Sales & Operations Planning

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Sales & Operations Planning: Role, Structure and Benefits

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  • MANY TOOLS, PROCESSES HOW DO THEY FIT TOGETHER DISCLAIMER – EXCLUDE YOUR PET PROCESS OVERLAP NECESSARY BUT NOT SUFFICIENT
  • < 2 HOURS PER MONTH
  • Sales & Operations Planning

    1. 1. Sales & Operations Planning <ul><li>A Presentation to: </li></ul><ul><li>PMI and APICS </li></ul><ul><li>by </li></ul><ul><li>Tom Wallace </li></ul><ul><li>Grand Rapids – 1-14-08 </li></ul>
    2. 2. Agenda <ul><li>Sales & Operations Planning: Role, Structure and Benefits </li></ul><ul><li>Implementation </li></ul><ul><li>Q & A </li></ul>
    3. 3. The Many Tools for Improving Effectiveness Increase Reliability Total Quality, Six Sigma, Poka-Yoke, ISO + others Lean Mfg., Just-In-Time, Quick Changeover (SMED), Flow + others Sales & Operations Planning, ERP, Kanban, VMI, + others X X X Enhance Coordination Reduce Waste & Time
    4. 4. Complexity, Change and Coordination COMPLEXITY AND THE RATE OF CHANGE NEED FOR EFFECTIVE COORDINATION PROCESSES: S&OP
    5. 5. The Four Fundamentals Mix <ul><li>How Much? </li></ul><ul><li>Rates </li></ul><ul><li>The Big Picture </li></ul><ul><li>Families </li></ul><ul><li>Strategy/Policy/Risk </li></ul><ul><li>Monthly/out to 36 Mos </li></ul><ul><li>Which Ones? </li></ul><ul><li>Timing/Sequence </li></ul><ul><li>The Details </li></ul><ul><li>Products </li></ul><ul><li>Tactics/Execution </li></ul><ul><li>Weekly/Daily 1-3 Mos </li></ul>Demand Supply Volume
    6. 6. Sales & Operations Planning Demand Supply Volume Mix Executive S&OP Master Scheduling Supplier and Plant Scheduling Distribution Scheduling Demand Planning/ Forecasting Supply (Capacity) Planning
    7. 7. More Terminology Changes? <ul><li>Sales & Operations Planning may </li></ul><ul><li>become the successor term to </li></ul><ul><li>ERP/MRPII </li></ul><ul><li>Thus the term Executive S&OP was developed – to set it apart. </li></ul>
    8. 8. Executive S&OP . . . <ul><li>Is an executive decision-making process </li></ul><ul><li>Balances demand and supply </li></ul><ul><li>Deals with volume in both units and $$$ </li></ul><ul><li>Ties operational plans to financial plans: one set of numbers </li></ul><ul><li>Is the forum for setting relevant strategy and policy </li></ul><ul><li>Is what, for years, we called </li></ul><ul><li>Sales & Operations Planning </li></ul>
    9. 9. Where Executive S&OP Fits Strategic Planning Detailed Planning, Scheduling & Execution Business Planning Disconnect!!! Executive S&OP
    10. 10. <ul><li>The Leader of the Business Unit (General Manager, President, COO) Needs to be Hands-On with Executive S&OP: </li></ul><ul><ul><li>Stewardship </li></ul></ul><ul><ul><li>Leadership </li></ul></ul><ul><ul><ul><ul><ul><li>Break ties </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Set high standards </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Motivate </li></ul></ul></ul></ul></ul>Monthly Time Commitment: 1.5 The Role of Top Management hours
    11. 11. Examples of S&OP Best Practices <ul><li>Three (of 13) Companies Studied: </li></ul><ul><li>High Seasonality </li></ul><ul><li>High Cyclicality </li></ul><ul><li>Highly Complex New Product Launch </li></ul>
    12. 12. Executive S&OP in Make-to-Stock w/ High Seasonality: The Scotts Co. <ul><li>Important Questions: </li></ul><ul><li>When start Pre-Build? </li></ul><ul><li>At what rates? </li></ul><ul><li>Which SKUs? </li></ul><ul><li>When ramp up & how much? </li></ul><ul><li>When ramp down? </li></ul><ul><li>S&OP helps answer these </li></ul><ul><li>& others </li></ul>Pre-Build Pre-Build
    13. 13. The Scotts Company <ul><li>“ During the last four years, almost half of the company’s increase in earnings has come from Supply Chain savings : inventory down, manufacturing efficiency up, purchase and transportation costs down. All of these are due to improved planning .” </li></ul><ul><li>Ken Reiff </li></ul><ul><li>Vice President, Product Planning </li></ul>
    14. 14. S&OP in Make-to-Order w/ Extreme Cyclicality: Cast-Fab <ul><li>Cast-Fab Technologies – Year-to-Year Sales Change </li></ul>1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 %Chg 15 38 6 12 14 25 14 1 32 25 18 up up down down up down down down down down up up up Implemented S&OP Some competitors go out of business Acquired from Cin’ti Milacron 46!!! 12
    15. 15. Cast-Fab Technologies <ul><li>“ During 2004, we posted sales increases of over 40% , which meant employee call-backs, retraining, new hires, initial training, getting up the learning curve and so forth. </li></ul><ul><li>“ During the same year, we had productivity gains of up to 3%! We never would have believed this was possible if we hadn’t done it. </li></ul><ul><li>“ S&OP played a key role in this; it gave us the forward visibility to make the right decisions on a timely basis.” </li></ul><ul><ul><ul><ul><ul><li>Ross Bushman </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>President and COO </li></ul></ul></ul></ul></ul>
    16. 16. Eli Lilly and Company <ul><li>New Product Launch in the Pharmaceutical Industry </li></ul><ul><li>Multiple stages of testing </li></ul><ul><li>Multiple approvals by FDA </li></ul><ul><li>Multiple years </li></ul><ul><li>Multiple 100s of millions of dollars </li></ul>
    17. 17. Eli Lilly and Company <ul><li>New Product Launch Performance: </li></ul><ul><li>Industry </li></ul><ul><li>Average Lilly </li></ul><ul><li>2001-04 1.8 </li></ul><ul><li>Years Required </li></ul><ul><li>(avg per product) >14 </li></ul>9 <11
    18. 18. Eli Lilly & Company <ul><li>“ In the past three years we have launched 9 new products and met all demand despite 2 products that sold significantly above the high-side forecast . </li></ul><ul><li>“ Without Global Sales & Operations Planning, we would have been driven to reaction mode, which could have resulted in an increase in investment in new assets, a slow down in our launch plans, and/or missed demand opportunities. ” </li></ul><ul><li>Ron Bohl </li></ul><ul><li>Supply Chain Coordinator </li></ul>
    19. 19. These 3 Examples: A Common Thread <ul><li>Executive S&OP is being used in areas of the business that are: </li></ul><ul><li>Mission Critical </li></ul><ul><li>Very Difficult to Manage </li></ul>
    20. 20. Agenda <ul><li>Sales & Operations Planning: Role, Structure and Benefits </li></ul><ul><li>Implementation </li></ul><ul><li>Q & A </li></ul>
    21. 21. The Real Issue . . . <ul><li>Understanding S&OP is simple. </li></ul><ul><li>The hard part is . . . </li></ul><ul><li>Behavior Change </li></ul><ul><li>changing the way we do our jobs. </li></ul>“ The hard stuff is the soft stuff.”
    22. 22. The ABC’s of Implementation <ul><li>C - Computer </li></ul><ul><li>B - Data </li></ul><ul><li>A - People </li></ul>
    23. 23. Implementing Executive S&OP <ul><li>Bad News </li></ul><ul><li>Change </li></ul><ul><li>8-12 Months </li></ul><ul><li>Good News </li></ul><ul><li>Few People (several dozen) </li></ul><ul><li>Early Results ( 2-3 Months) </li></ul><ul><li>Low Cost (~ $100K) </li></ul>
    24. 24. Implementing Executive S&OP Is Different Active, Hands-on Participation by the Leader and Staff <ul><li>The leader of the business ( president, </li></ul><ul><li>COO, CEO, general manager) must provide: </li></ul><ul><ul><li>Support </li></ul></ul><ul><ul><li>Funding </li></ul></ul><ul><ul><li>Commitment </li></ul></ul><ul><ul><li>Leadership </li></ul></ul>So what’s new? Each and Every Month
    25. 25. Implementing Executive S&OP Is Different <ul><li>Highly focused on Top Management </li></ul><ul><li>Relatively few people </li></ul><ul><li>Low cost/high impact </li></ul>
    26. 26. Implementation Path 1 2 3 4 5 6 7 8 9 Months Business Improvement Phase I Preparation Phase II Expansion Live Pilot Demonstration Go/No-Go #2 Phase III $$$ Integration Executive Briefing Go/No-Go #1 Kickoff Session
    27. 27. <ul><li>Month #1 </li></ul><ul><li>Assignment of Responsibility </li></ul><ul><li>Kickoff Education & Planning </li></ul><ul><li>Development of Project Schedule </li></ul><ul><li>Families & Sub-Families (Pilot Family) </li></ul><ul><li>Data Definitions, Sources & Displays </li></ul><ul><li>Month #3 </li></ul><ul><li>Pilot Demo Preparation & Execution </li></ul><ul><li>Go/No-Go Decision #2 </li></ul><ul><li>Month #2 </li></ul><ul><li>Demand Planning Processes & Data Feeds </li></ul><ul><li>Supply Planning Processes & Data Feeds </li></ul>Executive Briefing & Go/No-Go Decision #1 Phase I Preparation Phase II Expansion Phase III $$$ Integration
    28. 29. Implementation Roles <ul><li>Roles: </li></ul><ul><li>Executive Champion </li></ul><ul><li>Design Team (Core Team, Project Team) </li></ul><ul><li>Design Team Leader </li></ul><ul><li>S&OP Expert </li></ul>
    29. 30. The Executive S&OP Expert <ul><li>Role: </li></ul><ul><li>Adviser to the leader of the business </li></ul><ul><li>and others </li></ul><ul><li>Requirements: </li></ul><ul><li>Excellent people skills </li></ul><ul><li>Excellent facilitation skills </li></ul><ul><li>Experienced in implement/operating </li></ul><ul><li>at least one successful Executive </li></ul><ul><li>S&OP process </li></ul><ul><li>Courage </li></ul>
    30. 31. Implications for Project Management Professionals <ul><li>Participate in an Executive S&OP implementation in a support role </li></ul><ul><li>Gain knowledge and credibility </li></ul><ul><li>Become the internal Executive S&OP Expert for subsequent implementations within the company </li></ul>
    31. 32. Implications for APICS Members (CPIM) <ul><li>Premises: </li></ul><ul><li>Executive S&OP is a powerful tool for top management </li></ul><ul><li>It’s here to stay and it’s growing </li></ul><ul><li>It’s in APICS’ space </li></ul><ul><li>CPIMs know more about Executive S&OP than most others </li></ul><ul><li>Therefore, CPIMs are positioned to take part in the growth and to be more valuable to their companies </li></ul>
    32. 33. Agenda <ul><li>Sales & Operations Planning: Role, Structure and Benefits </li></ul><ul><li>Implementation </li></ul><ul><li>Q & A </li></ul>
    33. 34. Thanks for Listening <ul><li>Go to www.tfwallace.com for: </li></ul><ul><li>Copies of slides </li></ul><ul><li>Bi-monthly newsletter </li></ul><ul><li>White papers </li></ul><ul><li>Books and videos </li></ul>

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