Improved revenues, business performance, and customer satisfactions are outcomes of a strong Sales and Operations Planning (S&OP) process. S&OP can be applied to a variety of industries, from cosmetics to aftermarket parts manufacturers.

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Michael C. Ryan
Managing Partner
The M. Ryan Group
October 30, 2017
Sales & Operations Planning (S&OP)
Process Overview

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Connecting The Dots
Sales & Operations Planning (S&OP)
SystemsPeople Process
Sales & Operations Planning Connects People, Process, Systems

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Businesses Utilizing S&OP Realize Measurable Benefits
Supply Chain Insights LLC, Copyright © 2013
Cross-Industry Survey Linking S&OP to Business Results
Benefits of Sales & Operations Planning (S&OP)
Household Names Leveraging Best Practices

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Sales Perspective:
• Improved Supply
• Improved On Time Delivery
• Results in Sales Revenue
Why “Do” Sales & Operations Planning?
Quantitative: It Can be Measured
Manufacturing Perspective:
• Improved Forecasts
• Improved Communication
• Results in Better Execution
From a Business Perspective:
• Support Reaching Sales Goals
• Demonstrate Capability to Customers as a Reliable and On Time Supplier
• More Efficient Use of Capital by Linking Production, Shipments and Inventory
What’s In It For Me?
Leveraging Best Practices
S&OP Creates Cross-Functional Benefits and Bottom Line Results

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What is Sales & Operations Planning?
Integrated Business Planning
Sales & Operations Planning is…
• A cross-functional business process
• Customer driven and market based
• Collaborative and balanced
• Performance driven, tracked by metrics
• Tied to execution of strategic plans
• A process of continuous improvement
S&OP is a Closed-Loop Process of Continuous Improvement
Closed Loop
Process
Demand
Review
Supply
Review
Demand/
Supply
Balance
Financial
Review
Executive
S&OP

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What is Sales & Operations Planning?
Core Deliverables of the S&OP Process
• “Just a couple meetings a month”
• A unilateral declaration by a function
• Groundhog day;
Same discussions over & over
• Only focused on today’s fire drill
• Driven by daily execution @ item level
• Only focused on next 30 days
• Going away after a few months
• Market based and customer driven
• Collaborative and cross-functional
• Monthly process with fixed cadence
• Metrics tracked; performance driven
• Forward looking; 12-18 mo. horizon
• Driven by one set of numbers
• Tied to execution of strategic plans
• Process of continuous improvement
Sales and Operations Planning: S&OP
S&OP is not… S&OP is…
Expectations for the S&OP Process Are Well Defined

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• Timing Of Execution Creates Regular Operating Rhythm
S&OP Cadence and Discipline
Definable, Predictable, Repeatable
• S&OP process links Sales, Manufacturing, Finance and Supply Chain
• Process is driven by standard work; Definable, Predictable, Repeatable
• Business is aligned to one set of numbers
• Rolling 18 month horizon reviewed in each monthly cycle
• Enables the business to ”see around the corner”
• Mitigate risk by creating high & low scenarios to drive contingency planning
High Level S&OP Process Flow Sales & Demand Planning Horizon
1 2 3 4 5
6 7 8 9 10
11 12 13 14 15
16 17 18 19 20
Generate
Statistical
Forecast
Compile Prior Month Actual vs. Plan
Marketing Inputs
Sales Inputs
Review Industry
Inputs
Initial
Consensus
Meeting
Final
Consensus
Meeting
Release Plan to
Finance,
Manufacturing
Leadership
Review &
Signoff
Adjusted Statistical Forecast
Review
Performance
vs. Plan
S&OP Meeting
Communicate S&OP Output
Current Month
Next 3 Months
Balance of Year
5 Year Horizon
18 Months
S&OP Horizon = 18 Months
Requirements vs. Capability/Capacity
(R v CC) Horizon = 5 Years
90 Days at Item Level

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FeedbackLoop
External Input
History
Statistical Forecast
Customer Input
Marketing Input
Market Segment Mgr.
Sales Leadership
Consensus
Official S&OP Fcst.
Multiple Views Improve The Quality Of The Forecast
Multiple Views of the Forecast
Integrating External and Internal Sources of Information
Process Inputs
Consensus
Sales Plan
S&OP
Agreed
Sales Plan
18 Month Forward Horizon
E x t e r n a l I n t e r n a l

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All Working To - And Collaborating On - The Same Plan
Where Does the Forecast Go
What Is The Forecast Used For?
Demand
Planning
Supply
Planning
Finance
Consensus
Process
Parallel
Views
Internal Views
External Views
(Actual)
(Plan)
Demand & Supply Plan Flow
Control
Document
Sales Forecast Manufacturing Execution
Financial Performance
• S&OP process links Sales, Manufacturing, Finance and Supply Chain
• Sales forecast signals Manufacturing; Manufacturing supply plan signals Sourcing
• Sourcing utilizes forward forecast to schedule material buys
• Revenue forecast created by Finance; applying customer margins to sales forecast
• Forecast is a closed loop process; feedback incorporated from prior cycle
• Performance to plan is measured and tracked

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S&OP In Action (Sales)
Situations and Behaviors Viewed through the Lens of S&OP
Situation
At a major customer meeting, a sales manager agreed that his company could support a 25% increase in
orders in 30 days. The customer asked for immediate confirmation that this increase was feasible.
Action/Behavior
The sales manager believed that a third shift could be added in 30 days to meet this increase in sales. He
told the sales team to starting taking orders for the increase and promised delivery in 35 days.
S&OP Supportive ??
 Yes
 No
Result
The hiring and training time to staff the third shift did not happen in 30 days and the company had to deploy
costly overtime. Despite the overtime, promised dates were missed, customer service declined, and costs
were higher and profits lower.
What Should Have Been Done
The sales manager should have called a “Tilt” meeting to get cross functional approval on this increase.
The production planner should have worked with the plant to assess the impact of the sales increase. With
all of the facts and implications, the cross functional team can agree on the proper action. Based on the
cross functional decision the customer should have been informed and appropriate internal plans
developed.

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S&OP In Action (Manufacturing)
Situations and Behaviors Viewed through the Lens of S&OP
Situation
The current schedule fully utilizes the three Ekim machines on a 5 x 24 schedule to meet current customer
demand for Part AAA. One of the three Ekim machines that produce Part AAA goes down. It will take 4
weeks for the replacement part to come in.
Action/Behavior
The plant manager schedules Saturday and Sunday overtime in an effort to make up for the lost
production. Neither sales or customer service is made aware of the supply issue.
S&OP Supportive ??
 Yes
 No
Result
Even with two machines running 7 x 24, manufacturing can only meet 90% of the prior output and
backorders increase as customer satisfaction decreases. Costs are up significantly as running Sunday
overtime erodes the profit margin and ultimately loses money for the business.
What Should Have Been Done
Manufacturing should have called a “Tilt” meeting to actively communicate the supply issue. Sales should
communicate the issue to the customer in an effort to asses the true need for the product. With enough
lead time, the customer could potentially alter their schedule and demand, eliminating the need to run
weekend overtime. The dialogue between the business and customer works to strengthen the relationship
while preserving the profitability of Part AAA.

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In Range
of Forecast
Undersold
Forecast
Oversold
Forecast
$
$
$$
$$$
$$
$
$
PROFIT
Maximize Profit through Forecast Accuracy Expected Benefits of a Strong S&OP Process
The Value of S&OP
Important Role in Improving Quantitative Business Measures
Opportunity To Translate The Value Of S&OP To The Bottom Line
• Revenue, EBIT %
• OTD, Schedule Attainment
• Inventory ($ and turns)
• Working Capital
• Forecast Accuracy and Bias
Above metrics are tracked and made
visible through a balanced scorecard
Profit generally improves as forecast accuracy increases

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Build The Foundation For S&OP Implementation
Leveraging Business Process Improvement
Begin With the End in Mind:
What’s the problem you’re trying to solve? Build the foundation for S&OP
• People: Are roles & responsibilities within the process defined and understood?
• Process: Is the current state definable, predictable, and repeatable?
• System: Will existing technology support an effective S&OP implementation?
Sales & Operations Planning is transformative with three core attributes:
• Effective: Does the process meet the needs of the customer and the business?
• Efficient: Does it consume a minimal amount of time and resources?
• Adaptable: Is the process flexible enough to change as the business grows?
S&OP Creates a Definable, Predictable, Repeatable Process

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The Case for Change
A Decision on Which Road to Travel
Stay the Same
Pro:
Easy (no change!)
Con:
Declining Results
Evolve
Pro:
Strong Process
Improved Results
Con:
Cultural Evolution
“It is not necessary to change. Survival is not mandatory”
-W. Edwards Deming
Better Than Average Results Require Better Than Average Work

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Michael Ryan
Managing Partner
michael@mryangroup.com
(330) 283-7234
Creating Alignment Through S&OP
Delivering Results for Your Business
DEFINABLE ● PREDICTABLE ● REPEATABLE