S&OP Process – what, where, when, which, who, why etc

1. Sales & Operational Planning Process S&OP Process – what, where, when, which, who, why etc Anand Subramaniam

4. Current Challenges

7. Current Demand & Supply Challenges Challenges Poor coordination of demand and supply: lost sales : incorrect inventories : loss / lower profitability Breakdown in communication due to the lack of quality and availability of data Lack processes to manage new product development, innovation and / or feasibility Lack the right metrics to drive value or to determine same Lack integration with the financial budgeting process Lack or no technology / systems to do the “what if” modeling and gaining agreement Lack of leadership in getting agreement on S&OP plans Lack coordination of multi site / cultural teams Internal business processes does not facilitate delivery of right - product / price / qty / qlty, at the right time, to the right customer

8. Department - Concerns & Questions What products, What price, What profitability Buying / Purchasing What products, What price, What profitability Finance What products, What quantity, Where, When, What price, What quality Sales What products, In what quantities, Where, When Distribution / Logistics What products, In what quantities, When, What quality, What price Production / Operations What products, When, Where, In what quantities Sales Planning (Forecasting) What products, Where, When, What quantity, What price, What quality Marketing Their concerns & questions Department

9. Need for S&OP To manage Absence of teamwork & shared risk management among internal functions Material / product shortages - increased expediting $ Lack of confidence in planning systems Supply Interruption, leading - to production delays, on-time delivery issues, lower profits and / or customer loss Ineffective bottleneck and constraints management on the supply side Unacceptable lead times Excessive on-hand inventories and obsolescence Poor collaboration among stakeholders - internal or external (finger-pointing) Ineffective utilisation of resources, and / or lack of resources when needed

10. S&OP - Overview

14. S&OP - Relationship with other Plans

15. Planning Hierarchy Business Plan Master Scheduling Material & Service Planning Annually Monthly Weekly Daily Sales Profits ROI Product Groups Product Models & Options Components & workload Planning Cycle Planning Output S&OP

16. S&OP @ 100,000 Feet Executive S&OP A process to reconcile, agree upon, and communicate the company game plan Product Development (New Product Introduction) Finance (Dollars) Sales & Marketing (Units/$$ by product family) Operations (Units/Hours/Materials)

17. S&OP @ 10,000 Feet Demand Planning / Sales Forecasting Supply Planning (Capacity / Constraints) Master Scheduling Plant & Supplier Scheduling Distribution Scheduling Executive S&OP Volume Mix Supply Demand

19. Why S&OP ? Reasons Reviews done as part of an Integrated Business Management Process Clearly identifies the product domain in which the company competes through Product Management Provides a transparent view of the company’s response from Demand through to the Supply Review Aligns all stakeholders towards meeting customer demand / profitably & ensure delivery of the company’s strategic agenda Ensures that the Supply & Demand are reconciled & evaluated against financial targets in the Management Review Delivers one clear plan that answers all the customer demand questions that the organisation faces Formalises the generation and adoption of a Company Demand Plan through the Demand Review

22. S&OP - Challenges Challenges Senior leadership support & “walk the talk” Achieving process compliance Identifying S&OP Champion or expert to lead implementation Clear definition and acceptance of roles and responsibilities, including defining specific objectives in employee appraisals Establishing S&OP meetings as the business priority Adapting the process to the organisation Data accuracy and integrity Organisational silos IT enabling process with adequate tool functionality

23. Department – Concerns & the Answers What Price, What Profitability What Products, What Price, What Profitability Buying / Purchasing What Profitability What Products, What Price, What Profitability Finance What Products, What Quantity, Where, When, What Price, (What quality) What Products, In what quantities, where, when (What quality) What Products, In what quantities, when, what quality, what price What Products, When, Where, In what Quantities What products, What Price, What Quality Questions Answered What Products, What Quantity, Where, When, What Price, What Quality Sales What Products, In what quantities, where, when Distribution / Logistics What Products, In what quantities, when, what quality, what price Production / Operations What Products, When, Where, In what Quantities Sales Planning (Forecasting) What products, Where, When, What Quantity, What Price, What Quality Marketing Departmental concern & questions Department

24. S&OP - Benefits Benefits Improved coordination, communication and team work Improved utlisation of machines and resources Integration with the financial budget process & process automation Inventory & Cost Reduction Improvement in Perfect Order and an increase in revenue Ability to perform “what if” modeling and competing on products that the customer requires Improvement in Logistics / Distribution Improved forecast accuracy & processes around it Improved new product launches: Internal efficiency and effectiveness

25. S&OP - Leaders

29. S&OP – Policies

31. S&OP – Policies Policies Planning process & how demonstrated capacities by product family will be maintained and utilised Schedule of future meetings, attendees, & an agenda for a monthly review meeting Inventory, backorder, backlog plan, planning fences, service levels, new product intro, promotion, special offers etc Product families & variances analysis how the plans will be used to establish financial plans, budgets and detailed MPS and line item forecasts Team Charter & Responsibilities Forecasting, demand management, RCCP, inventory techniques Guideline for developing and approving various changes to the plans Rolling forecasts / sales plans - shipment forecast / plan to be maintained for the horizon Planning Horizon, Time Zones, Metrics, UOM

32. S&OP – Principles

38. S&OP – Process / Inputs / Outputs / Controls & Rules

40. S&OP – Input & Output Process Company Policies Strategic Objectives Financial Constraints Capacity Constraints Demand Forecasts Sales Plan Operations Plan Sales per month by product family Customer service levels Workforce & inventory levels Backlogs, backorders & lost sales Demand management ( including new product introduction, promotions, special offers etc Production per month by product family (including regular & overtime, sub-contract work) Sales & Operational Planning

47. S&OP – Planning Fences No Changes to plan accepted – “frozen” Customer Order Daily Production Schedule FG Ship Weekly Schedule Issued Changes to plan accepted – 5% Changes to plan accepted – 10% Changes to plan accepted – 20% Emergencies only accepted Forecast Monthly S&OP

49. S&OP - Cross Functional Teams

53. S&OP - Functional Manager’s Inputs Sales & Operations Plan

55. Communication - Cross Functional Teams S&OP Meetings Demand Review Executive S&OP / Management Review Pre-S&OP (Integrated reconcilia-tion) Supply Review Product Management Review

65. S&OP – Planning Worksheet

66. S&OP – Information Flow S&OP Spreadsheet Demand Information Supply Information Summarised by family, sub family, by month, In lbs. Order fill % Shortages KPI Actuals Prod. Pln KPI Forecasts Actuals Util. % OT Inventory Ad. To Plan Capabilities Outages Constraints Production Distribution Inventory Issues Orders Shortages Issues Orders New Products Spec Changes New customers Accuracy % DP Accuracy % Achievement of Plan

67. S&OP – “What If” Model As-Is Impacts To-Be As-Is Lost Orders To-Be Data Entry 87.0% On Time Shipments 91.3% 75.5 Lost Order Count 56.0 Monthly M lbs. Orders Grade Production-Plan 86000 1623 Reduction in Lost Orders 19.5 Grade Production-Actual 78000 1472 Recovered Margin - monthly $154,950 Grade Production -To Be 81700 1542 Adh. to Plan - % Calc 90.7% M Lbs. As-Is Current OT Cost To-Be Adh. to Plan - % Actual 87.0% 74820 $55,000 Adh. to Plan To-Be - % 95.0% 81700 $249 Std.OT/order Base (15% of orders) 220.8 Lbs.AS-Is due to SKU miss 3180 New OT orders (10% of orders) 147.2 % due to SKU miss 3.7% Savings in OT - monthly $18,333 Summary - Annual Savings Actual Savings As-Is Inventory To-Be Inventory Carrying Costs $107,774 71 Current Level-million Lbs OT Costs $220,000 Production (diff - act v tobe) 4.74% New Inventory (reduced by difference) 67.6 Total Actual Cost Savings $327,774 Annual Carrying Cost Savings (10%) $107,774 Recovered Margin (.15) As-Is SKU Mismatch To-Be Recovery of Lost Orders $1,859,400 60.0 Lost Orders Count 60.0 $477,000 Lost Order Cost $477,000 Total Annual $ $2,187,174 Inventory % 4.08% Les SKU miss $1,706,988 New Inventory Lbs. 70.5 Not Included Note: Added cost above To-Be $15,147 Rush transportion cost Entered Numbers OT Assumes no reduction) -$18,333 Decrease in days late Calculated Numbers Total Added Cost to To Be $480,187

68. S&OP – Measures & Metrics

71. S&OP – Checklist