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Making Sales and Operations Planning a Truly Collaborative Process, Dick Ling
The document discusses improving the sales and operations planning (S&OP) process through collaboration. It provides context on the history of S&OP, emphasizing early focus on leadership and aggregate management rather than collaboration. More recently, the authors have come to see collaboration as important. An effective S&OP requires integrating demand and supply reconciliations in a collaborative, cross-functional way.
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Making Sales and Operations Planning a Truly Collaborative Process, Dick Ling
- 1. Ling Coldrick Partnership MakingSales and Operations Planning a Truly Collaborative Process Dick Ling © D. Ling and A.Coldrick 2010 Sales & Operations Planning Summit Caesars Palace, Las Vegas, NV January 28, 2011
- 2. Ling Coldrick Partnership Howmany people have picked up some good ideas at the conference about improving the S&OP process? © D.Ling and A.Coldrick 2010
- 3. © D.Ling andA.Coldrick 2010
- 4. Prioritize them 1 23 4 5 6 7 X X XX X X JUST DO IT © D.Ling and A.Coldrick 2010
- 5. Ling Coldrick Partnership Agenda •Collaboration • Integrated Reconciliation • Scenario Planning © D.Ling and A.Coldrick 2010
- 6. Ling Coldrick Partnership Whyis it important that S&OP be collaborative? © D. Ling and A.Coldrick 2010
- 7. Ling Coldrick Partnership© D.Ling and A.Coldrick 2010 1986
- 8. Ling Coldrick Partnership Inthe early days of S&OP development, we emphasized leadership, all areas of the business being involved and managing at the aggregate level(product families) © D.Ling and A.Coldrick 2010
- 9. Ling Coldrick Partnership Whydid we not emphasize Collaboration at that time? • As a young boy I heard about the collaborators during World War Two and therefore the term did not resonate with me until recently. © D.Ling and A.Coldrick 2010
- 10. S&OP Meeting MANAGING SUPPLY MANAGING DEMAND Pre-S&OP Meeting Original 5 Step S&OP Process ©D.Ling and A.Coldrick 2010 GATHER DATA 1984
- 11. SENIOR BUSINESS MANAGEMENT REVIEW INTEGRATED RECONCILIATION WITH BUSINESS PLAN MANAGINGTHE PORTFOLIO & NEW ACTIVITIES MANAGING SUPPLY MANAGING DEMAND Sales and Operations Planning Ling/Coldrick Model 1993 © D.Ling and A.Coldrick 2010
- 12. SENIOR BUSINESS MANAGEMENT REVIEW INTEGRATED RECONCILIATION WITH BUSINESS PLAN MANAGINGTHE PORTFOLIO & NEW ACTIVITIES MANAGING SUPPLY MANAGING DEMAND This process will work best when it is done in a truly collaborative way. © D.Ling and A.Coldrick 2010
- 13. SENIOR BUSINESS MANAGEMENT REVIEW INTEGRATED RECONCILIATION WITH BUSINESS PLAN MANAGINGTHE PORTFOLIO & NEW ACTIVITIES MANAGING SUPPLY MANAGING DEMAND The secret is understanding & implementing Integrated Reconciliation. © D.Ling and A.Coldrick 2010
- 14. Ling Coldrick Partnership Forcesa cross-functional way of operating and this requires collaboration integrate /|inti|greite/ adj. 1. Combine parts into a whole; incorporate. 2. make into a whole by bringing all parts together; unify. 3. join with something else; made part of a larger unit; unite. 4. form into one whole; make entire; complete. 5. complete (imperfect thing), by addition of parts reconcile /|rεk( )n|sail/ n. 1. make (two or more apparently conflicting things) compatible or consistent with each other. 2. bring back to harmony; cause to be no longer at variance. 3. make consistent or congruous; bring to agreement. 4. harmonise, make compatible, show compatibility of by argument or in practise (apparently conflicting facts, statements, qualities, actions of one such with others) 5. bring into consonance or accord. Integrated Reconciliation © D.Ling and A.Coldrick 2010
- 15. Ling Coldrick Partnership IntegratedReconciliation will not work well in your Company unless you either have or develop a collaborative culture © D.Ling and A.Coldrick 2010
- 16. Ling Coldrick Partnership Whatneeds reconciling? • New directives from senior management • New opportunities in the market place • New product timing • Deviations from the business plan • Supply problems • Any issue emerging from the monthly process © D.Ling and A.Coldrick 2010
- 17. Ling Coldrick Partnership WhoMakes up the Integrated Reconciliation Team Who Needs to Collaborate? • You need a leader or process owner of the Integrated Reconciliation process • Leaders from finance, new product development, sales and marketing and supply chain • Members from each area of the company who are needed to reach a consensus, make decisions and make recommendations on a path forward © D.Ling and A.Coldrick 2010
- 18. OPTION 5 OPTION 4 OPTION2 OPTION 1 OPTION 3 STRATEGY GAP OPTION 7 OPTION 8 OPTION 6 2 YEARS 5 YEARS0 LATEST VIEW OPTION 9 MANAGING NEW ACTIVITIES MANAGING SUPPLY MANAGING DEMAND MANAGEMENT BUSINESS REVIEW Analysis/ Decisions Required Options/ Contingencies Decision Support Interactive Emerging Issues European Business Summary Austria Belgium France Germany Greece Holland Ireland Italy Norway Portugal Spain Switzerland UKInventory KPIs 1-3 KPIs 4-6 Brand Y Brand X Major Assumptions (In ata) Price rise q303 75% certain Supply does not inclunewly acquired plant Italy Based on IRR total growth of 8%……. Major Changes thiiteration Timing of price rise brought forward by 3 weeks t Tesco range review date ……. Vulnerabilities and Opportunities Capacity constrained. If erises by 12% stockouts occur qtr 3 03 Low stock position leads to Emerging Issues and Gaps Supply at near fullcapacity. Overtime cannot uaranteat Avezzano over Christmas …… Decision Made in PreviousSteps Low service rates will be erated Reduce the bridge buying ading price rise …… Decisions Required – endations & Costs Phase marketing spend in 0bolster demand through price rise. Pull £1.5m in media from qtr 4 03 to qtr 3 03 Brand Z Europe - Total Business 68 980 378 370 653169 1084 1060 1796 1687 0 200 400 600 800 1000 1200 1400 1600 1800 2000 02Actual 03Current View 03 LQR 03 Plan 04 Forecast 03 Plan $ MM's Gross Margin COGS European Rolling Quarterly Summary 245 96 245 245 98 245 9589 89 89 96 96 473 468 425 430 270 274 256 255 256 274285 274 0 50 100 150 200 250 300 350 400 450 500 Current View Q2 LGR Q2Plan Q2 Current View Q3 LQR Q3Plan Q3 Current View Q4 LQR Q4Plan Q4 Current View Q1 LQR Q1Plan Q1 $ MM's Gross Margin COGS Euro Total Performance Monitoring Financial Impact & Analysis INTEGRATED RECONCILIATION WITH BUSINESS PLAN What is the work of the Integrated Reconciliation team? © D.Ling and A.Coldrick 2010
- 19. Ling Coldrick Partnership OPTION5 OPTION 4 OPTION 2 OPTION 1 OPTION 3 STRATEGY GAP OPTION 7 OPTION 8 OPTION 6 2 YEARS 5 YEARS0 LATEST VIEW OPTION 9 What is the work of the Integrated Reconciliation team? MANAGING NEW ACTIVITIES MANAGING SUPPLY MANAGING DEMAND •Review global performance outlook and differences between business strategy, budget and forecast. Reconcile gaps between new activities, demand, supply and financial targets •Highlight impact of changes (units and financials), gaps, opportunities and major integration issues over a 2 Year-end horizon •Develop scenarios considering the interdependencies and trade-offs that drive overall business performance. •Redirect issues that should have been resolved elsewhere, in line with organisational accountabilities •Make recommendations and/or decisions for alternatives with business impacts for each •Elevate to senior management major issues and opportunities still requiring resolution. MANAGEMENT BUSINESS REVIEW Analysis/ Decisions Required Options/ Contingencies Decision Support Interactive Emerging Issues European Business Summary Austria Belgium France Germany Greece Holland Ireland Italy Norway Portugal Spain Switzerland UKInventory KPIs 1-3 KPIs 4-6 Brand Y Brand X Major Assumptions (In ata) Price rise q303 75% certain Supply does not inclunewly acquired plant Italy Based on IRR total growth of 8%……. Major Changes thiiteration Timing of price rise brought forward by 3 weeks t Tesco range review date ……. Vulnerabilities and Opportunities Capacity constrained. If erises by 12% stockouts occur qtr 3 03 Low stock position leads to Emerging Issues and Gaps Supply at near fullcapacity. Overtime cannot uaranteat Avezzano over Christmas …… Decision Made in PreviousSteps Low service rates will be erated Reduce the bridge buying ading price rise …… Decisions Required – endations & Costs Phase marketing spend in 0bolster demand through price rise. Pull £1.5m in media from qtr 4 03 to qtr 3 03 Brand Z Europe - Total Business 68 980 378 370 653169 1084 1060 1796 1687 0 200 400 600 800 1000 1200 1400 1600 1800 2000 02Actual 03Current View 03 LQR 03 Plan 04 Forecast 03 Plan $ MM's Gross Margin COGS European Rolling Quarterly Summary 245 96 245 245 98 245 9589 89 89 96 96 473 468 425 430 270 274 256 255 256 274285 274 0 50 100 150 200 250 300 350 400 450 500 Current View Q2 LGR Q2Plan Q2 Current View Q3 LQR Q3Plan Q3 Current View Q4 LQR Q4Plan Q4 Current View Q1 LQR Q1Plan Q1 $ MM's Gross Margin COGS Euro Total Performance Monitoring Financial Impact & Analysis
- 20. Ling Coldrick Partnership AirTraffic Control for Issues and Opportunities To be effective the business needs to know where these issues are and guide them into land for decisions in the appropriate timing and sequence to minimise risk and maximise business value. All businesses have a range of issues and opportunities ‘in the air’ at any point in time moving at different speed, at different altitude, in different directions. © D.Ling and A.Coldrick 2010
- 21. The internet andteleconferencing capabilities available today make this much easier to accomplish because there is no need for face to face meetings © D.Ling and A.Coldrick 2010
- 22. Ling Coldrick Partnership Preparinginformation for the Management Business Review Volumes, Financials and the Story in One Sheet or Screen Ongoing Planning Assumptions Major Assumption Changes In this Cycle Emerging Issues Decisions made in Previous steps Risks and Opportunities Decisions Required
- 23. 2/1/20 11 Pg 23 ProductFamily: WIGITS I &II WW Canto - Demand (FY06) 0 10 20 30 40 50 60 70 80 90 100 FY05 Shipments 20 44 26 43 28 35 29 25 35 20 43 37 FY06 July Demand Plan 27 7 6 31 31 32 26 19 61 29 69 92 FY06 June Finl. Forecast 22 22 22 27 27 28 21 21 21 47 48 48 Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep *Actual FY05Shipments 385 FY06JulyDemandPlan 430 FY06JuneFinl.Forecast 354 WW Canto - Supply (FY06) 0 10 20 30 40 50 60 70 80 FGI Inventory 19 34 26 18 24 18 9 5 3 15 15 -9 FY05 Actual Build 35 55 31 21 26 34 30 34 33 26 31 43 FY06 August Supply Plan 28 22 2 19 39 25 17 15 63 41 69 68 Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep *Actual Major Assumptions (In Data) 1. Wigit II Launch schedule US IVD Clearance – estimated Sep 06 Japan Registration approved to sell Canto II in August. China and Taiwan registration estimated by end of FY07 2. Based on current inventory and open purchase orders the assumption is that the current Wigit supply will satisfy current demand of 48 units (Aug 06 to Aug 07). No additional demand can be satisfied. Major Changes this Cycle (In Data) 1. Last Month’s statement (Current Wigit I Demand from July to August 07 is 45 units. No additional Wigit I can be built based on material availability.) 2. Europe increased Wigit II demand by 16 units for the period of August and September. Risks and Opportunities (not in Data) 1. High volume for Wigit lines still causing serious constraints in test. 2. Chassis availability for Wigit II is still an issue. Supplier concern about meeting current requirements for September. Decisions Made During this Cycle 1. Strategy about Wigit II Demo units is that new builds will take priority unless otherwise defined by US Sales and Marketing leadership. Decisions Required - Recommendations & Costs 1. For the remaining Wigit II Demo units we need to decide if additional material be purchased for remanufacturing. Emerging Issues and Gaps (in Data) 1. Wigit II mix is still not stable and could create supply issues. 2. Production still unable to meet plan. Production resources will be stretched in September. FY05ActualBuild 399 FY06AugustSupplyPlan 408 FY06OpsBudgetPlan 450 WW Canto - Demand & Supply (2 year end) 0 20 40 60 80 100 120 140 160 180 200 FY06 June Demand Plan 40 94 106 190 112 110 111 114 FY06 July Supply Plan 52 83 95 178 143 112 112 114 FY06 Jun Fin FC/FY07 Fin Pln 66 82 63 143 82 91 100 105 FY06 Q1 FY06 Q2 FY06 Q3 FY06 Q4 FY07 Q1 FY07 Q2 FY07 Q3 FY07 Q4 FY06FY07 FY06JuneDemandPlan 430 447 FY06JulySupplyPlan 408 481 FY06JunFinFC/FY07FinPln 354 378 Canto A Regular, 185 Canto A RUO & Refub, 34 Canto II Internal, 38 Canto II End User (incl. Inv.), 173 FY06 WW Canto Demand Breakdown Canto FY06 CA 2% EU 45% US 34% AP 10% JP 6% NLA 1% SLA 2% FY06
- 24. 2 YEARS 4YEARS0 2 YEARS 4 YEARS0 2 YEARS 4 YEARS0 Integrated Reconciliation will look quite different depending on which models you are supporting 5 4 3 2 1 Line Extension and Promos 2 YEARS 4 YEARS0 Existing Portfolio 2 YEARS 4 YEARS0 © D.Ling and A.Coldrick 2010
- 25. Ling Coldrick Partnership Week1 Week 2 Week 3 Week 4 GLOBAL REGIONAL (e.g. EUROPE) COUNTRY Your Organisational Structure will Shape your S&OP process Activities that need to be managed and decisions that need to be taken GLOBALLY Activities that need to be managed and decisions that need to be taken REGIONALLY Activities that need to be managed and decisions that need to be taken LOCALLY © D.Ling and A.Coldrick 2010
- 26. Ling Coldrick Partnership REGION 2COUNTRY NEW PRODUCT REVIEW COUNTRY CUSTOMER 8 SENIOR MANAGEMENT REVIEW COUNTRY/ REGION 4 GLBL DEMAND REVIEW 3 COUNTRY DEMAND REVIEW 5 PLANT SUPPLY REVIEW 5 GLBL SUPPLY REVIEW 7 INTEGRATED RECONCILIATION (GLOBAL) 9 SENIOR MANAGEMENT REVIEW GLOBAL GLOBAL 6 INTEGRATED RECONCILIATION (COUNTRY/REGION) 1 REGION NEW PRODUCT REVIEW Example Global Model 1 GLBL NEW PRODUCT REVIEW 4 REGION DEMAND REVIEW © D.Ling and A.Coldrick 2010
- 27. Ling Coldrick Partnership ThePROCESS and the PLAYERS must change as the business conditions evolve © D.Ling and A.Coldrick 2010
- 28. Ling Coldrick Partnership Whatwill it take to enable the organization to do the integrated reconciliation in a truly collaborative way? The Question Is: © D.Ling and A.Coldrick 2010
- 29. Ling Coldrick Partnership Whatwill it take? • Leadership • Attitude • Education • People understanding the value • Support tools • Experience and results © D.Ling and A.Coldrick 2010
- 30. Ling Coldrick Partnership Collaboration •When people see that something better can result from sharing ideas and information and that is what is right for the company not who is right---Then and only then will the people be in collaboration mode © D.Ling and A.Coldrick 2010
- 31. Ling Coldrick Partnership ExtendCollaboration Beyond your Company, where it is appropiate • Your Customers-CPFR • Your Suppliers © D.Ling and A.Coldrick 2010
- 32. 2 YEARS 4YEARS0 2 YEARS 4 YEARS0 2 YEARS 4 YEARS0 The more that there is uncertainty about the future the more you may need to do scenario planning. 5 4 3 2 1 Line Extension and Promos 2 YEARS 4 YEARS0 Existing Portfolio 2 YEARS 4 YEARS0 © D.Ling and A.Coldrick 2010
- 33. Ling Coldrick Partnership Whatis Scenario Planning • Scenario Planning involves testing business strategies against a limited number of alternative futures. • It can be used to help develop the Strategic plan • It can be used to help execute your strategic plan through the S&OP process • We need a new set of tools in order to accomplish Scenario Planning © D.Ling and A.Coldrick 2010
- 34. Ling Coldrick Partnership DevelopingScenario’s • What is your Strategic Plan? • What is your Business Plan? • How do you measure whether you are achieving them? • What assumptions are supporting them? • What are the elements of your plans and anticipated results that could be affected by change? • How could we evaluate the results or these changes and see the possible results © D.Ling and A.Coldrick 2010
- 35. Ling Coldrick Partnership Whenis Scenario Planning Needed • When there are major issues in your ability to sell, produce or hit your financial targets • When there are major opportunities that you would like to explore • When there is much uncertainty in the market place © D.Ling and A.Coldrick 2010
- 36. Ling Coldrick Partnership UsingScenarios in Strategic Planning • Acquisition of a new business • Entry into a brand new product line • Entry into a brand new market • Employing a dramatically new marketing approach • Moving production offshore © D.Ling and A.Coldrick 2010
- 37. Ling Coldrick Partnership ScenarioPlanning within S&OP Environment • Changing timing of new product introduction • Change in product life cycle • Massive swing in demand - UP or Down • Major supply problem • Price change – UP or Down • Major cost change – Up or Down • Change in inventory strategy • It probably isn’t needed every month © D.Ling and A.Coldrick 2010
- 38. Ling Coldrick Partnership ScenarioPlanning • Each scenario that you are exploring should therefore be defined by a set of assumptions in order to meet your business goals • A different scenario would be to define a different set of assumptions © D.Ling and A.Coldrick 2010
- 39. Ling Coldrick Partnership Whatare you trying to determine with each scenario? • Will it solve the business plan problem or take advantage of an opportunity? • What will it do to profitability? • What will it do to market share? • Can I accomplish it with my resources? • Is the risk worth it? • What did we learn from looking at these scenario? © D.Ling and A.Coldrick 2010
- 40. Ling Coldrick Partnership ScenarioPlanning • Scenario Planning does not make the decision for you, it gives you better information so that you can make a more informed decision in charting your future © D.Ling and A.Coldrick 2010
- 41. Ling Coldrick Partnership Newtools are finally emerging that will assist you with your scenario planning © D.Ling and A.Coldrick 2010 You can see the term starting to appear more in presentations and in software vendors literature about their capabilities
- 42. Andy and Iare collaborating with Portfolio Decisions in order to help them use their powerful Scenario Planning software (which has been highly successful in the Oil and Gas industry for 15 years) to operate in a Sales & Operations planning environment with your S&OP data © R.Ling and A.Coldrick 2010
- 43. Scenarios with GraphicResults Source: Portfolio Decisions
- 44. Ling Coldrick Partnership ScenarioPlanning • In the past the focus in scenario planning has been on optimization of resources • In the future the focus will also be on new market scenarios in order to maximize business results • There needs to be a better definition of scenario planning that is understood by all We are working on that © D.Ling and A.Coldrick 2010
- 45. Ling Coldrick Partnership MyChallenge to you • Explore improving your Integrated reconciliation process. • Adopt Collaboration as a way of life. • Look at Scenario planning as a tool to help improve your decision making process. • Obtain continuous improvement of your S&OP process through continuous assessment. © D.Ling and A.Coldrick 2010
- 46. Ling Coldrick Partnership IanWilson However good our research may be, we shall never escape from the ultimate dilemma that all our knowledge is about the past, and all our decisions are about the future © D.Ling and A.Coldrick 2010
- 47. Ling Coldrick Partnership MakingBetter Decisions about the future and setting direction is what Sales and operations planning is all about © D.Ling and A.Coldrick 2010
- 48. Thank You © D.Lingand A.Coldrick 2010 lingcoldrick.com dick.ling@lingcoldrick.com andy.coldrick@lingcoldrick.com