s&op overview - implementation approach - biel- 01-18-12

Jim Biel, Ph: 847.687.5379, E-Mail: [email protected], http://www.linkedin.com/in/jimbiel (January 18, 2012)

Sales & Operations Planning (S&OP)Introduction & Overview of the Process /

My Implementation Approach

Wednesday, January 18, 2012

Jim BielManagement Consultant

E-Mail: [email protected]: 847.687.5379

LinkedIn Profile: http://www.linkedin.com/in/jimbielS&OP Writings: http://www.slideshare.net/jimbiel

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Professional Biography – Jim BielPhone: 847.687.5379, Chicago, ILE-Mail: [email protected]

LinkedIn Profile: http://www.linkedin.com/in/jimbielSlideShare Profile: http://www.slideshare.net/jimbiel

• Multi-Functional Experience, Concentrated in Consumer Product Goods (CPG) Industry (Sara Lee, Unilever, Chiquita, Pepsi) – Retail & B-to-B

• Core understanding of multiple supply chains – frozen, fresh, cold, dry, liquid

• Adept at integrating relevant business concepts and processes with enterprise-wide systems, a strong business process understanding and acumen including S&OP (boot strap and retrofit S&OP implementations).

– Demand Planning / S&OP Writings Available Here: http://www.slideshare.net/jimbiel

• Experience in Business Forecasting, Sales Operations & Planning, S&OP, Sales Systems, ERP, CRM, Demand Planning, Business Information Management, Supply Chain, Trade Promotion Management, IT, HR, Training & Development, and Finance (Corporate FP&A & Public Accounting, CPA)

• Independent Management Consulting for large and small entities• Client Services position with a SaaS (software as a service) provider of trade promotion

software (Adesso Solutions)

• Practiced public accounting as a CPA with McGladrey; Corporate Finance Financial Planning & Analysis (FP&A) Roles

• Project Management Capabilities (PM Certification – Loyola, Chicago)

• Network of Resources (Can bring additional experts to the table)

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Business Drivers / Pain PointsThe Why

• Implement Concepts & Tactics To:

– Improve Demand Forecasting Accuracy– Reduce Supply Chain Volatility– Improve Working Capital (Inventory)– Improve Decision Making

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• A Blend of Concept & Tactics

• The Recipe: Process, People, Performance (Metrics), Platform (Systems)


My Bias – S&OP(Sales & Operations Planning)

• My Preferred Business Model To:– Improve Forecast Accuracy– Reduce Supply Chain Volatility– Improve Customer Service Levels– Drive Decision Making

The Concept is Easy, Execution Can Be Challenging

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Note: S&OP may also be known as IBF (Integrated Business Forecasting), SIOP (Sales, Inventory, & Operations Planning), and other names.


Top Business Benefits of Best-in-Class S&OP

• Increasing revenue• Improving forecast accuracy• Improvements in the perfect order/ customer service• Better supply planning/scheduling adherence• Improving new product launch• Reduction of inventory

Source: “Demand Driven Sales and Operations Planning”, One Network Enterprises (Downloaded from CGT E-Mail, 8/22/11)

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Key Learnings / Observations• Key Learnings From My Experience

– The Concept is Easy

– The Initial Buy-In is Fairly Easy

– The Change Management Required Can Be Hard• New Process (Includes Collaboration)• New Technologies / Systems• New Accountabilities / Roles• Traditional Functional Ownership Dies Hard – Silos• Transparency Hard For Some to Swallow

– Consistency & Month-to-Month Execution is Hard

– Leader Needs to Keep Functional Leads Feet to the Fire

– May Need a Process Coach

– Treat Implementation as a Project

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S&OP Defined

• APICS defines S&OP as the function of setting the overall level of manufacturing output(production plan) and other activities to best satisfy the current planned levels of sales (sales plan and/or forecasts), while meeting general business objectives of profitability, productivity, competitive customer lead times, etc., as expressed in the overall business plan.

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The S&OP FlowDemand

SupplyDaily

WeeklyMonthly

Balancing

FinanceGenerates Proformas,Cost, Risk /

Ops Monthly;As Needed In

Interim

Utilize DemandOutputs as BasisFor Forecasts,Annual Plans,

Strategic Plans, Add Risks / Opps /

Other Lifts / Discount Factors

As Needed

GMControls Monthly

S&OP

+ Results+ Metrics Review+ Var to Bus Pl+ Future Frcst+ Assumptions

+ Bulk of Meeting:Gaps, Opps in

Future Frcst

+ Create Business Rules (Between Demand/Supply)+ Forecast Time Fence: Rolling 12-24-36 Months (“Rolling Forecasts”)+ Functional Leads & Leader Participate in Monthly S&OP Review

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Best Practices• One Integrated Process (Process)• People/Functional Alignment (People)• One Common Set of Metrics

(Performance) – Start with Baseline• One System of Record (Platform)• All Demand Streams (Demand Supply)• Integrate All Available Data (Internal &

External) - Collaboration• One Forecast (Used by All Functions * )

* With Some Caveats

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S&OP • Process Alignment / Integration

– (Demand-Supply-Finance-GM)• “Connect the Knobs” for Leadership

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Dem Pl

Supp PlFinance

GM Owner


“Connecting the Knobs”(Why Integration is Important)

• “Before we had Executive S&OP in the Company, I Spent A Lot of Time Turning Knobs That Weren’t Connected To Anything”

– VP & GM Quote From Tom Wallace’s Book, Sales & Operations Planning, The Executive’s GuidePage 24

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Process, Metrics, Results

PROCESS

Leadership(Strategic Direction)

Demand FeedsSupply; Balancing /

Capacitization / Shipment(Ops Execution, Future Forecast)

Finance($ Scorekeeper, Forward Looking

Economic Advisor)

Leadership(S&OP Process Owner)

DESIRED RESULTSPositive P&L Outcomes

Positive Working Capital OutcomesCustomer Service Levels

Productivity ImprovementsDecision Making Improvements

PERFORMANCE METRICSRevenue, Cost Targets

Forecast Accuracy,Working Capital Targets,

Inventory TargetsNew Product Launch Success

Service Level TargetsCycle Time / Quality - Processes

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Metrics

– 5 Basic Metrics:• Forecast Accuracy (Demand Owner)• Perfect Orders (Cust Serv, Supply)• Revenue (Units & Mix)• Profitability (Mix, Margins, Costs)• Inventory (Demand Owner + Supply Owner)

– Simple Scorecard– Improvement From a Baseline

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Accountability Systems For Internal Stakeholders

• Metrics – Common– 5 Basic Metrics:

• Forecast Accuracy (Demand Owner)• Perfect Orders (Cust Serv, Supply)• Revenue (Units & Mix)• Profitability (Mix, Margins, Costs)• Inventory (Demand Owner + Supply Owner)

– Simple Scorecard– Improvement From a Baseline

• Active Involvement By All Functions –– Accountability & Roles / Responsibilities

• Daily• Weekly• Monthly (Decisions Made + Follow-Up Assigned)

• Transparency Through Dynamic Communication Flow

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Cross Functional Alignment

Provides P&L Proformas & Risk / Opportunity Assessment

Counsel, Input, Risk Assessment, Pro-Formas of Future Forecasts

Economic Oversight / Counsel

Finance

Daily, Weekly Interaction with Demand & Finance; Owns Monthly Supply Component of S&OP

Owns the Fulfillment of the” Constrained”Demand Forecast at Least Cost (Balancing with Demand Planning)

Fulfillment of “Constrained Demand”, Least Cost

Supply > Finished> Raw

Daily, Weekly Interaction with Supply & Finance; Owns Monthly Demand Component of S&OP

Owns the Demand Forecast; Accountable for Excess Inventory Generated by a Forecast Miss

Translates Strategy intoDemand Generation; Dem Planning Reports to a Demand Leader;Unconstrained Demand

Demand > Sales> Marketing

Owns Monthly S&OP Meeting; Consulted Daily/Weekly as Needed (Exception)

Owns the Overall Process – The Process Owner

Strategic DirectionGeneral ManagerCommunicationS&OP RoleBusiness RoleFunctional Role

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Cross Functional Alignment / Effective Communication – The S&OP Communication Flow

Owns Financial Component

Consulted As Needed

Consulted As Needed

Finance

Owns Supply Component

Active w/ Demand Planning

Active w/ Demand Planning

Supply Planning

Owns Demand Component

Active w/ Supply Planning; Sales;

Marketing;Customers

Active w/ Supply Planning; Sales;

Marketing; Customers

Demand Planning

Owns the Meeting

RarelyRarelyGMMonthlyWeeklyDailyRole

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Methodological Approach Measuring, Managing, Executing Strategies

S&OP Meeting:MetricsBest FrcstAssumptionsNew ProductsGaps / OppsStrategic Issues

P&L Proforma with Gaps / Opps; Risks

Demand to Supply; Supply Back to Demand; Finance P&L w/ Risks / Opps

+ Demand Pre-Meeting+ Supply Pre-Meeting+ Capacitization

Monthly

If Needed, very rare

When needed, exception basis

Same as Above

Demand Planning:+ Same as

Above

Weekly

If Needed, very rare

When needed, exception basis

Dem Pl with System & Sources;Dem Pl w/ Supply –BalancingSupply Metrics

Demand Planning:+ Dem Planners+ Sales+ Marketing+ Customers+ Synd Data

Daily

GMFinanceTypical Interactions

ActivityFrequency

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S&OP• Improve Demand Forecasting Accuracy

• Process, Structure, & Ownership• Tools, Metrics

• Reduce Supply Volatility• Process, Structure, & Ownership• Tools, Metrics

– Drive Decision Making• Process Alignment / Integration

– (Demand-Supply-Finance-GM)• “Connect the Knobs” for Leadership

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S&OP (The Recipe / A Holistic View)

Process, People, Performance, Platform

• DP Starts the Process (Demand-Supply-Finance)• Business Intelligence / Collaboration Essential• Defines Units, Revenue, Margin $ Can Be Derived• Ownership of Forecast: Demand Owner• Unconstrained Demand / Constrained Demand• One Forecast (Demand/Supply/Finance/GM Consensus)• Metric Driven: Forecast Accuracy (Level/Time Fence)• Metric Driven: Supply Fulfillment• Tool / System – Foundation For Demand Forecast• Tool/ System – Rough Cut Capacity• Tool/ System – Detailed Supply Planning• How (Demand Management): Tools, Collaboration, and

Assumptions Managed By Demand With a Defined Accuracy Metric (Start With Baseline)

• Debate the Assumptions Not the Number

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Process / People

Performance

Platform / Process

Summary


One Forecast(Linkage – S&OP to Other Plans)

Latest Est / Frcst

S&OP

Business Plan

Demand Plan

SupplyPlan Financial

StrategicTarget /

Intent

StrategicPlan

Demand Plan

SupplyPlan FinancialAnnual

Plan

Demand Plan

SupplyPlan FinancialInterim

Forecasts

Future Execution/ Forecast

FinancialSupplyPlan

Demand Plan

Use S&OPAs a GutCheck

Use S&OPAs Key

Input / Core, Plus Risks/Ops

Use S&OPAs Key

Input / Core, Plus Risks/Ops

Future ExecutionForecast / Details, Active Risk / Ops

Discussion

S&OP Outputs Validate, Support Other Planning Processes

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Alignment Between Corporate Strategy and Operational Execution

Revenue TargetsMargins

Working CapitalNew ProductsNew Markets

New CustomersNew ChannelsExit Strategies

Capital Investment

Corporate Strategy Business Plan S&OP




Capital Investment




Capital Investment

Strategic Intent 3-5 Yrs Annual Plan / Frcsts Rolling 36 Mo Review

Amount of Detail (Increases through various processes)

> Working Backwards from S&OP, Provides Validation of Plan & Strategy> S&OP Focuses on Gap / Opportunity Assessment vs. Plan

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S&OP Time Fences

Short-Term

(1-3 Months)

Mid-Term

(4-12 Months)

Long-Term

(13-36 Months)

DemandDem Pl – SKUs

All Demand Streams

Sales

Customers

Promotions

New Products

SupplyFulfillment

Cust Serv

Finished Goods

Supply Contracts

DemandDem Pl – Prod Fam

All Demand Streams

Marketing

Customers

Promotions

New Products

SupplyFulfillment

Finished Gds, Raw

Supply Contracts

Demand - StrategyDem Pl – Prod Fam

All Demand Streams

Marketing

Customers

Promotions

New Products

Supply - StrategyFulfillment & Sourcing

Ingred Contracts

Plant/Cap Network/Invest

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Tool Box Needed to Execute

Systems of Record & Collaboration Tools- Spreadsheets- ERP System- Collaboration Tools - Purpose Built S&OP System Capability (i.e. SteelWedge)- Inventory Management System (i.e. SmartOps) - Metrics Scorecard Capability

Need a well thought-out and efficient S&OP Reporting Toolto support Meetings and interactions

> Numbers> Metrics Reporting> Assumptions

Make your analysts “analysts” – not data and report generators

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Implementation Steps• Education• Assessment / Discovery• Project Planning• Process Design• Roles / Responsibilities• Metrics• Tools / IT Solutions• Execution / Implementation• Process Improvement• Business Performance Improvement

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Resources• A Book: Sales & Operations Planning,

The Executive’s Guide, Thomas Wallace & Robert A. Stahl

• Expanded Library of Resources Available Here, – http://www.slideshare.net/jimbiel/sampop-resource-guide-biel-04-19-11

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s&op overview - implementation approach - biel- 01-18-12

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