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  1. 1. 1S&OP Process inHigh PerformanceOrganizationsSyed Yasir Saeed
  2. 2. 2Business ModelStrategic PlansFinancial PlansBusiness ObjectivesDemand-Side Plans Supply-Side PlansBusinessImperativesOperations PlanningMPS Master Production SchedulingBusinessImperativesSales PlanningDataAccuracyProcurement Process Shop Floor ProcessDataAccuracyCustomer ServiceMRPMarketing PlansPull Systems BOM, Inv., Item MasterS&OP ProcessSupplychainSyed Yasir Saeed
  3. 3. 3What is the S&OP?l Risk management for demand, capacity and profitl Spreadsheet for review and accountability– Revenue– Operations– Inventory– Profitl Does not have to have the “books closed”l 12-months rolling plansl Same time every monthl HEADLIGHTS!Syed Yasir Saeed
  4. 4. 4Why S&OP in ManufacturingNeed good plans for stakeholdersCapacity and inventory agreements with the plants/resourcesSyed Yasir Saeed
  5. 5. 5Simple S&OP Example20 25 23 23 28 20 2021 21 21 21 22 22 22Beginning Inventory = 17Top Management directive for inventory at end of period7 = 817 8Operations Plan = Demand Plan plus delta in inventorydivided by the number of periods20+25+23+23+28+20+20=159-9/7=150/7=21.418 14 12 10 4 6 8DemandOperationsInventoryO Ring Compression Molding - Make to Stock (MTS)(Numbers in 000’s)Syed Yasir Saeed
  6. 6. 6Structure of Supply-SideCorporate PlansPlant 1 Plant 2 OtherPlantsOtherPlantsOtherPlantsOther PlantsSyed Yasir Saeed
  7. 7. 7Data Stream,DemandCorporate PlansVP Sales & MarketingCustomersDistributionCustomer SalesRepsPlant 1 Plant 2 SuppliersOther PlantsSyed Yasir Saeed
  8. 8. 8Data Stream, DemandDemand ManagerOperations CoordinationVP Sales & MarketingCustomersDistributionCustomer SalesRepsPlant 1 Plant 2SuppliersOther PlantsSyed Yasir Saeed
  9. 9. 9Objectives of an S&OP Process•Improve competitive advantage for the business•Handshake between Demand and Supply sides of the organization•Risk management for the business•New product introduction•Product transfers•New suppliers•Capacity risks in general•Supplychain management•Inventory!•Backorders and customer service!•Keep the top management team in sync with the rest of thebusiness•Send clear messages to the team on priorities and objectives•Headlights to the supply-sideSyed Yasir Saeed
  10. 10. 10S&OP Data Stream StandardsS&OP Information StandardsStaticDataSuddenChangesMissingDataSyed Yasir Saeed
  11. 11. 11It starts with Demandl Business inputsl Customer inputsl Sales inputsl Historical inputsl Etc.Syed Yasir Saeed
  12. 12. 12Demand PlanninglDemand planning is a process consisting of actionsand planned expectations to affect customerbehaviors (bookings) by product family.lIt is stated by product family.lOne deliverable is the resulting forecast ofanticipated customer orders (bookings) received byproduct family.lBookings are stated in both currency and units byproduct family.lThe demand plan is measured by plan accuracy ofunits by product family.Syed Yasir Saeed
  13. 13. 13Forecast Detail LogicTarget$Item numbers(SKUs)highlowSyed Yasir Saeed
  14. 14. 14Factors in Product Groupingsl Common componentsl Common capacityl Common constraintl Common inventorystrategyl Similar pricing strategyl Other commonalitiesl What ever makessense in your businessSyed Yasir Saeed
  15. 15. 15BacklogPlanNew Demand PlanOperationsCapacityPlanMTOSyed Yasir Saeed
  16. 16. 16InventoryPlanOperations PlanDemandPlanMTSSyed Yasir Saeed
  17. 17. 17Demand PlanningDemand Reviewor Pre-S&OP S&OPDemand PlanningForecastby productfamilySyed Yasir Saeed
  18. 18. 18Demand PlanningBusiness PlanDemand Review S&OPWhat productsWhat marketsWhat CustomersRevenueProfit/PricingCost DriversEconomicAssumptionsForecastby productfamilyDemand PlanningSyed Yasir Saeed
  19. 19. 19Demand PlanningBusiness PlanMarketingDemand Review S&OPAffecting customer behaviorsMarketing/Demand DevelopmentPromotionsNew Product IntroductionsChannel ManagementForecastby productfamilyDemand PlanningSyed Yasir Saeed
  20. 20. 20Demand PlanningBusiness PlanMarketingDemand Review S&OPSalesThe funnel reviewKnow opportunitiesKnow closure rateKnow closure cycle timeCalculate resultsForecastby productfamilyDemand PlanningSyed Yasir Saeed
  21. 21. 21Demand PlanningBusiness PlanMarketingDemand Review S&OPSalesHistoryExperience byproduct familyForecastby productfamilyDemand PlanningSyed Yasir Saeed
  22. 22. 22Characteristics of aGood Forecastl 12-months rolling by product familyl Reviewed at least monthly for validity and measured foraccuracy, short terml Communicated appropriately to operationsl Sales/Marketing is accountable for accuracy– What did we learn?– What are we going to do differently?l Appropriate historical informationl Appropriate market/customer informationl Marketing influences and expectations taken intoconsiderationl Performance is measured and postedSyed Yasir Saeed
  23. 23. 23Demand Process Ownerl Responsible for data gathering processl Responsible for accuracy of datal Responsible for root cause analysisl Responsible for actionsl Responsible for trendsSyed Yasir Saeed
  24. 24. 24Demand Review or Pre-S&OPl Happens between the master scheduler(s) ofthe business and the demand-side of thebusiness.l Demand Review 3 weeks of the monthl Pre-S&OP last Friday prior to the S&OPSyed Yasir Saeed
  25. 25. 25Demand Reviewor Pre-S&OPl Same time every monthl Responsibility well defined (demand processowners)l Prep for S&OPl Agenda– Review last 30 day performance– Discuss likelihood of hitting plans out 30-90 days– Firm and adjust plan for S&OPSyed Yasir Saeed
  26. 26. 26Performance Metric –Demand Planningl Forecast Accuracy of each Product Familyl Delta from plan (no % above 100)l Average Performancel Tolerance– Total Dollars ($) = 95-100%– Product Family Units = 90-95%Syed Yasir Saeed
  27. 27. 27Orders Received per Day020401275379105131157183DaysReceivedSeries1Customers canbe unruly!Syed Yasir Saeed
  28. 28. 28Beginningof new monthEnd of month0 30030Beginningof new monthEnd ofmonthPre-S&OPS&OPPre-S&OPTiming* * * * * ** = Weekly Demand ReviewSyed Yasir Saeed
  29. 29. 29Manager in charge- ?Data Messenger - ?Demand ProcessOwner – ?Operations ProcessOwner - ?Finance ProcessOwner - ?Develops the spreadsheetsReconciles Demand PerformanceAsks the tough questionsReconciles Operational PerformanceReconciles Profit PerformanceS&OP ProcessSyed Yasir Saeed
  30. 30. 30S&OP Agendal Review performance to plan, last 30 days(Metric)– Business plan (Profit)– Demand plan (Forecast)– Operations plan (Capacity)l Review next 30, 60, 90 day plansl Review 12-month rolling plansl Review any open actions and document newactionsSyed Yasir Saeed
  31. 31. 31Separate the Risks on theSpreadsheetsl New productsl New Customersl New equipmentl New shiftsl New suppliers (major impact)l Other risks?Syed Yasir Saeed
  32. 32. 32Supply-side (Operations Plan) ProcessOwner(s)l Responsible for data gathering processl Responsible for accuracy of datal Responsible for root cause analysisl Responsible for actionsl Responsible for trendsSyed Yasir Saeed
  33. 33. 33Thoughts to goaway withl S&OP = Risk managementl The Demand Plan is not necessarily equal to theOperations Plan.l Good service is not necessarily dependant onaccurate forecastsl Business strategy (inventory strategy) is aprerequisite in understanding how to run thebusiness cost effectively as a high performanceenterprisel Top Management must own the S&OPSyed Yasir Saeed
  34. 34. 34Semi-Annual•Talent Review•Strategic ReviewWeekly•Operational Plan Accuracy•Project Review•Weekly PerformanceMonthly•S&OP•Financial•Operational Quarterly•Portfolio Review•Business ReviewDaily•Schedule AdherenceRigorous Management SystemClass A ERP Management SystemsS&OPSyed Yasir Saeed
  35. 35. 35Implementation Planningl Educationl Performance Metricsl S&OP Organization - Infrastructure forReporting (accountability)l Implementation Plan– Choose the level of detail for Product groupings– Define the data flow – Demand and Operations– Assign accountability– Determine schedule for reviewl Handshake ManagementSyed Yasir Saeed
  36. 36. 36Performance forthis last monthProd Fam 1Prod Fam 2Prod Fam 3Total 87%Actions Names Datesxxxxx xxxxx xx/xx/xxxxxxx xxxxx xx/xx/xxxxxxx xxxxx xx/xx/xxxxxxx xxxxx xx/xx/xxxxxxx xxxxx xx/xx/xxInventory AccuracyTrend ChartPareto ChartCommon Reporting FormatSyed Yasir Saeed
  37. 37. 37Handshake ManagementIncludes (not limited to):Rules of engagementStock levels (MTS & MTO)Competitive lead-timesInventory buffer placementTime fence policyAssumptions and risk managementDrumbeat from MPSProcess ownership and accountabilityFlexibility from forecastCommunication of headlightsSyed Yasir Saeed
  38. 38. 38Potential Improvement Potential ImpactReduce inventory levels Reduce capital investment in inventoryReduce time-to-market Increase revenues through increased salesIncrease capacity Increase revenuesIncrease customer satisfaction Increase revenues through increased salesReduce rejects/rework Decrease material costs; greater ROISpeed up delivery time Increase revenuesBusiness ImpactSyed Yasir Saeed