The document discusses sales and operations planning (S&OP), which is a process that companies use to synchronize production with market demand. It describes how most companies take a static, disconnected approach to S&OP that is ineffective. The best practices of some leading companies are highlighted, showing how S&OP can be improved by taking a more strategic approach that incorporates multiple perspectives and shares information. Specifically, the document recommends a five-step review process to structure collaboration and ensure tactical plans align with company strategy.
SAP® S&OP powered by SAP HANA®: Practical Steps to Launch for ResultsPlan4Demand
For more information visit www.plan4demand.com | email: info@plan4demand.com | or call 866-P4D-INFO
S&OP Solution Director, Andrew McCall, discusses how to best understand, evaluate and move forward with SAP S&OP powered by SAP HANA.
To view the recording of the event, visit http://bit.ly/SOPHANA
Key take-a-ways include:
• A quick review of the value and benefits of a high-performance Sales & Operations Planning Process
• A concise overview of exactly what functionality SAP's S&OP on HANA provides
• How the solution can best overcome common obstacles and drive process maturity
• Practical steps to get started
o Evaluating fit for your needs
o Framing a practical fit
o Planning requirements necessary for a successful pilot
If you are fatigued from a "Brute-Force" data intensive S&OP process that is often a day late and a dollar short, this solution is for you. Real-Time Information is no longer out of reach.
The event materials, questions we did not get to answer during the Q&A, as well as additional S&OP Materials, can be found in our S&OP Leadership Exchange LinkedIn Forum. We'd like to extend an invitation to you to join and leverage the experience of your peers & industry experts. http://linkd.in/SOPLeadershipExchange
If you’d be interested in setting up a one-on-one discussion with Andrew McCall, surrounding your process, needs & any specific questions you have, email jaime.reints@plan4demand.com to set up a time.
Check out this webinar on-demand at http://www.plan4demand.com/Video-Webinar-SAP-SOP-powered-by-SAP-HANA-Practical-Steps-to-Launch-for-Results
SAP® S&OP powered by SAP HANA®: Practical Steps to Launch for ResultsPlan4Demand
For more information visit www.plan4demand.com | email: info@plan4demand.com | or call 866-P4D-INFO
S&OP Solution Director, Andrew McCall, discusses how to best understand, evaluate and move forward with SAP S&OP powered by SAP HANA.
To view the recording of the event, visit http://bit.ly/SOPHANA
Key take-a-ways include:
• A quick review of the value and benefits of a high-performance Sales & Operations Planning Process
• A concise overview of exactly what functionality SAP's S&OP on HANA provides
• How the solution can best overcome common obstacles and drive process maturity
• Practical steps to get started
o Evaluating fit for your needs
o Framing a practical fit
o Planning requirements necessary for a successful pilot
If you are fatigued from a "Brute-Force" data intensive S&OP process that is often a day late and a dollar short, this solution is for you. Real-Time Information is no longer out of reach.
The event materials, questions we did not get to answer during the Q&A, as well as additional S&OP Materials, can be found in our S&OP Leadership Exchange LinkedIn Forum. We'd like to extend an invitation to you to join and leverage the experience of your peers & industry experts. http://linkd.in/SOPLeadershipExchange
If you’d be interested in setting up a one-on-one discussion with Andrew McCall, surrounding your process, needs & any specific questions you have, email jaime.reints@plan4demand.com to set up a time.
Check out this webinar on-demand at http://www.plan4demand.com/Video-Webinar-SAP-SOP-powered-by-SAP-HANA-Practical-Steps-to-Launch-for-Results
- Understanding Demand Management Basics
- Planning a Demand Management Process
- Execution of Demand Management
- Conducting a Performance Review of your Demand Management Process (and KPIs)
Analytics has demonstrably helped transform supply chains in the modern enterprise. Across Procurement, Planning and Operations functions, organizations have benefited from leveraging analytics to optimize business processes and cultivate a data-driven decision making practice. At BRIDGEi2i, we help organizations get the best out of their data assets to address key supply chain challenges.
Many companies see the need and are now seeing the business case and profit results for environmental and social sustainability programs and initiatives. A typical progression is for organizations to look at internal initiatives (i.e., energy efficiency), followed by downstream usage of products or services and reuse, recycling and disposal of products. For maximum beneficial impact, organizations need to leverage the supply base. However, not everyone has the power of Wal-mart, GE or IBM to require suppliers to engage. This presentation is an overview of a practical roadmap for extension of sustainability programs upstream to suppliers that companies of various size and status can follow to make progress and move up the curve toward supply chain sustainability.
When planning on producing a new product and/or service, the key factor is the product and service design. Successful designs come down to these basic principles: translate customers' wants and needs, refine existing products and services, develop new products and services, formulate quality goals, formulate cost targets, construct and test prototypes, document specifications, and translate products and service specification into process specifications. The process of design has certain steps that include motivation, ideas for improvement, organizational capabilities, and forecasting. In the product process innovations, research and development play a significant role. Because of the influence a product and service design can have on an organization, the design process is encouraged to be tied in with the organization's strategy and take into account some key considerations.
Companies choose various ways to design their products and the type of services they provide. Which include: standardization, mass customization, delayed differentiation, modular design, and robust design deciding which method to use is very important along with deciding the company's target market. Deciding the right method, establishes good productivity and efficient way of operations.
Planning is an ongoing process that happens at different levels and different times dependent on resource availability and this is recognised by the 5 levels of Supply Chain Planning Horizon.
Towards connected planning for Supply Chain Bluecrux
Far too often, Supply Chain management leaders make decisions in a data vacuum. But that doesn’t work in today’s fast-paced market. Rob Van Driel (Solutions Consultant, Anaplan) explained why & how Supply Chain leaders need to make timely, value-based decisions so you can respond quickly to shifts in demand and customer needs. Because: when value is king, margins are optimized, and profit is maximized.
Presented by Rob Van Driel, Solutions Consultant Anaplan on Supply Chain 4.0 : ready to operate in the digital era? (29 Nov, 2018)
Every Angle value for food & beverage businesses running SAPEvery Angle US
Benefits to the Food and Beverage Industry
Every Angle supports the entire company operationally, along all the major business processes. Through the use of Every Angle, companies in the Food and Beverage Industry can obtain:
•Transparency of customer order flows;
•Great overview of obsolete stock (passed shelf life or changed packaging);
•Insight into different process bottlenecks to customer service issues and future stock allocations (e.g. shortages);
•Monitoring of returnable packaging (Beverage Industry).
________________________________________
Business Value
Every Angle with all standard applications and added value can be used in the Food & Beverage industry with special focus on:
•Clear visibility through the entire supply chain leads to better allocation of goods and products, reducing high levels of stock;
•Better management of batches (customer demands, shelf life, regulations, etc.);
•Less age rejections, downgrades, scrap and reworks, resulting in cost reductions;
•Increased profitability of the organization.
Do you realize the potential benefits of modern technology, but still struggle to take the right approach towards transformation?
Don’t worry! The change cannot take place overnight and must be done with a step-by-step approach. We bring you a Digital Transformation roadmap for Next-gen supply chain. In just 5 easy steps, you can begin your Digital Transformation journey and optimize your value chain.
To know more, visit: https://bit.ly/3pkub6a
Understand what value can be gained by using simulation-based predictive analytics for supply chain, distribution center, logistics and warehouse design, operations, and improvement
Demand Planning Leadership Exchange: SAP APO DP Statistical Forecast Optimiza...Plan4Demand
866.P4D.INFO | Plan4Demand.com | Info@plan4demand.com
If you are still using manual processes to support your demand planning cycles outside of APO, this Leadership Exchange is for you and your team. Join us to learn how to remove the burden of magnitude and get back on the track to leveraging your SAP APO DP to the fullest beginning with Statistical Forecast Optimization.
The session will focus on common issues and methods to maximize your implementation in order to really turbo-charge your Demand Planning. To do this, we’ll touch upon ways to simplify the process, which statistical models to use and when, and how to prioritize and manage by exception effectively for the long haul to evolve with your business.
A few key takeaways from this session include:
How to unclutter the process
Which Statistical Model to use & When
Tips for holistic optimization
Future design considerations
Check out this webinar on-demand at http://plan4demand.com/Video-SAP-APO-DP-Statistical-Forecast-Optimization
- Understanding Demand Management Basics
- Planning a Demand Management Process
- Execution of Demand Management
- Conducting a Performance Review of your Demand Management Process (and KPIs)
Analytics has demonstrably helped transform supply chains in the modern enterprise. Across Procurement, Planning and Operations functions, organizations have benefited from leveraging analytics to optimize business processes and cultivate a data-driven decision making practice. At BRIDGEi2i, we help organizations get the best out of their data assets to address key supply chain challenges.
Many companies see the need and are now seeing the business case and profit results for environmental and social sustainability programs and initiatives. A typical progression is for organizations to look at internal initiatives (i.e., energy efficiency), followed by downstream usage of products or services and reuse, recycling and disposal of products. For maximum beneficial impact, organizations need to leverage the supply base. However, not everyone has the power of Wal-mart, GE or IBM to require suppliers to engage. This presentation is an overview of a practical roadmap for extension of sustainability programs upstream to suppliers that companies of various size and status can follow to make progress and move up the curve toward supply chain sustainability.
When planning on producing a new product and/or service, the key factor is the product and service design. Successful designs come down to these basic principles: translate customers' wants and needs, refine existing products and services, develop new products and services, formulate quality goals, formulate cost targets, construct and test prototypes, document specifications, and translate products and service specification into process specifications. The process of design has certain steps that include motivation, ideas for improvement, organizational capabilities, and forecasting. In the product process innovations, research and development play a significant role. Because of the influence a product and service design can have on an organization, the design process is encouraged to be tied in with the organization's strategy and take into account some key considerations.
Companies choose various ways to design their products and the type of services they provide. Which include: standardization, mass customization, delayed differentiation, modular design, and robust design deciding which method to use is very important along with deciding the company's target market. Deciding the right method, establishes good productivity and efficient way of operations.
Planning is an ongoing process that happens at different levels and different times dependent on resource availability and this is recognised by the 5 levels of Supply Chain Planning Horizon.
Towards connected planning for Supply Chain Bluecrux
Far too often, Supply Chain management leaders make decisions in a data vacuum. But that doesn’t work in today’s fast-paced market. Rob Van Driel (Solutions Consultant, Anaplan) explained why & how Supply Chain leaders need to make timely, value-based decisions so you can respond quickly to shifts in demand and customer needs. Because: when value is king, margins are optimized, and profit is maximized.
Presented by Rob Van Driel, Solutions Consultant Anaplan on Supply Chain 4.0 : ready to operate in the digital era? (29 Nov, 2018)
Every Angle value for food & beverage businesses running SAPEvery Angle US
Benefits to the Food and Beverage Industry
Every Angle supports the entire company operationally, along all the major business processes. Through the use of Every Angle, companies in the Food and Beverage Industry can obtain:
•Transparency of customer order flows;
•Great overview of obsolete stock (passed shelf life or changed packaging);
•Insight into different process bottlenecks to customer service issues and future stock allocations (e.g. shortages);
•Monitoring of returnable packaging (Beverage Industry).
________________________________________
Business Value
Every Angle with all standard applications and added value can be used in the Food & Beverage industry with special focus on:
•Clear visibility through the entire supply chain leads to better allocation of goods and products, reducing high levels of stock;
•Better management of batches (customer demands, shelf life, regulations, etc.);
•Less age rejections, downgrades, scrap and reworks, resulting in cost reductions;
•Increased profitability of the organization.
Do you realize the potential benefits of modern technology, but still struggle to take the right approach towards transformation?
Don’t worry! The change cannot take place overnight and must be done with a step-by-step approach. We bring you a Digital Transformation roadmap for Next-gen supply chain. In just 5 easy steps, you can begin your Digital Transformation journey and optimize your value chain.
To know more, visit: https://bit.ly/3pkub6a
Understand what value can be gained by using simulation-based predictive analytics for supply chain, distribution center, logistics and warehouse design, operations, and improvement
Demand Planning Leadership Exchange: SAP APO DP Statistical Forecast Optimiza...Plan4Demand
866.P4D.INFO | Plan4Demand.com | Info@plan4demand.com
If you are still using manual processes to support your demand planning cycles outside of APO, this Leadership Exchange is for you and your team. Join us to learn how to remove the burden of magnitude and get back on the track to leveraging your SAP APO DP to the fullest beginning with Statistical Forecast Optimization.
The session will focus on common issues and methods to maximize your implementation in order to really turbo-charge your Demand Planning. To do this, we’ll touch upon ways to simplify the process, which statistical models to use and when, and how to prioritize and manage by exception effectively for the long haul to evolve with your business.
A few key takeaways from this session include:
How to unclutter the process
Which Statistical Model to use & When
Tips for holistic optimization
Future design considerations
Check out this webinar on-demand at http://plan4demand.com/Video-SAP-APO-DP-Statistical-Forecast-Optimization
Using the Integrated Performance Solution (IPS), a client has created a new marketing campaign management blueprint and road map. The IPS developed by George B. Lampere provides a collaborative and integrated approach to align the people / organization, business processes, technology, and information / knowledge management. For more information, contact glampere@glampere.com
How to Use Technology to Support the Lean EnterpriseFindWhitePapers
This SAP Executive Insight addresses the following questions: . What is the Lean enterprise? . What impact do Lean initiatives have on profitability? . What role does IT play in enabling Lean initiatives? . How is technology connected to the success of Lean initiatives?
Creating a Monetization Framework For Your BusinessBluLogix
There’s little dispute that digital transformation has affected nearly every aspect of B2B commercial activity. Success in the digital economy requires that organizations move beyond traditional ways of doing business while accelerating market-facing responsiveness across all functional areas.
"Supply Management: The Missing Voice in the Integrated Business Plan: How Cost Management, Negotiation and Contract Management Inform the Process and are Essential to Its Execution ”
In manufacturing, traditional sales and operations planning is expanding beyond simple supply-demand balancing toward integrated business decision-making. Service firms are also realizing the benefits of holistic business planning. Integrated business planning is neither integrated nor complete without supply management which must come to the process with an understanding of the supply risks and a strategy for capitalizing on opportunities. An integrated plan for the business must be informed by the relative bargaining position of the firm, supplier viability under multiple economic scenarios, trends and potential ranges for commodity and other prices, supplier and global capacities, technological advances, and other relevant context. Supply management must also be prepared to contribute to integrated business planning with a comprehensive analysis of total cost of ownership and its sensitivity to each of its components, strategies for structuring supply agreements to mitigate risk and minimize the cash-to-cash cycle, approaches for substituting information for time and inventory, sourcing alternatives to support sales and marketing initiatives as well as manufacturing and quality requirements, and scenarios for reducing lead time and lot size.
Council Of Supply Chain Management Professionals Comment Nov Dec 06
Sales And Operations Planning The Key To Continuous Demand Satisfaction
1. SAP INSIGHT
Business Process Innovations
SALES AND OPERATIONS
PLANNING :
THE KEY TO CONTINUOUS
DEMAND SATISFACTION
2. Table of Contents
Executive Agenda 1
The Trouble with Planning When Information Is Not Shared 3
Learning from the Best S&OP Practices 5
Defining the Five-Step Review Process 7
Taking S&OP to the Next Level 9
About the Sources 10
3. SALES AND OPERATIONS
PLANNING
THE KEY TO CONTINUOUS
DEMAND SATISFACTION
by Arnold Mark Wells, SAP America Inc.
and John Schorr, Oliver Wight Americas
4. EXECUTIVE AGENDA
All companies do some form of sales and The following examples illustrate how three
operations planning (S&OP) to synchronize global companies are putting this strategic process
market data with production output. But most into practice.
practice a planning process based more on logistics
Brown-Forman Corporation believes its
than strategy. Demand is forecast based on last
approach to S&OP is a better way to align
month’s numbers, and historical performance supply and demand with the company’s
leads the analysis. Companies rarely solicit a cross- business requirements, build better internal
section of perspectives from different functional communications, and plan activities to meet
areas or supply chain partners. The practice is customers’ needs.
static and insular, disconnected from the reality of ExxonMobil Chemical leverages sales and
today’s complex supply chains. As a consequence, operations planning to improve customer
sales and operations planning becomes almost service while controlling costs.
dysfunctional, lacking the communication and the
Procter & Gamble credits its own version of
insight into market demands required to carry out
S&OP with creating a single set of sales and
business plans and achieve strategic goals. supply plans to optimize resources to support
Taking a more strategic approach, however, the the company’s business objectives – assessing the
sales and operations planning process can be financial implications of the plan as well as its
designed to bring a company’s marketing, finance, impact on both supply and demand.
sales, and operations departments together While companies like these are reaping the benefits
to continuously monitor and meet customer of effective S&OP, many others continue to take a
demand. As the separate departments collaborate, more static approach. By using a five-step review
they create business plans with the latest and most process, however, companies can review and
accurate data and begin to develop and measure evaluate new products in development and future
a common set of metrics. With integrated S&OP plans in the context of demand, supply, financial
processes, companies are better able to synchronize reconciliation, and management analysis. The
supply and demand, improve revenue, decrease result is an S&OP process that begins to follow
costs, and increase customer satisfaction. the model of the companies that are leaders in
this process.
With integrated S&OP processes, companies are better able to
synchronize supply and demand, improve revenue, decrease costs, and
increase customer satisfaction.
SAP Insight| 1
5. The best sales and operations planning process Management evaluation and analysis.
creates the framework for five integrated and Evaluate the results of your activities to decide
interdependent business reviews to ensure that how to run the business moving forward. This
tactical plans align and support the company’s includes an evaluation of planned versus actual
strategy. This framework helps develop the results, an analysis of profitability by customer,
consensus among stakeholders necessary to channel, and product, and a look at perfect
continue the planning process, allows for order, cash-to-cash, and asset performance.
management understanding and analysis, and While this approach to S&OP creates an invaluable
forms the basis for the tactical plans necessary to foundation for clear-sighted decision making, the
satisfy demand with an integrated and responsive process adds the most value when integrated with
supply chain. Companies perform specific activities other core business processes including inquiry
within each process as outlined below: to order, procure to pay, order to cash, and new
product introduction and development. With a
New product review. Analyze the potential
full-fledged S&OP program in place and integrated
for new products to impact the market,
throughout operations, a company can expect to
considering elements such as rationalization
with channels, pricing and margin implications, do the following:
ramp-up projections, and both incremental and Speed up the commercialization of new
cannibalized demand. products and improve time to value
Demand review. Anticipate total market Make budgeting less complex and more accurate
requirements for all offerings from all
Enhance sales organization effectiveness
perspectives, using sources such as quantitative
forecasts, input from sales and marketing, and Create greater supplier effectiveness, reducing
what-if analysis – balancing orders and cycle time and procurement costs
demand and achieving consensus on various Concentrate more thoroughly on building
demand scenarios. customer loyalty and greater satisfaction
Supply review. Review the supply chain Improve collaboration between the company
capacity, including inventory requirements, and its external partners
procurement policy, and logistics, to make Lower operating costs and reduce order
certain that there is sufficient manufacturing fulfillment times
and distribution capacity. In this step you can
Increase inventory turns and reduce cash-to-
identify any potential decision points such as the
cash cycle times
need to outsource for additional capacity.
Improve return on net assets
Financial reconciliation review. Translate
the supply and demand plan into financial This SAP Insight discusses the problems faced
terms of revenue, margin, and working by most S&OP programs, how some
capital requirements. Then balance supply companies succeed, and the key to the
and demand, making decisions with regard to five-step review process.
potential supply issues and contingencies for the
range of possible demand scenarios.
2 | Sales and Operations Planning: The Key to Continuous Demand Satisfaction
6. THE TROUBLE WITH PLANNING WHEN
INFORMATION IS NOT SHARED
Most companies have implemented some form of In addition, many S&OP processes are incapable of
sales and operations planning for quite some time, reconciling the perspectives of sales, marketing,
but few are satisfied with the current process. As manufacturing, and logistics or extending
a result, they are encountering more and more the supply-chain decision process to include
problems, particularly as their supply chains customers and suppliers. When each part of a
become more complex – and can suffer from the company is operating separately and lacking
“four stages of planning grief” (see Figure 1). In effective communications that share updated
stage one the status quo seems fine, but symptoms data, stakeholders make decisions independently
of future problems begin to show up – such as without recognizing the broader impact. Instead,
mounting back orders. In stage two, the symptoms stakeholders need aggregated data presented
intensify as the company institutes planned according to different dimensions that are
price increases while introducing new products, meaningful to them: time, organization, product,
effectively cannibalizing its own market. In stage geography, unit of measure, and so forth, Thus,
three, demand increases, but manufacturing the company’s S&OP process can link decisions
capacity can’t keep up – and competitors begin to at the strategic level, align tactics with strategy
capture the unmet market demand and increase and goals, and allow decision makers to adapt to
their market share. Finally, in stage four, the changing circumstances as they develop.
competitive trickle becomes a flood of competing
products, ultimately depleting working capital and
affecting financial performance.
18 months out
S&OP provides future planning
Unexpected levels of
Figure 1 to avoid surprises . . . What can
working capital required
be done differently now?
The Four Stages Sales and operations planning Demand exceeds capacity
of Planning Grief integrates into a single Unexpected plant shutdown
operating plan for the Competition grows capacity
next 18 months.
New product intro and cannibalization
Impact of planned price increase
Supply Inventories
S&OP
Today Process Things seem OK at the moment
Demand New Back orders are high
Product Not all shipments are on time
SAP Insight| 3
7. INADEQUATE TECHNOLOGY New product introductions fall flat. The
SPELLS DOOM successful commercialization of new products
Some companies approach the S&OP process using mandates close coordination between research
and development, marketing, sales, production,
spreadsheets and simple tools for rudimentary
supply, and logistics. An information or
collaboration. The spreadsheet technique, while
communications failure between any of these
a low-cost option in the short term, presents
links can result in lost market share because of a
several challenges, including different versions tardy or ineffective commercial launch of a
of the same data and an inability to integrate new product.
and reconcile S&OP with underlying business
Supply mix does not meet market demand.
processes. Data becomes outdated very quickly,
Many large companies must support a complex
hampering collaboration, while team members get
supply web and balance their multifaceted
frustrated trying to piece together the picture of supply mix with the requirements of diverse
the company from faxed or e-mailed spreadsheets. customers, channels, and regions. Without
The consequences of this approach can be sufficient information, these same companies
costly and far-reaching, for some of the may have difficulty adapting their supply chains
to meet the constantly shifting demands of
following reasons.
their best customers, opening more productive
Product supply and the market are not channels, or negotiating for access into new
reconciled. Repeated stock-outs cause geographic regions.
distributors to switch to other manufacturers
for the same product. Distributors show little
mercy in making up for any slowdown in
getting stock through their pipeline.
Excess inventory dilutes prices. Excess
inventory is the mirror image of the stock-out.
For example, when an electronics manufacturer
bet on the wrong style of MP3 player,
production capacity and demand were out of
sync for more than six months. The company
wound up with excess capacity that it had to
dump on an unsuspecting market, taking a big
financial loss.
4 | Sales and Operations Planning: The Key to Continuous Demand Satisfaction
8. LEARNING FROM THE BEST S&OP PRACTICES
Companies like Brown-Forman, ExxonMobil The supply side of leading S&OP processes
Chemical, and Procter & Gamble are taking sales emphasizes out-of-the-box thinking, and the
and operations planning to a new level where it analysis incorporates the availability of finished-
harnesses the most effective technology, enables product inventory. More important, the
communication, and creates comprehensive entire manufacturing process also becomes an
business plans based on both experience and integral part of the supply review process from
expectations. The best S&OP focuses on demand procurement through production, and including
as much as supply, differentiates between what is data on imports, outside purchases, and inputs
viable and what is not, fosters real communication from contract manufacturers.
between all parts of the value chain, and as a
result, anticipates and avoids unwelcome surprises. CREATING COMMUNICATION
BETWEEN DEPARTMENTS
SAP research has found that the best S&OP process
creates an unrestrained demand forecast by A growing understanding of the importance
accomplishing the following: of S&OP has led to efforts to ensure that the
process enables communication between different
Accounting for internal factors – The process departments of the company. Randy Isdahl, supply
should consider elements such as price changes, planning manager for Brown-Forman, puts it this
lead times, sales plans, product promotions, and way: “One of the biggest benefits is the fact that
new product launches.
the process has resulted in an open, unfettered
Accounting for external factors – The process conversation across all our Brown-Forman
should consider elements such as customer functional groups … the results are astonishing.”
input, the competition’s activities, the trajectory
of the economy, regulatory considerations, and As a result of this inclusive conversation, finance
market trends. members share their perspective in terms of
Considering a product’s complete life cycle– revenues, margins, and working capital; marketing
This begins with introduction and ramp-up and members talk in terms of channels and brands;
continues through final phase-out. and the manufacturing and logistics members
bring their thinking on products, sources,
capacity, and destinations (see Figure 2).
Figure 2 Supplier
(Products and Sources)
Customer
(Products and Destinations)
Differing All departments
Perspectives can see the
Among Manufacturing & Logistics same data at the Research & Development
Stakeholders (Products, Sources, Capacity (Channels and Brands)
and Destinations) same time from
their own
perspective.
Finance Sales & Marketing
(Revenues, Margins and Working
(Customers and Product Families)
Capital)
SAP Insight| 5
9. David Sharp, supply chain process leader at Increasingly, the best S&OP processes rely on
ExxonMobil Chemical, remarks, “Because we’re software that allows all stakeholders to see the
working with a single [information] systems same data, at the same time, but each in their own
platform, the same information is available to terms. Software that supports S&OP integrates
everyone, allowing us to better align our supply the data and information flow of the parts of
plans with ExxonMobil Chemical’s worldwide the organization that will be relevant to the
business strategy. Also, the common systems company’s need to manage risk and uncertainty.
platform makes it easier to transfer supply chain The company has access to the right data
best practices around the world.” and insights to make smarter decisions across
all participating functions (sales, marketing,
The architects of these superior S&OP processes
procurement, manufacturing, distribution,
recognize that higher-quality decisions in less
and finance).
time require intelligent leveraging of today’s
best information technology. Today, companies The most sophisticated software applications
want decision support for scenario planning in encompass scenario capabilities that allow a
addition to industry-specific capabilities and the company’s senior executives to test their various
capacity to include global market and supply chain assumptions about demand and supply in a virtual
requirements. environment. They can also examine the impact of
untried strategic and operational ideas for change.
LOOKING TO THE PAST AND This type of process provides a global view of the
ENVISIONING THE FUTURE business that allows supply, sales, marketing, and
These types of capabilities also allow a company manufacturing to collaborate on a consistent basis
to compare plan assumptions with actual results, to maximize customer satisfaction.
so that future plans can be revised to be more Most important, the right information technology
effective. Procter & Gamble, for example, uses can provide the contextual information necessary
the results of the S&OP process to create more to maximize the impact of decisions on business
effective plans by looking backward and forward. value creation – to help increase profitability and
First, a team evaluates a past plan: where the achieve strategic goals. The company can adapt
business went right, where it went wrong, and its actions to changing conditions without
what needs to change. The teams compare current decreasing performance.
plans with historical trends and other data such as
market size and consumption to determine if the Dick Clark, the demand planning global process
assumptions of the new plan make sense. owner for Procter & Gamble, concurs that the
company’s S&OP process has helped maximize
AVOIDING RISK AND UNCERTAINTY resources to achieve better financial results. As he
put it, “Our monthly S&OP meetings allocate and
Companies often experience difficulties in
align company resources to a single set of sales and
foreseeing uncertainties in their supply chains.
supply plans. Our goal is to optimize resources to
This can be disastrous in the long run. Figure 1
support the company’s business objectives. This
demonstrated how the process can easily get out
includes assessing the financial implications of the
of control at the end – creating a real traffic jam
plan as well as its impact on supply and demand.”
that could have been avoided through an effective
S&OP process.
6 | Sales and Operations Planning: The Key to Continuous Demand Satisfaction
10. DEFINING THE FIVE-STEP REVIEW PROCESS
A five-step review process is an integral part of The best new product review process rationalizes
the best S&OP because it structures the flow of the information about customer needs with
collaboration and information sharing. It starts channel potential and ideas for new product
at the highest practical level of management offerings. But the process does not stop there. It
business review, which is then reconciled with the analyzes the structure of supply chain costs and
lower-level product management, supply, and determines the need for facilities or capacity,
demand reviews. Brown-Forman, for example, facility consolidation or outsourcing, and the right
implements both strategic and tactical supply set of key performance indicators.
chain planning processes because of the long time
frames associated with wine and spirit production. 2. DEMAND REVIEW
The company’s S&OP process creates an 18-month The purpose of each of the demand reviews is
consensus forecast (most companies now create a to lend an aspect of integration to a process that
24-month plan) for demand planning, near-term typically takes place in isolation. The demand
inventory planning, and production planning and review does not simply rely on quantitative
scheduling (see Figure 3). The following outlines forecasting, for example, but instead balances
in detail each of the steps in the process. orders and demand through what-if analysis,
achieving consensus among the various
1. NEW PRODUCT REVIEW stakeholders all along the supply chain.
In analyzing the feasibility of a new product,
The best demand reviews not only ensure that
the company uses inputs from management
the statistical forecast is based on the best data
and statistical analysis to align new product
and model, including marketing assumptions, but
development and introduction with corporate
also compare and incorporate sales and customer
financial and strategic goals. The analysis takes
forecasts and include input from operations. The
into account product life cycles, seasonal
demand review also incorporates the results of the
influences, promotions, and rebates and creates a
new product review, proposed promotions, and
multiperiod business plan.
their demand impact. It incorporates real-time
demand signals to monitor the plan assumptions
and planning cycle so that demand can be
adjusted accordingly.
Figure 3 Management
Business Product
Review Management
An Integrated Latest View and Review
S&OP Process Recommendation
(Source: Oliver Strategy
Wight Americas) Business Plan
Performance
FinanciaReconciliation
Integrated
l Appraisal
Supply Financia
Review l Appraisal Demand
Review
SAP Insight| 7
11. 3. SUPPLY REVIEW 5. MANAGEMENT EVALUATION AND
The supply review includes manufacturing ANALYSIS
capacity, inventory, procurement, and logistics At this point, management reviews the S&OP
planning. The supply review considers potential results and plans and compares assumptions,
material shortages in the supply chain as well identifying any problems and their root causes.
as the capacity for the company to develop
The best management evaluation processes use
excess inventory.
a number of leading practices such as waterfall
analyses of forecasts and supply plans and the
4. FINANCIAL RECONCILIATION
precise measurement of actual demand to the
REVIEW
demand plan. The analyses include profitability by
At this point, the strategic S&OP process diverges customer, channel, product, and supplier, as well
from current business practice by creating a as backlog and lead-time trends. The management
forward financial forecast of the previous three review also addresses any high-impact exceptions
reviews. The supply and demand reviews are to the plan, such as perfect order, cash-to-cash,
balanced by taking a close look at the product mix, and asset performance.
conducting what-if analysis, filtering it through
constraint management, and allocating supply to
demand. Most important, all stakeholders in the
process must reach consensus on the business and
financial impact of the assumptions that have gone
into the financial reconciliation.
The best financial reconciliation optimizes the
supply chain to avoid problems down the line,
and then compares the optimized supply chain
plan to the demand plan. While the financial
reconciliation makes certain that the S&OP
plan hits targets for revenue and margin, it also
considers whether the company’s budgets remain
consistent with the assumptions. The process
validates potential demand spikes and supply
disruptions, adds in forecasts for future financial
profit and loss statements, and identifies gaps
between the current S&OP and the company’s
future business plan.
8 | Sales and Operations Planning: The Key to Continuous Demand Satisfaction
12. TAKING S&OP TO THE NEXT LEVEL
Brown-Forman, ExxonMobil Chemical, and When more companies follow the lead of these
Procter & Gamble have all changed their approach three best-practice corporations, they will take
to S&OP with world-class results. Perhaps their S&OP process to the next level – aligning
the greatest testimony to the need for more their supply and demand, creating better
sophisticated S&OP is a comment by Randy Isdahl internal coordination, and maximizing their
of Brown-Forman: “We will extend [this new global effectiveness.
approach to] S&OP wherever business value can
be enhanced by leveraging S&OP to maximize our
supply chain effectiveness.”
David Sharp of ExxonMobil Chemical maintains,
“[S&OP] provides us with a multidimensional view
of how the business is doing on a global basis.”
And Dick Clark of Procter & Gamble adds, “S&OP
is the key process for information sharing within
the business. It’s helping us meet our goal of
better business decisions through an improved
mutual understanding of demand, supply, and
financial information.”
SAP Insight| 9
13. ABOUT THE SOURCES
ABOUT SAP ABOUT THE AUTHORS
SAP is the world’s leading provider of business Arnold Mark Wells is a solution principal with
software.* Today, more than 38,000 customers in SAP America Inc. For more than 20 years, he has
more than 120 countries run SAP® applications committed himself to enhancing the value of
– from distinct solutions addressing the needs of organizations through improved business practices
small businesses and midsize companies to suite and enabling technologies. He has contributed
offerings for global organizations. Powered by the from within industry, as a supply chain
SAP NetWeaver® platform to drive innovation consultant, and as part of a software development
and enable business change, SAP software organization. Wells has worked on supply chain
helps enterprises of all sizes around the world solutions with many companies across a broad
improve customer relationships, enhance partner array of industries. He holds memberships in
collaboration, and create efficiencies across their the Council of Supply Chain Management
supply chains and business operations. SAP Professionals and in APICS, which has certified
solution portfolios support the unique business him since 1989. He holds an MBA from Drexel
processes of more than 25 industries, including University.
high tech, retail, financial services, healthcare
John Schorr of Oliver Wight Americas
and the public sector. With subsidiaries in more
contributed to the executive agenda and the five-
than 50 countries, the company is listed on several
step review process content of this SAP Insight.
exchanges, including the Frankfurt stock exchange
Schorr has been with Oliver Wight Americas since
and NYSE under the symbol “SAP.” For more
1978. He has served as president of Oliver Wight
information, please visit www.sap.com.
International and on the Board of Directors of
* SAP defines business software as comprising enterprise Oliver Wight Americas and is a principal. He was
resource planning and related applications such as supply
chain management, customer relationship management,
president of Oliver Wight East, which is now
product life-cycle management, and supplier relationship part of Oliver Wight Americas. As a consultant
management. and educator in the areas of enterprise resource
planning (ERP), manufacturing resource planning
ABOUT OLIVER WIGHT AMERICAS II (MRP II), integrated supply chain management,
Oliver Wight Americas is a global management sales and operations planning, and demand
consulting firm that specializes in helping management, Schorr has assisted many companies
manufacturing organizations to work smarter, in attaining class A performance. He is recognized
faster, and better than their competitors. The firm as one of the leading experts in the areas of sales
includes leading business process improvement and operations planning and the interface of
specialists who educate, coach, and mentor purchasing with ERP. Prior to consulting, Schorr
people to lead and sustain change on the journey served as vice president of operations at Haworth
to business excellence and outstanding business Inc. and as director of purchasing at Steelcase Inc.
performance. He is the author of two books, Purchasing in the 21st
Century and High Performance Purchasing. He holds a BS
in chemistry from the University of Iowa.
10 | Sales and Operations Planning: The Key to Continuous Demand Satisfaction