Sales & Operations

Planning
A Centralized approach of
Planning at all levels of
organizations
Harshal Badgujar
Learning Session

What are the conflicts in

Traditional Planning Approach of
working
in
SILOs
Function
Implications
Objectives
Marketing

High Revenues
High Availability

High
Low

Customer
Service

Production

Low Production cost

Long production Runs

Many

Disruption to
Production

Finance

Low Investment & Cost

Few Fixed Costs

High
Low

Few

Inventories

Let consider a case of conflict in

Traditional Planning approach A
Video
(

http://www.slideshare.net/JadeGlobal/oracle-sales-operations-planning-video
)

Hence the Need for a Collaborative

Approach led to
1980s Need for Integrated
systems for planning
SalesData
& Operations
Planning

1990s Birth of ERP systems

Late 2000 Birth of Planning Module software with ERP packages
But the real Question is Even after implementation of organization-wide ERP

Have companies realized the proclaimed benefits of

ERP and Return on huge investments made in its
implementation
Reason Functions were still operating in SILOs

Agenda - Overview

What is S&OP?
How does it differ from traditional Planning?
Where does S&OP fit in levels of Planning?
A case of Auto-Component Manufacturer
S&OP Process Overview how is it practiced by
organizations?
Critical Success factors of S&OP implementation
Benefits of S&OP

What is S&OP?

A decision-making & Business Management process

To ensures that the tactical plans in all business
functions are
Aligned and in support of the company strategy
and the business plans and goals.

Single Environment for optimally

synchronizing
Demand, Inventory, and Supply plans
While considering costs, revenue and profit
objectives of organization

What is S&OP?

Formal Business Process spread over 18-24 Months of

planning Horizon
Product Families (not items)
Volume (not Mix)
Monthly review Cycle
Both product and financial units

What is purpose of S&OP?

The objective is
To reach consensus on a single
S&OP
Updated
operating plan
Forecasts
Process
that allocates the critical
resources of people, capacity,
materials, time, and money
to most effectively meet the
marketplace in a profitable way.

Sales Plan
Production Plan
Inventory Plan
Backlog Plan
Finance
NPD Plan
Strategic Initiatives Plan
Financial Plan

S&OP
Demand

Supply

Why is S&OP Planning?

Factors responsible for imbalance between

Supply & Demand

Promotions
New Product Introductions
Packaging Changes
Changing demand patterns Wreck havoc in planning

Companies that use S&OP stand competitive advantage

by gaining the visibility and agility to improve product management and promotional
planning,
Help minimize unnecessary build-ups of inventory and better predict revenue

Gives a complete picture of forecasted demand, supply capacity and

corresponding financial information

S&OP is a vehicle for communication that puts the vision, strategy, financial and
tactical plans of a business into one unified operating plan in order to optimize the
allocation of critical resources

How Does S&OP Differ from

Traditional Planning?
S&O Planning

Traditional Planning

Review of Planning
activities happen at a
Higher Level, on a
monthly and yearly basis

Review of Planning
activities happen at a
products Level, on a
daily or weekly basis

Involves Senior
Management to drive
consensus

Involves only
department heads and
managers

Where does S&OP fit in Big

Picture of Planning?

Hierarchical Nature of Planning

Medium Range
Items

Production
Planning

Capacity
Planning

Resource
Level

Product lines
or families

Sales and
Operations
Plan

Resource
requirements
plan

Plants

Individual
products

Master
production
schedule

Rough-cut
capacity
plan

Critical
work
centers

Components

Material
requirements
plan

Capacity
requirements
plan

All
work
centers

Manufacturing
operations

Shop
floor
schedule

Input/
output
control

Individual
machines

Short Range
Planning

Let us understand S&OP process

through a case of Auto-Component
Supplier
manufacturer
Imagine a case
that President of

Division new to the position

He could not understand why
with 15000 components, he
heard problems like

Shortage of few Items

Incomplete production runs
Excessive Inventory
Unhappy customers with poor
delivery performance

Case of Auto-component Supplier:

If he were introduced to 15000 people in stadium,

15000 MRP
Components

Case of Auto-component Supplier:

How about he inviting 120 people into a large
conference room?

15000 MRP
Components

120 MPS Items

Case of Auto-component Supplier:

How if we brought FOUR people into his office..?

Performance

15000 MRP
Components

4 S&OP
Families

Rate of
Production

120 MPS Items

Product Mix

So, Goal of the Company was decided Understand Demand for

each of these 4 Families and then supply accordingly

How is it practiced by
organizations?
The monthly sales and operations planning process
STEP 5

Exec SOP
Meeting

Decisions

STEP 4
Pre-SOP
Meeting

STEP 3
Supply
Planning

STEP 2
Demand
Planning

STEP 1
Data
Gathering

End of month

Recommendations
For executive S&OP

Capacity constraints
2-nd pass spreadsheet

Management forecast
1-st pass spreadsheets

Statistical forecasts
Field sales worksheet
Wallace: 2nd edition Sales & Operations Planning

Step 1 Data gathering

Month end data

Actual sales
Inventory
Production

Sales and marketing

All pertinent information

Who brings what to the Table?

Sales Product Family A

Jan

Feb

Mar

Apr

May

June

Jul

Aug

Forecast

100

100

100

120

120

120

120

130

Actual sales

90

95

85

Difference

-10

-5

-15

-15

-30

Cum. difference

Wallace: 2nd edition Sales & Operations Planning

21

Production Product Family A

Jan

Feb

Mar

Apr

May

June

Jul

Aug

Planned
production

100

100

100

110

120

120

120

130

Actual production

98

100

101

Difference

-2

Cum. difference

-2

-1

Wallace: 2nd edition Sales & Operations Planning

22

Inventory Product Family A

Jan

Feb

Mar

Apr

May

June

Jul

Aug

Planned
inventory

100

100

100

142

142

142

142

142

Actual inventory

111*

116

132

11

16

32

Difference

*January Inventory = 103

Wallace: 2nd edition Sales & Operations23

Planning

Comparing actual to forecast Product

Family A

Wallace: 2nd edition Sales & Operations Planning

Step 2 Demand planning

Sales and marketing review information

received from Step 1

Sales forecast

By product
By family
Total

Demand planning team

Demand manager

Product manager

Salesperson

Forecast analyst

Customer service

Sales manager

Accounting manager

Supply chain
manager

Forecasting: Inputs, Process,

Outputs
INPUTS
OUTPUTS
Current Customers
New customers
Competition
Economy

Forecasts That:

New products
Pricing
Bids
Promotions
Management directive
History
Other

Are reasoned
THE
PROCESS

Are realistic
Are reviewed
Represent demand

Step 3 Supply planning

Bill of resources

Rough-cut capacity

Demand/Supply Strategies

Resource Planning Process

Bill of Resource

Wallace: 2nd edition Sales & Operations Planning

Resource Planning Process

Rough-cut capacity planning

Resource Bill

Total Load

Wallace: 2nd edition Sales & Operations Planning

% Load =
Total Load /
Available Capacity

Demand/Supply StrategiesConstraint Management

Product Family: 1

1.
2.
3.

Make-to-stock
Target customer service level 99%
Target finished goods inventory 1 month

Product Family: 2

1.
2.
3.

Make-to-order
Target customer service level 98%
Target customer lead time
2 weeks

Step 4 Pre-SOP meeting

Make decisions to balance supply/demand

Resolve differences where possible

Identify areas of disagreement

Develop scenarios

Set agenda for Executive S&OP meeting

Step 5 Executive S&OP

meeting
Make decisions

Authorize changes in S&OP plan

Relate Rup version

Resolve issues

Review performance, product issues, special projects,

etc.

What are critical success factors for

S&OP?

Benefits of S&OP Process

Links business plan to departmental operations

Provides a means to work for a common goal
Eliminates counterproductive hidden or unilateral
decisions
Greater visibility of demand and supply across
the company
Improved Product Lifecycle Management process
Better communication between groups
Improved inventory management
More predictable revenue management

Summary

Thank You