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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 [email protected] hOp://www.linkedin.com/in/mxraleja