sales&operationsplanning. what is happening 6-12 months from now?
TRANSCRIPT
Sales&
OperationsPlanning
What is happening 6-12 months from now?
Maturity Scan
How do you characterize the S&OP process in your team?
Stage of Evolution Characteristics
Ad hoc decisions, fire fighting problems, no specific sequence
Functional organization with each function making separate decisions in its own silo, not sharing it with the others
Joint decision making with a rough logical sequence, not formalized or detailed. Limited preparation on trade offs
Formalized logical sequence of joint decision making. Individual preparation of decisions and trade offs beforehand
Stage I
React
Stage II
Anticipate
Stage III
Collaborate
Stage IV
Orchestrate
A definition
S&OP is
a process discipline that brings together the sales & marketing ambitions, supply capabilities, customer needs and financial constraints and objectives to balance them and create a single, achievable plan for the tactical horizon
S&OP can be an effective bridgebetween Strategic Business Planning and Execution
Strategic Management /Business Planning
Tactical Planning & Decision Making
(Tactical) Execution
S&OP• Align functional plans• Create the right context• 2-18 months horizon• Prepare for different scenarios• Recognise and address gaps
Sense and respond
Predict and prepare
S&OP is business planning in 5 steps…
Sales and Ops Planning
MeetingReconcile with financial plans
Supply
Reconcile demand and supply
Demand
From Forecasting to Demand Shaping
From Capacity Planning to Supply Network trade offs & design
“What if?” Rather than “Yes/No”
Getting the right info to make decisions into the last 60 minutes of the process
The process seems simplebut some principles are a challenge….
– Discussions should be fact-based– There must be clear ownership of each element of the process
and of the decisions made
– The operating plan must be formally linked by assumptions to a financial plan
– There needs to be a formal balancing of demand and supply across
a rolling horizon– Gaps (vs set targets…) must be recognised and action plans
formulated to close them taking into consideration the relevant lead
times– Trade-offs must be clearly articulated and commercially
evaluated
Common pitfall: believing that S&OP is a monthly meeting
Slide 8
15.00–18.00 S&OP
If S&OP is only a monthly meeting, it will not deliver the targeted results:a good process consists of well-prepared and fact-based discussions on key topics only, resulting in optimal decisions for the company as a whole
What do you think about this discussion?
:
• Sales: “We have received a tough target of 5% additional sales next year and we have accepted the challenge”
• Marketing: “We are designing a new campaign and will invest €10m, so we think that volumes should increase by 6%”
• Supply Chain: “The statistical forecast indicates 2% growth”
Compromise reached after long fight in S&OP meeting: 4% growth
Slide 9
Aligning with finance does not mean that the forecast has to become the target!
Slide 10
Forecast
Plan
Target
The best estimate of anticipated events (a likely future outcome)
A set of actions designed to achieve a defined outcome
A goal or objective (a desired future outcome)
≠
≠
Realising that there are gaps is good! This helps to timely drive the right actions
Slide 11
History Time Horizon
Dem
a nd
pla
n
Short term Next 3 Months
Medium Term3-18 months
Long Term>18 months
GAPG
AP
Target
Forecast
Recognising that gaps exist between forecast and target is very useful: in the S&OP process you can decide to do something about it!
It is all about the gaps
Comparing the bottom-up forecast with financial targets will give better understanding of the expected outcomes
Slide 12
Volume plan
Planned net average sales prices
Bottom-up financial forecast
Business targetsGaps?
13
Source figure: Red Pepper. Modified E&Y 1999
● Functional silo approach
● Ineffective behaviour
● Fire fighting
● Lots of ad-hoc meetings
● Lots of effort, little reward
● Key decision making forum
● Manage together
● Routine things done routinely
● Issues addressed early –
efficient response &
anticipation
oneconsensusplan
Sales:we can sell 200Sales:we can sell 200
Marketing:
the promotion will sell 400
Marketing:
the promotion will sell 400
Manufacturing:they will only sell 150
Finance:
we have budget of 300
Who Brings What to the Table?
Marketing
ProductDevelopment
ProductDemand
Capital
MPS and Supplier
ConstraintsBusiness
Plan
WorkforceAvailability
Adapted from: Launchbury, Keith J. Principles of Planning Omeric, 1999.
Finance
Materials
Operations
HumanResources
Engineering
GeneralManagement
Capacity
CustomerInterface
Sales
How to translate this to The Fresh Connection
ServicelevelDemand patternShelflife
Adapted from: Launchbury, Keith J. Principles of Planning Omeric, 1999.
Supply Chain
Operations
Purchasing Sales
LeadtimesQualityReliabilityTrade Unit
CapacityImprovements
FrequenciesStocklevelFixed period
Strategy
Decision making
sequence
Sales OperationsSupply chain
Purchasing
• Decision making– Who is involved?– What sequence makes sense?
Decide about portfolio/ customer service
Forecasting demand (pattern)
Production resources and allocation
Production policy (interval / fixed
period)
Inventory policy finished product (safety stock)
Production capacity plan (shifts/projects)
Capacity plan outbound warehouse
Inventory policy raw mat. (batch size,
safety stock)
Capacity plan inbound warehouse
Sales Operations Supply chain Purchasing
The value proposition
Supplier selection and agreements
Set up a logical sequence of decisions and roles involved for The Fresh Connection
2. Portfolio / customer service
3. Forecasting demand 4. Production resources and allocation
5. Production policy (interval / fixed period)
6. Inventory policy finished product (safety stock)
5. Production capacity plan (shifts/projects)
7. Capacity plan outbound warehouse
9. Inventory policy raw mat. (batch size, safety stock)
10. Capacity plan inbound warehouse
Sales Operations Supply chain Purchasing
1. The value proposition
Cus-tomer
Product group
Finished product
Finished product
Compo-nents
8. Supplier selection and agreements
10 steps to success
Iterate