Next  Generation  of  S&OP

Raúl  Alejandre  García  Industry    Expert  Consumer  Products    October      2012  

Understanding  that

• You  are  familiar  with    S&OP  Process.  

 

• You  understand  the  basic  mechanics  and  steps  of  the  process.    

Top  3  Pressures  to  Improve    Sales  and  Operations  Planning

35%  

31%  

45%  

56%  

45%  

26%  

40%  

49%  

53%  

59%  

0%   10%   20%   30%   40%   50%   60%  

Need  to  uIlize  manufacturing  assets  with  

maximum  efficiency  

Customer  mandates  for  faster,  more  accurate  and  

more  unique  fulfillment  

Management  of  increasing  demand  volaIlity    

Reduce  supply  chain  operaIng  costs  

Improve    top  line  revenue  

Percent  of  Respondents,  n=196  

2009   2010  35%  

31%  

45%  

56%  

45%  

26%  

40%  

49%  

53%  

59%  

Aberdeen  Group,  July  2010  

Why  do  you  care  about  S&OP?

Your  organization  should  be  aligned…    S&OP  will  do  this!!!!

DESIGN MAKE STORE MOVE SELL CUSTOMER SERVICE PLAN

Supply Chain Planning

Supply Chain Execution

Supply Chain Performance Management and Continuous Improvement Change Agent

Customer Service

BUY So  before  we  get  started…  who  is  

this  guy  in  front  of  you?

Manufacturing

S&OP / Demand Planning

BUY

What  would  I  like  for  you  to  take  away  from  today’s  session…

Understand  how  S&OP  will  make  your  organizaIon  beYer  financially  and  operaIonally  

Think  about  how  S&OP  may  require  you  to  rebuild  your  current  business  processes  and  pracIces  

What  it  will  take  organizaIonally  for  S&OP  to  be  successful  at  your  business  

What  does  S&OP  look  like  and  how  do  you  measure  it’s  success  

What  would  I  like  for  you  to  take  away  from  today’s  session…

Focused  on  how  your  can  enable  your  organizaIon  and  your  teams  to  make    beYer  and  more  Imely  decisions  

•  Sales  “  •  I  think  I  can  sell  100,  but  I  want  to  make  sure  I  keep  my  boss  happy  by  making  my  number,  so  I  will  say  80.”  

•  Finance  •  “Our  numbers  are  hard  to  es?mate  and  I  can’t  rely  on  the  rest  of  the  organiza?on,  so  I  will  do  my  best  and  

create  the  P&L”  

•  Brand  MarkeIng    •  “I  can’t  tell  anyone  when  this  new  product  will  be  ready,  it  must  be  kept  a  surprise.”  

•  Factory  Planner    •  “I  can’t  make  this  SKU  today,  so  I  will  just  pull  something  else  into  it’s  place  and  make  it  next  week.”  

•  Supply  Planner    •  “I  think  we  will  sell  more  than  the  forecast,  I  can  always  adjust  it  down  later,  so  I  will  add  20.”  

•  Demand  Planner    •  “We  are  con?nuing  to  sell  less  than  our  plan  so  irregardless  of  what  anybody  else  says,  I’m  going  to  reduce  

my  forecast  by  50.”  

Is  S&OP  right  for  your  organization?

Pain  points  experienced  by  typical  organizations  in  

early  S&OP  process  maturity… §  Too  many  spreadsheets  and  systems  involved  in  the  S&OP  process  §  Cannot  get  users  to  provide  input,  especially  sales,  markeIng  and  execuIves  

§  Spend  more  Ime  assembling  data  than  planning  

§  Outdated  demand,  supply  and  finance  plans  

 

§  Working  at  aggregates  only  and  can’t  connect  to  detailed  mix  §  Cannot  change  demand  and  view  impact  on  supply  and  financials  right  away  

§  Too  hard  to  simulate  and  compare  planning  scenarios  

§  Planning  decisions  made  without  considering  supply  chain  constraints  and  profitability    

 

§  ExecuIve  S&OP  views  lack  latest  informaIon    §  ExecuIve  S&OP  meeIng  informaIon  is  hard  to  share  and  is  disconnected  from  

planning  tools  

§  Process  is  not  controlled  and  stakeholders  don’t  know  what  is  expected  

 

Sales  &  Operations  Planning  Problem  Planning  objectives,  data  and  measurement  vary  by  department

Sales  Forecas3ng  

Consensus  Demand  Planning  

Materials,  Produc3on,    Inventory  Mgmt  

� Weekly  for  next  3  months  

�  Customer  level  � Units  &  Value  � Quota,  Forecast,  Performance  

� Daily,  weekly  �  LocaIon,  resource,  material  

� Units,  capacity  � UIlizaIon,  Coverage,  Turns,  Lead-­‐Imes  

� Monthly,  Quarters  � Geo,  Division,  Cost  Center  

�  Value  �  Revenue,  Working  Capital,  Velocity  

� Weekly,  Monthly  next    12  months  

�  Product,  customer,  category  

� Units  �  Fcst  Accuracy,  History,  Trends  

Finance  Sales   OperaIons,    Supply  Planning  Demand  Planning  

New  Products,  Promo3ons,  Events  

�  Event  Horizons  �  Campaign,  Product  � Units  &  Value  �  Fcst,  Actuals,  Budget  

MarkeIng  

Different  Views   Different  Levels  of  AggregaIon  

Different  Time  Horizons  

Different  Conversions  

Planning,  Budge3ng  

S&OP Overview

What  is  S&OP Satisfy Needs

Financial Reporting

Distribution Points

Customer Satisfaction

Service Levels Product Availability

Response Time

Customer Satisfaction

Utilize Resources

Manpower

Facilities

Suppliers

Capital

Inventory/Cash Flow

Manpower

Facilities

Suppliers

Capital

Demand Supply

Forecast

Annual Budget / Plan

Gap Analysis New markets New customers New products Merges and acquisitions

S&OP is a business process that allows companies to make effective and timely business decisions that lead to overall improved profitability and

customer satisfaction

What  is  S&OP

Forecast

Annual Budget / Plan

It is equally as important to understand what is going good in your business; learn from your successes

What  is  S&OP

What  does  S&OP  look  like

Demand Planning

Demand Review

Product Supply Review

S&OP Meeting

ES&OP Meeting

Innovation Strategy

Annual Business

Plan

Business Strategy (Long Range Planning)

Consensus Demand Planning Supply Chain Synchronization Alignment & Agreement

Decision / Exception Management Funnel

Partner-ship

Meeting

Pricing & Trade

Strategy

Customer Strategy

Procurement Strategy

High  Level  Process  View Pr

oces

s St

eps

•  Review previous month’s performance

•  Review and gain consensus on 18 month unconstrained demand plan @ business unit / brand / category level

•  Document assumptions

•  Identify, problem-solve, and document major anomalies, quality, and service issues

•  Review previous month’s performance

•  Review summary consensus demand plan

•  Review significant demand related variances to identify root cause

•  Identify and document open issues, assumptions, opportunities and risks

•  Develop gap closure plans / options

•  Review significant supply related issues, identifying plans to fill gaps

•  Identify and document open issues, assumptions, opportunities and risks

•  Develop gap closure and continuous improvement options

•  Review SPI at MBU level with lower level exceptions

Demand Planning Meetings

1Demand Review Meeting

2Product Supply Review

3

•  Verify closure of previous month’s action items and open issues

•  Review previous month’s performance

•  Gain approval on synchronized demand & supply plan

•  Review and resolve current open issues

•  Review significant changes in end-to-end performance

•  Provide feedback to S&OP participants

S&OP and ES&OP Meeting

5

Key

Act

iviti

es

Partnership Meetings

4

•  Review exceptions, capacity issues, over inventory positions and options analysis and determine recommended action.

•  Review new product initiatives timelines

•  Review significant exceptions in end-to-end performance

•  Final alignment on sales & operations plan at business unit level

•  Align on sales and inventory dollar plan

What  are  KPI’s  of  S&OP  success

Key Performance Indicators (KPIs), as a tool for the S&OP process, have to be established at both the overall process level and within each functional area. Many times issues will occur at the

functional level and not reflect immediately at the overall process view.

•  Overall Planning process: All measures (pounds/units/$) vs. plan; Overall

measures (pounds/units/$) variances; Overall fill rates; Overall inventory levels for RAW, WHIP and FG; Planning bias; Perfect order

•  Sales, Marketing: Customer Fill Rates; Forecast Variances; Sales and Finished Goods Inventory by promoted group; Product Life Cycle forecasts; SKU complexity; Assumption accuracy

•  Production: Schedule Attainment; Quality Measures; WIP Inventory; MFG cost and variances

•  Procurement: Raw Material Inventory; Quality Measures; On-Time delivery; Material Cost

•  Logistics / Order: Order and Transportation Lead Times; Overall Cost; Finished Goods Inventory across distribution locations

•  Financial: COGS; Profitability; Cash flow •  Process: Attendance; Participation; Benefit; Documentation; Process critique

Gartner (April 2011)

Sales  &  Operations  Planning  Maturity  Model  Evolutionary  process,  different  steps  of  maturity

Strategy Stage  1:  Reacting Stage  2:  Anticipating Stage  3:  Collaborating Stage  4:  Orchestrating

Balance:  S&OP

Goal Development  of  an  operational  plan Demand  and  supply  matching Profitability

Demand  sensing,  and  conscious  trade-­‐‑offs  to  drive  an  optimized  demand  response

Cross-­‐‑functional  Alignment

Supply  chain-­‐‑driven  process,  with  strong  sales  or  operations  basis  leading  to  imbalance Lack  of  goal  clarity

Supply  chain-­‐‑driven  process  that  achieves  optimum  forecast  and  supply  response  to  demand

Supply  chain  orchestrates  S&OP Business  takes  ownership  of  input,  output  and  results,  including  financial  impact  of  decisions

Business  ownership  at  multiple  levels,  with  strong  participation  from  executives  and  finance Collaboration  and  consensus  extends  beyond  the  enterprise  to  achieve  end-­‐‑to-­‐‑end  value  creation

Progress  and  Technology

Emerging Inconsistent  and  marginal Tools  are  typically  Excel/ERP

Formal  one-­‐‑size-­‐‑all  structure Tools  extend  to  forecasting SCP  and  inventory  optimization

Tailored  to  business  model Tools  extend  to  what-­‐‑if  analysis  and  demand  and  supply,  financial  reconciliation

Balanced,  dynamic  and  event-­‐‑driven Stronger  connection  to  strategic  planning  and  execution Tools  extend  to  risk-­‐‑value  trade-­‐‑offs  and  value  optimization

Metrics Order  fill  rate,  asset  utilization  and  inventory  levels

Order  fill  rate,  forecast  error,  inventory  turns  and  functional    costs

Demand  error,  customer  service,  working  capital  and  total  costs

Demand  risk,  customer  service,  cash  flow,  market  share  and  profit

S

OP

S

OP

SOP

S OP

Guidelines  your  organization  should  follow

SPONSORSHIP Standardized

Decision Making Collaborative

Meaningful

KP

I Driven

Why? FINANCIALS

One View of Demand

When  S&OP    will  work  fine Does  exist  a  Manager  or  Director  running    behind  the  process    who:  

 

• Is  organized  and  always  prepared.  

• Knows  the  process  very  well.  

• Hard  working.  

• Has  the  respect  of  all.  

Will  work  as  a  good  ConInuos  Improvement  Process    because  everybody    knows  the  ExecuIve  Team  who  wants  this  and  hold  everyone  accountable.    

You have a choice to make…

Take the journey…

Gracias! Raúl  Alejandre  García Industry    Expert  Consumer  Products   raleja@hotmail.com hOp://www.linkedin.com/in/mxraleja