Improving sales and operations (S&0P) in FMCG companies

1. Abdul-Wahab Issah,
MCTS, PMP, PgMP, PfMP
1
C 2014
Improving Sales and
Operations Planning
(S&OP) in the Fast
Moving and Consumer
Goods (FMCG) Sector in
Ghana:
A Case Study of PZ Cussons
Ghana Ltd

2.  Background of Study
 Problem Statement
 Research Objectives
 Relevance of Research
 Literature Review
 Methodology
 Results and Analysis
 Conclusion and Recommendation
 Research Limitation & Areas of further Research
2

3.  Todays business environment is characterized with:
• Increasing competition
• Short product life cycles
• Globalization
• Change in consumer demand and behaviour
 Companies are resorting to the use of Sales and Operations Planning
(S&OP) as a structured approach to the delivery of both operational and
strategic plans (Singh 2009).
 S&OP is a process led by senior management that evaluates and
revises time-phased projections for demand, supply, product and
portfolio changes, strategic projects, and the resulting financial
plans on a monthly basis over a 24-month rolling planning horizon
(Schorr 2007).
 Improved revenue 10 -15% and forecast accuracy 18 – 25 &,
increased time of delivery 10 -50%, reduction in safety stock and
other soft benefits – teamwork and communication.
3

4.  Most companies in the world today have in one way or the
other implemented some form of S&OP
 Few companies are however reaping the expected benefits of
S&OP
 Inability of companies to determine the S&OP maturity levels
and gaps deprives them from maturing and improving the
process to reap the full benefits as reported (Lapide 2005).
 Ghana is a middle income country with significant
implications on companies in the Fast Moving and Consumer
Goods (FMCG) sector of the economy.
4

5.  Companies have to ensure that supply is aligned to growing
demand with a fast delivery and introduction of new products
to meet growing demand.
 Some multi nationals in Ghana have adopted S&OP from their
parent companies. Yet, the extent of adoption is not known, as
this area has attracted limited studies
 As a result of the above this research is under taken to
determine the rate of adoption of S&OP and the gaps and
maturity levels, so as to be able to improve the process.
5

6.  To assess the gaps of S&OP practice against literature in
FMCG sector in Ghana using PZCG as a case study
 To determine the maturity level of the practiced S&OP
 To assess the benefits of practising Integrated S&OP
 What is the level of adoption of S&OP?
 What are the gaps compared to literature in S&OP
practice?.
 What is the maturity level of the S&OP?
 What are the benefits of an integrated S&OP?
Formulated Research Questions to address Objectives
6

7.  Serve as a precursor for companies in the FMCG sector in
Ghana who intend to adopt/Improve S&OP process and very
valuable for the researched company
 Provide evidence for academic discourse and add to existing
knowledge and literature
 Useful to consultants who intend to improve S&OP in
companies
7

8. The success of S&OP depends largely on People, Processes and
Technology (APICS & PROVITI Research 2012, Oliver Wight 2012).
 People
 Palmatier (2007) posits that S&OP success is achieved through leadership
support and the dedication of every member of the organisation.
 S&OP process should have structured and formalized cross functional teams.
(Muzumdar & Fontanella 2006, Ventana 2006)
 Meetings should have good behaviours and disciplines and should be respected
by all in the organisation (Lapide 2004, Bower 2005)
 According to Schorr (2007) the S&OP process should be part of the induction
process of every employee and those involved directly should have S&OP in their
job descriptions.
 Bower (2005) indicates that all process's should have in place their respective
KPIs.
8

9.  Processes
Step 1: New
Product Review
Step 2: Demand
Review
Step 3: Supply
Review
Step 3:
Integrated
Reconciliation
Step 3: Senior
Management
Review
What is coming and
what is going out
Demand Forecast ,
how many in Val & Vol
Make or buy –
Capacity planning
Financials Outlook, Review
total business issues, Risks,
Opportunities
KPI reviews Decisions &
Directions,
Source: Modified from Review Various Processes
(2013)
Different S&OP Process structure models
were reviewed, the below are the models
reviewed.
o Turner (2002) – StrataBridge
Five Step Process Model
o Schorr (2007) – S&OP/IBP
Process Model
o Aberdeen Group (2008)
S&OP/IBP Process Model
o Coldrick et al (2003) S&OP
Framework
o Wallace and Stahl (2008) S&OP
Model (5 Step)
o AMR Research (2010)
S&OP/IBP Process Model ( 8
Steps)
A 5 step S&OP model was build based
on the various models reviewed above
9

10.  Technology
 According to Muzumdar &
Fontanella (2006) S&OP should be
supported by Technology and
systems.
 S&OP should be supported by
three types of software, demand-
process, supply-process and an
integrated S&OP workbench
(Lapide (2005)
 Companies that rely on excel
sheets encounter data accuracy
issues and are unable to integrate
and synchronize data coming from
the various departments
(Mauzumdar & Fontanella 2006)
 The process becomes burdensome
and unable to achieve its best
without a supporting technology
(Lapide 2005)
Reviewed Maturity Models:
Lapide (2005) Four Stage S&OP
Process Maturity Model
AMR Research (2009) Four
stage S&OP Maturity Model
Ventana Research (2006) Four
S&OP Stage Framework
Nex View Consulting (2010)
Five Step S&OP Maturity Model
Aberdeen Group’s (2010) Four
Stage Competitive Maturity
Frame work
Selected Lapide (2005) Four Stage Model:
• Larry Lapide (MIT) - renowned
researcher and academic. Areas of
S&OP
• Peer reviewed in Journal of Business
Forecasting and widely quoted
• Maturity model is not industry
specific but academic in focus.
10

11.  Design
A case study of a company in the FMCG Sector was used – PZ
Cussons Ghana (PZCG) was selected.
o PZCG is part of the UK based Cussons Group.
o Incorporated in Ghana in 1962
o Employs about 150 people of which about 105 are senior staff.
o Produces through its subsidiaries popular brands such as Imperial Leather,
Carex hand Gels and Soaps, Robb, Premier, Nunu Milk, Duck Soap
 Design Approach
Develop ‘as is’ state
Current State &
Practice
Determine ‘to be’
state from Theoretical
Framework
Map ‘as is’ to ‘to be’
state
1 2 3
Identify gaps between
‘as is’ and ‘to be’ state
for PZ Cussons
Determine the Maturity
level of the Process using
Lapide (2005) Model
Gaps
4 5
Source: Field Data (2013)
11

12.  Population , Sample and Technique
- Sample size of 87 was selected using a guide from Krejcie and Morgan (1970)
- A purposive sampling technique was used to select the target group made up
of process members, leaders and champions into sample
- Simple random technique used to complete number of respondents into the
sample size
 Data Collection and Instruments
 Primary Data
 Interviews [Champions and process leaders]
 Questionnaires [Circulated questionnaires to entire sample by mail]
 Observations [Observed two consecutive months meetings (June & July)]
 Secondary Data
 Literature review – Best practice literature, models and frameworks
 Documentation from PZCG
12

13. S&OP Participants in
PZCG
No of questionnaires
sent out
No of
questionnaires
returned
No of
Incomplete
Total
responses
Process Leaders and
Champion
8 8 Nil 8
Process team members 34 32 Nil 32
S&OP Support Staff
(Random)
45 42 Nil 42
Total 87 82 Nil 82
Out of the total of 87 questionnaire sent out 82 were returned fully
completed, representing about 94% response rate
100% response from leaders and champions
94% process team members
93% response from support staff
Source: Field Data (2013)
Table of Responses
13

14. Source: Field Data (2013)
5
3 2.9
3.1
S&OP 'People'
Element Adoption
5
3.32
3.5
3.2
2.8
3.1
4
S&OP 'Process ' Element Adoption
5
1.2 1.2
0
S&OP 'Technology' Element
Adoption
5-Fully
Adopted
0 - Not
Adopted
Target adoption
Average rate of adoption - Element
Average rate of adoption - Sub - Elements
14

15. 18 Gaps were found out of 33 Areas assessed
Source: Field Data (2013)
ID Identified Gaps to Literature Priority
People
1Meeting behaviours below expectation in some process meetings (B-OP & Forecast) H
2Meetings are short term in perspective than a review of the 24 month horizon H
3Some decisions taken without passing through the S&OP process L
4S&OP not part of job description of all involved L
5S&OP induction is not done for all employees L
Processes
6Activities to support new product introduction are not discussed in New Activities Meeting L
7Innovation and ideation funnel process not fully in place L
8No documentation of forecast assumptions H
9Forecast bias not used to shape demand forecast H
10Forecasting does not take into account stocks in trade i.e. Customers sell-out (Not Collaborative) H
11Scenario, and What-if analysis not in use in the supply process H
12Supplier capacities not reviewed within the supply process H
13Weekly ‘check-in’ meetings to discuss business issues prior to major meetings none existent L
14
Executive S&OP meeting pack and presentations sent late as a result limited time is allowed to be
reviewed prior to meeting H
15Most ‘red’ KPIs do not have plans and actions to bring them on track L
Technology
16No End to end S&OP automated system with a dashboard in place VH
17Demand and Supply Planning Software not available for process VH
18No Centralized database to host planning data. Most data is hosted on excel VH
15

16. Stage 1
Marginal
Stage 2
Rudimentary
Stage 3
Classic
Stage 4
Ideal
PeopleProcessesTechnology
Informal Meetings
Sporadic Scheduling
Separate, disjoint
demand plans
Routine
Scheduling
Scheduled when someone
wants a change or when a
supply imbalance is
detected.
100% attendance
and Participation
Spotty Attendance
& Participation
Disjointed Processes Interfaced Processes Integrated Processes Extended Processes
Minimal Technology
Enablement
Standalone application
Interface
Application
integrated
Full set – Integrated
technologies
Supply plans not aligned
to demand
Demand plans
reconciled
Supply plans aligned to
demand plans
Demand and supply
plans jointly aligned
External collaboration
with limited number of
suppliers and
customers
Demand plans aligned
internally and Externally.
External Collaboration
with most suppliers and
customers
Multiple spreadsheets Standalone demand
planning system
Standalone multi-facility
APS system
Demand and supply
planning packages
integrated
External information
manually brought into
the process
An advanced S&OP
workbench
External-facing
collaborative software
integrated to internal
demand –supply
planning systems
System interfaced on
one way basis
PZCG Maturity
PZCG Maturity
PZCG Maturity
PZCG maturity classification according to Lapide (2005) S&OP maturity framework.
16
Practiced
Not Practiced

17. 0%
20%
40%
60%
80%
2011/12 2012/13 Target
Year
Average Yearly Forecast Accuracy
(%)
2011/12
2012/13
Target
86% 86%
88%
95%
% DIFOT - Yearly Average
2010/11 2011/12 2012/13 Target
Year
Strongly
Disagree
0%
Disagree
0%
Not
Sure
5%
Agree
77%
Strongly
Agree
18%
There has been improved
Communication from the process?
Strongly
Disagree
0%
Disagree
0%
Not Sure
0%
Agree
82%
Strongly
Agree
18%
Team work has improved over the
period with the IBP process? Strongly
Disagre
e
0%
Disagree
0%
Not Sure
0%
Agree
85%
Strongly
Agree
15%
The process has led to a
Business Mentality as agianst
'Silo Mentality'
FAccuracy – 15% improvement over prior year, Customer service – 2 Percentage point improvement over prior year , Sales
revenue – 29% improvement over prior year, Stock target of 17m/month ended 26m year end 56% more than target.
17

18. The following conclusions can be drawn based on the findings:
• A formalized S&OP process is in place in PZCG. The process has
support and committed of management and team. 84 %
respondents agree there is support from management.
• Assessment revealed eighteen (18) gaps out of Thirty-three areas
assessed on recommendations from literature which indicates an
immature process.
o The overall maturity of S&OP PZCG was found to be between
stage 2 and 3. With the ‘Technology’ element being the least
matured.
• The Integrated S&OP approach though has lead to improved
communication, teamwork and sales revenue, other areas such as,
forecast accuracy and customer service showed very marginal
improvements.
In conclusion therefore the above supports Gartner (2010) findings that
most organisations are at stage 2 as such unable to reap the full benefits
of the process.
18

19. People
 S&OP process meetings should be reviewed over longer term
horizon of a minimum of 24 months
 Meeting charters should be put in place and enforced. All
participants should have S&OP in their job descriptions
Processes
 Demand forecast adjustment should be done using forecast bias
 Forecasting should be collaborative involving customer data.
 What –if and scenario analysis should be modelled into the supply
process so as to bring alternatives and options.
 The Business team in the reconciliation meeting should develop
action plans to ensure key KPIs are on track.
Technology
 PZCG should invest in an integrated S&OP technology that
incorporates demand, supply with a dashboard and workflow
capability
A team should be setup to ensure the identified gaps are closed and
also create a separate New Activity and Demand review process for
the Electrical Business Unit. 19

20. Some respondents felt being audited and not convinced the exercise
was academic as such their responses could be influenced.
Limited data in some areas on previous years.
The case study approach restricts generalizing
The study was limited to macro level study of the elements of people,
processes and technology.
 Future study should consider some micro activities such as:
Forecasting techniques in the FMCG sector to ascertain a best forecasting
approach
 Future comparative study of S&OP in various companies both
within and outside FMCG sector in Ghana would help establish the
general practice of S&OP in the country.
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