to tactical-level planners in ETO environments concerning the areas of improvement to consider when configuring and upgrading the planning process to manage complexity. The theoretical contribution of the thesis is concerned with the developed framework that describes the relation between tactical planning, DS balancing, cross-functional integration and complexity in ETO settings.