Sales&

OperationsPlanning

What is happening 6-12 months from now?

Maturity Scan

How do you characterize the S&OP process in your team?

Stage of Evolution Characteristics

Ad hoc decisions, fire fighting problems, no specific sequence

Functional organization with each function making separate decisions in its own silo, not sharing it with the others

Joint decision making with a rough logical sequence, not formalized or detailed. Limited preparation on trade offs

Formalized logical sequence of joint decision making. Individual preparation of decisions and trade offs beforehand

Stage IReact

Stage IIAnticipate

Stage IIICollabor

ate

Stage IVOrchestr

ate

A definition

S&OP is

a process discipline that brings together the sales & marketing ambitions, supply capabilities, customer needs and financial constraints and objectives to balance them and create a single, achievable plan for the tactical horizon

S&OP can be an effective bridgebetween Strategic Business Planning and Execution

Strategic Management /Business Planning

Tactical Planning & Decision Making

(Tactical) Execution

S&OP• Align functional plans• Create the right context• 2-18 months horizon• Prepare for different scenarios• Recognise and address gaps

Sense and respond

Predict and prepare

S&OP is business planning in 5 steps…

Sales and Ops Planning

MeetingReconcile with financial plans

Supply

Reconcile demand and supply

Demand

From Forecasting to Demand Shaping

From Capacity Planning to Supply Network trade offs & design

“What if?” Rather than “Yes/No”

Getting the right info to make decisions into the last 60 minutes of the process

The process seems simplebut some principles are a challenge….

– Discussions should be fact-based– There must be clear ownership of each element of the process

and of the decisions made– The operating plan must be formally linked by assumptions to a

financial plan– There needs to be a formal balancing of demand and supply across

a rolling horizon– Gaps (vs set targets…) must be recognised and action plans

formulated to close them taking into consideration the relevant lead times

– Trade-offs must be clearly articulated and commercially evaluated

Common pitfall: believing that S&OP is a monthly meeting

Slide 8

15.00–18.00 S&OP

If S&OP is only a monthly meeting, it will not deliver the targeted results:a good process consists of well-prepared and fact-based discussions on key topics only, resulting in optimal decisions for the company as a whole

What do you think about this discussion?

:

• Sales: “We have received a tough target of 5% additional sales next year and we have accepted the challenge”

• Marketing: “We are designing a new campaign and will invest €10m, so we think that volumes should increase by 6%”

• Supply Chain: “The statistical forecast indicates 2% growth”

Compromise reached after long fight in S&OP meeting: 4% growth

Slide 9

Aligning with finance does not mean that the forecast has to become the target!

Slide 10

Forecast

Plan

Target

The best estimate of anticipated events (a likely future outcome)

A set of actions designed to achieve a defined outcome

A goal or objective (a desired future outcome)

≠

≠

Realising that there are gaps is good! This helps to timely drive the right actions

Slide 11

History Time Horizon

Dem

and

plan

Short term Next 3 Months

Medium Term3-18 months

Long Term>18 months

GAPG

AP

Target

Forecast

Recognising that gaps exist between forecast and target is very useful: in the S&OP process you can decide to do something about it!

It is all about the gaps

Comparing the bottom-up forecast with financial targets will give better understanding of the expected outcomes

Slide 12

Volume plan

Planned net average sales prices

Bottom-up financial forecast Business targetsGaps?

13

Source figure: Red Pepper. Modified E&Y 1999

● Functional silo approach● Ineffective behaviour● Fire fighting● Lots of ad-hoc meetings● Lots of effort, little reward

● Key decision making forum● Manage together● Routine things done routinely● Issues addressed early –

efficient response & anticipation

oneconsensusplan

Sales:we can sell 200

Marketing:the promotion will sell 400

Manufacturing:they will only sell 150

Finance:

we have budget of 300

Who Brings What to the Table?

Marketing

ProductDevelopment

ProductDemand

CapitalMPS and Supplier

ConstraintsBusiness

Plan

WorkforceAvailability

Adapted from: Launchbury, Keith J. Principles of Planning Omeric, 1999.

Finance

Materials

Operations

HumanResources

Engineering

GeneralManagement

Capacity

CustomerInterface

Sales

How to translate this to The Fresh Connection

ServicelevelDemand patternShelflife

Adapted from: Launchbury, Keith J. Principles of Planning Omeric, 1999.

Supply Chain

Operations

Purchasing Sales

LeadtimesQualityReliabilityTrade Unit

CapacityImprovements

FrequenciesStocklevelFixed period

Strategy

Decision making

sequence

Sales Operations Supply chain Purchasing

• Decision making– Who is involved?– What sequence makes sense?

Decide about portfolio/ customer service

Forecasting demand (pattern)

Production resources and allocation

Production policy (interval / fixed

period)

Inventory policy finished product (safety stock)

Production capacity plan (shifts/projects)

Capacity plan outbound warehouse

Inventory policy raw mat. (batch size,

safety stock)

Capacity plan inbound warehouse

Sales Operations Supply chain Purchasing

The value proposition

Supplier selection and agreements

Set up a logical sequence of decisions and roles involved for The Fresh Connection

2. Portfolio / customer service

3. Forecasting demand 4. Production resources and allocation

5. Production policy (interval / fixed period)

6. Inventory policy finished product (safety stock)

5. Production capacity plan (shifts/projects)

7. Capacity plan outbound warehouse

9. Inventory policy raw mat. (batch size, safety stock)

10. Capacity plan inbound warehouse

Sales Operations Supply chain Purchasing

1. The value proposition

Cus-tomer

Product group

Finished product

Finished product

Compo-nents

8. Supplier selection and agreements

10 steps to success

Iterate