Moving beyond materials into services

1. Sales and Operations Planning
S&OP

2. What is it?
 Formal Business Process spread over 18-24 Months of
planning Horizon
 Product Families (not items)
 Volume (not Mix)
 Monthly review Cycle
 Both product and financial units
2

3. Principles
3

4. More Principles
4

5. Suggested Process
Buffer
Management
5

6. Inputs by Function
6

7. Some Rules
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8. Agenda
8

9. Put Simply
End of
month
STEP 1
Data
Gathering
STEP 5
Exec SOP
Meeting
STEP 4
Pre-SOP
Meeting
STEP 3
Supply
Planning
STEP 2
Demand
Planning
Statistical forecasts
Field sales worksheet
Management forecast
1st pass spreadsheets
Capacity constraints
2nd pass spreadsheet
Recommendations
For executive S&OP
Decisions
Wallace: 2nd edition Sales & Operations
Planning
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10. Step 1 – Data gathering
Month end data
 Actual sales
 Inventory
 Production
Sales and marketing
All pertinent information
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11. Jan Feb Mar Apr May June Jul Aug
Forecast 100 100 100 120 120 120 120 130
Acutal sales 90 95 85
Difference -10 -5 -15
Cum. difference -15 -30
Jan Feb Mar Apr May June Jul Aug
Planned production 100 100 100 110 120 120 120 130
Actual production 98 100 101
Difference -2 0 1
Cum. difference -2 -1
Jan Feb Mar Apr May June Jul Aug
Planned inventory 100 100 100 142 142 142 142 142
Actual inventory 111* 116 132
Difference 11 16 32
*January Inventory=103
Comparing actual to forecast Product
Family A
Alternatively Time
or Capacity Buffer
Management
History Present FutureVol=Widgets
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12. Total S&OP summarises family plans
1
𝐹
𝐹𝑎𝑚𝑖𝑙𝑖𝑒𝑠
S&OP
Family A
Volume
=> £
Family B
Volume
=> £
Family C
Volume
=> £
Family D
Volume
=> £
Family E
Volume
=> £
Family F
Volume
=> £
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13. Step 2 – Demand planning
Sales and marketing review information received from Step 1
Sales forecast
 By product
 By family
 Total
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14. Demand planning team
Demand manager
Product manager
Forecast analyst
Sales manager
Salesperson
Customer service
Accounting manager
Supply chain manager
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15. Forecasting
INPUTS OUTPUTS
Forecasts
That:
•Are
reasoned
•Are
realistic
•Are
reviewed
•Represent
demand
THE
PROCESS
Current Customers
New customers
Competition
Economy
New products
Pricing
Bids
Promotions
Management
directive
History
Other
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16. Step 3 – Supply planning
Bill of resources
Rough-cut capacity
Demand/Supply Strategies
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17. Resource Planning Process
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18. Bill of Resource
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19. Resource Planning Process
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20. Rough-cut capacity planning
Resource
Bill
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21. Demand/Supply Strategies-Constraint
Management
 Product Family: 1
1. Make-to-stock
2. Target customer service level 99%
3. Target finished goods inventory 1 month
 Product Family: 2
1. Make-to-order
2. Target customer service level 98%
3. Target customer lead time 2 weeks
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22. Step 4 – Pre-SOP meeting
Make decisions to balance supply/demand
Resolve differences where possible
Identify areas of disagreement
Develop scenarios
Set agenda for Executive S&OP meeting
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23. Step 5 – Executive S&OP meeting
Make decisions
Authorize changes in S&OP plan
Relate Rup version
Resolve issues
Review performance, product issues, special projects, etc.
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24. What are critical success factors for S&OP?
S&OP
Top
Management
Involvement
Ongoing
Routine S&OP
Meetings
Structured
meeting
agendas
Cross-
functional
participation
Participants
empowered to
take decisions
Internal
Collaborative
process
Measurement
of Process
Supported by
Integrated
Supply-
Demand
Planning
Technology
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