Sales & Operations Planning: SalesAnOperations Planning: & Introduction An Introduction
S&OP Overview
The S&OP process was first developed in the1980s.
1980s 1990s
Today, S&OP is used across the Global 1000
2000s
Today
S&OP evolved from supply chain execution activities such as MRP (material requirements planning)
Sales and Operations Planning (S&OP)
A integrated business process that drives collaboration, focus and alignment across multiple divisions and departments in a company
S&OP brings together
Demand plans Financial goals Supply plans Inventory quantities New product plans
Inventory
S&OP
Aligns different teams around a common plan
Balances supply and demand
Identifies discrepancies between planning numbers
Improves sales forecasts
Reduces the long-term impact of unexpected events
Typical S&OP Results
50-70% reduction in planning cycle time
15-30% improvement in forecast accuracy
10-20% reduction in excess inventory
25% reduction in stock-outs 5% lift in revenue and margin
Source: Steelwedge Client Aggregate Performance Results
S&OP IS
A strategic approach that links the Business Plan with current Demand/Supply Plans
A cross-functional, collaborative process focusing on improving business performance A structured, formal, holistic set of monthly consensus business disciplines
S&OP is NOT
x Informal, analysis-paralysis meetings
x A silver bullet solution to resolve all business problems x A short-term business issue resolution process
The S&OP Process
The S&OP Process
Annually
Develop Financial Budgeting Plans Communicate Sales and Profit Expectations Internally and to the Analysts/Wall Street
Quarterly
Develop Financial Budgeting Plans Review Consensus Plans, Perform Financial Impact Analyses Select Optimal Plan, Submit for Approval Communicate Sales and Profit Expectations Internally and to the Analysts/Wall Street
Monthly
Develop Financial Budgeting Plans, Perform Financial Impact Analyses, Select Optimal Plan, Submit for Approval Create Alternative Supply Plans Recommend and Review Preferred Consensus Plan Agree on Consensus Demand & Supply Plans
The S&OP Process (cont.)
Weekly
Adjust Sales Forecasts Create Alternative Supply Plans Production & Shipment Planning
Daily
Order Fulfillment Inventory Management Production & Shipment Execution
Corporate Objectives, Annual Operating Budget/Plan
Week 4: Executive S&OP
To do: Aggregated plan review Resolve impasses Make key decisions Drive to consensus
Week 3: Pre-S&OP Meeting
To do: Financial review Prepare for exec S&OP Hold pre-S&OP meeting Result: Balanced plan in units and revenue
Week 1: Demand Review
To do: Gather sales forecasts Drive to consensus demand plan Hold demand review meeting Result: Proposed demand plan
Monthly S&OP Cycle
Week 2: Supply Review
To do: Adjust supply Shape demand Hold review meeting Result: Balanced supply & demand plans
2012 Steelwedge Software, Inc. Confidential.
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S&OP Maturity
90% of companies believe an S&OP process can improve agility and impact business results
Source: Supply Chain Insights, 2012
But only 13% of companies can tie S&OP directly to execution and measure results
Thats a significant opportunity for productivity improvement
Source: Supply Chain Insights, 2012
Your S&OP process will be driven by continuous, incremental improvement.
Start by implementing small changes and improve on them each month. This is the S&OP maturity process.
The S&OP maturity process
Level 3: Strategic Collaboration
Level 2: Decision Making
Level 1: Fundamentals
Maturity Level 1: Fundamentals of S&OP
Bring together People, process, & technology Compile Sales in units, revenue & currency data Take action Forecasting Supply and demand balancing
Maturity Level 2: Decision-Making
Choose The best path to attain business drivers, revenue and profit Align The strategic plan with sales, operations and financial plans
Compromise Competing groups should understand tradeoffs financial and operationalto achieve Key Performance Indicators (KPIs)
Maturity Level 3: Strategic Collaboration
Create Collaborative process for internal business inputs External communication channels with customers, suppliers, partners Use
Technology to support processes via workflows and plan performance reviews
Roadmap for S&OP Maturity
Level 1 Maturity
Monthly Review Process Demand & Supply Visibility
Level 2 Maturity
Collaborative Forecasting & Planning Supply Planning New Product Introduction
Level 3 Maturity
Executive S&OP Performance Management Financial Planning
7 Critical Factors for S&OP Excellence
1. Demand and Supply Visibility
Challenge Multiple systems, outdated information, aggregate level detail, growing volume of data.
Opportunity Data cleansing to improve account information Delete duplicate documents and information
2. Collaborative Forecasting
Challenge Multiple forecasts for sales, operations and finance are difficult to reconcile. Opportunity Use S&OP meetings to set a cross-functional plan that achieves margins rather than acting independently of each other
3. New Product Introduction
Challenge Limited interdepartmental visibility in new product planning Opportunity Increase visibility to planned launch dates and forecasts with easy-to-access tools Make sure new product planning is included in S&OP process to align supply with demand plans
4. Supply Planning
Challenge Excess inventory, supply constraints, limited supplier response times
Opportunity Use the S&OP process to set a strategic planning horizon and drive supply plans ahead of need. Strategic planning reduces "fire-fighting", improves fill rates and lowers inventories
5. Monthly Review Meetings
Challenge Ad Hoc process without clearly defined roles. Opportunity S&OP team should present the following to department leadership and executives for approval: 1. A process planincluding situation, objectives, strategies and tactics 2. Measurementsincluding margin goals, sales metrics and operational targets
6. Performance Management
Challenge Metrics not clearly defined with periodic updates and exception alerts to mitigate outliers
Opportunity See #5 Capture forecast accuracy and bias factors at various levels of aggregation Use a manage by exception approach to address issues and solidify improvements
7. Executive S&OP
Challenge Lack of sponsorship and buy in, no connection with companys strategic and financial objectives
Opportunity See #5 and #6 S&OP involves all levels of organization. Top level management participation is critical to set expectations and make key decisions
Summary of the 7 Critical Factors
Unique Challenges Executive S&OP 1. Lack of sponsorship or buy in 2. No connection with companys strategic and financial objectives
Performance Management 1. Metrics not clearly defined 2. No periodic updates or exception alerts to mitigate outliers Monthly Review Process Supply Planning 1. Ad hoc process 2. No clearly defined roles 1. Excess inventory 2. Supply constraints 3. Limited supplier response times 1. Limited visibility to NPI for Operations 1. Multiple forecasting views for sales, operations and finance that are difficult to reconcile 1. Multiple systems with growing volume of data 2. Outdated information with no aggregate level detail
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New Product Introduction Collaborative Forecasting & Planning Demand & Supply Visibility
S&OP and Integrated Business Planning (IBP)
S&OP balances Demand and Supply and is the first step to future-looking Integrated Business Planning (IBP)
The IBP Roadmap
Your S&OP/IBP Process
As recently as 8 years ago, each company had ONE S&OP Execution Planning process
Execution level Order fulfillment Master scheduling Past Today Month 1-2
IBP
S&OP
Strategic level Supply & demand balancing Executive level What-if scenario planning Financial Analysis Month 19+
Month 3-4
Month 5-18
You are here
Achieving Corporate Goals with IBP
IBP maximizes: Cost & margin visibility Revenue & profit Geographic coverage Product life cycle management Plan and budget alignment
For more perspective on your IBP journey: www.steelwedge.com
A Single Line of Sight:
Plan, Perform, Profit
