Sales & Operations Planning:

Agenda

So what is S&OP?

Sales & Operations Planning . . .

. . .is a set of

Decision-Making Processes
to

Balance Demand & Supply

to

Align Volume and Mix

and to

Integrate Financial & Operating Plans

The Many Tools for Improving Effectiveness*

Increase Reliability
Total Quality, Six Sigma, Poka-Yoke, ISO + others

X X

Reduce Waste & Time

Lean Mfg., Just-In-Time, Quick Changeover (SMED), Flow + others

Enhance Coordination
Sales & Operations Planning, ERP, Kanban, VMI, + others

* Per Chris Gray

Why Its Popular

1. Adoption Curve for New Processes

Adoption of New Processes

There is a 15-25 year lag between the development of a new process and its widespread adoption. Examples: MRPII/ERP, TQM/6SIGMA, JIT/LEAN

S&OP Today

Why Its Popular

1. Adoption Curve for New Processes 2. Supply Chains are Lengthening

Balancing the Supply Chain

YOUR CUSTOMERS YOUR CUSTOMERS CUSTOMERS

TRANSPORTATION

YOUR COMPANY

YOUR SUPPLIERS

YOUR SUPPLIERS SUPPLIERS

TRANSPORTATION

SALES & OPERATIONS PLANNING

The Four Fundamentals

Volume
How Much? Rates The Big Picture Families Strategy/Policy/Risk Monthly/out to 36 Mos

Demand

Supply
Which Ones? Timing/Sequence The Details Products Tactics/Execution Weekly/Daily 1-3 Mos

Mix

Sales & Operations Planning

Executive S&OP
Volume

Demand Planning/ Demand Forecasting

Mix

Supply

Supply (Capacity) Planning

Master Scheduling Plant Scheduling Supplier Scheduling Logistics Scheduling

S&OP Process
Heavy Lifting
Step #4 Pre-S&OP Meeting Step #3 Supply Planning Step #2 Demand Planning Step #1 Data Gathering
End of Month

Step #5 Executive Meeting

Decisions & Game Plan

Conflict Resolution, Recommendations & Agenda for Exec. Mtg.

Capacity constraints 2nd-pass spreadsheets

Management Forecast 1st-pass spreadsheets

Sales & Supply Actual, Statistical Forecasts

Input
Current Customer New Customer Competition Economy New Product Pricing Bids Promotions History

Outputs
Forecasts That : Are Reasoned

The Process

Are Realistic Are Reviewed frequently Present the total Demand

Executive S&OP . . .
is a Decision-Making Process to Balance Demand & Supply (at the volume level) and to Integrate Financial & Operating Plans.
Executive S&OP is essential for the other pieces of Sales & Operations Planning to work at their best.

Sales & Operations Planning

The Mix Tools
Demand Planning/Sales Forecasting (Detail Level) Supply (Capacity) Planning (Detail Level) Master Scheduling (Available-To-Promise, Capable-To- Promise) Plant Scheduling (Traditional, Adv Planning Systems, Kanban) Supplier Scheduling Logistics Scheduling

1 Initial Briefing Education

2 Assign Responsi bilities 3 Establish Families 6 Develop S & OP Policy 4 Pilot 1 or 2 Families 8 Bring all the Families onto S & OP adding Supply (Capacity) Planning Financial Planning 10 Continuous Improvement

Software

5 Develop S &OP Spread sheet

7 Develop Supply report

9 Automate Data Feeds Into spreadsheet

PRODUCTION PLANNING
F O R E C A S T I N G & D E M A N D M G M T

BUSINESS PLANNING

SALES PLANNING

PRODUCTION PLANNING

C A P A C I T Y P L A N N I N G

MASTER SCHEDULING

DETAILED PLANNING & EXECUTION SYSTEMS

SALES & OPERATIONS PLANNING

F O R E C A S T I N G & D E M A N D M G M T

BUSINESS PLANNING
C A P A C I T Y P L A N N I N G

SALES & OPERATIONS PLANNING SALES PLAN OPERATIONS PLAN

MASTER SCHEDULING

DETAILED PLANNING & EXECUTION SYSTEMS

HOW MUCH DOES S & OP COST:

Education And Training Costs Are Low. No Requirement Of Full-Time Project Team Or Even Full-Time Project Leader. Software Plays A Relatively Minor Role In Sales & Operations Planning , So Computer Costs Are Moderate To Zero. Forecasting and S & OP Software And A Consultant = $100,000 If No Software Is Required Then The Costs Go Very down. S & OP Costs Nearly About $100,000 Which Is Less Than Installing ERP Software System Which Costs Millions Of Dollars.

Benefits
Demand Hub

Consensus Forecasting Balancing of supply, demand, and budgets Balancing of volume & mix Adapt and adjust to changing business conditions Integrated Solution

Hard Benefits
Customer Service

Inventory Obsolescence Freight Costs Order Lead Times (MTO) Supplier Lead Times Plant Productivity Time to Launch New Products

UP DOWN DOWN DOWN DOWN DOWN UP DOWN

Soft Benefits
Enhanced Teamwork Better Decisions with Less Effort and Time Better $$$ Plans with Less Effort and Time Greater Accountability Greater Control Window into the Future

The Best Practice Companies:

AGFA (USA Belgium) Amcor (Australia) Cast Fab Technologies (USA) Coca-Cola (France USA) Dade Behring (USA) Danfoss (France - Denmark) Eclipse (USA) Eli Lilly (USA) Engineered Materials (USA) Interbake (USA) Norse Dairy Systems (USA) PYOSA (Mexico) The Scotts Company (USA) X-Ray Equipment & Film Flexible Packaging Castings and Fabrications Soft drinks and juices Medical Diagnostic Equipment Compressors Industrial Heating Equipment Pharmaceuticals Clad Metals Cookies Dairy Equipment Chemicals Lawn Products

Initial Situation

Sales and Operation Planning Process

Forecast Accuracy Performance

Inventory Turns Performance

Key Indicators of Need

Absence of teamwork & shared risk management among internal functions - Executive-level on down! Poor collaboration among business partners - internal or external (finger-pointing) Unacceptable levels of forecast bias and lack of ownership of sales forecasts Ineffective bottleneck and constraints management on the supply side Material/product shortages - increased expediting $

Contd

Supply Interruption leading to production delays and ontime delivery issues with customers and profits hits and/or customer loss Unacceptable lead times Excessive on-hand inventories and obsolescence Lack of confidence in planning systems; Chaos!!!! Ineffective utilization of resources, and lack of resources when needed.

Key Indicators of a successful S&OP

High levels of customer service, satisfaction, and retention Senior management leads and is actively involved in the process Short, mid and long-term demand/supply/financial risks and plans are managed, re-evaluated, and integrated continuously across a rolling horizon Clear demand planning accountability, and unbiased forecasts Ability to reliably execute on supply commitments Trade-offs articulated and commercially evaluated Prioritization of Business Initiatives Disciplined, consistent process in place

Key Takeaways

S&OP delivers business results Risk Management thinking is at the heart of S&OP Finance should be fully integrated into the S&OP process S&OP needs to be a cross-functional process The consumer does not care about your financial calendar Decisions should be based on visibility of facts