The document discusses the worst practices in sales and operations planning (S&OP), emphasizing the importance of integrating sales, inventory, and operations. It outlines a five-step S&OP process and critiques the reliance on outdated software like Excel, advocating for improved communication and collaboration across departments. Key issues include poor data management, misalignment of forecasts with actual performance, and the need for more effective metrics tailored to different strategies.

1. Sales and Opera,ons Planning
Worst Prac,ces
Interna'onal Ins'tute of Forecasters
“Worst Prac'ces” Conference
Chris Gray
Gray Research

2. Good judgment comes from experience,
and a lot of that comes from bad judgment.
Will Rogers, 20th Century American Humorist
Similarly, good prac,ces come from experience, and a
lot of that comes from bad prac,ces.

3. S&OP Worst Prac/ces
Or …
It’s Inventory and Operations without involving Sales,
Or …
It’s Financial Planning without involving Sales, Inventory or the Operations,
Or …
It’s S, I, and OP without even considering the New Products!
In our Company, Sales and Operations Planning is Sales (and Inventory)
without involving Operations,

4. "It’s easy to get the players. Ge2ng ‘em
to play together, that’s the hard part."
Casey Stengel

5. Putting the S and O in S&OP
• To work – must include silo and cross-silo communica'on for all demand and supply
groups
• Brings together planning processes to create one integrated set of plans
• Done monthly, reviewed in aggregate by senior management
• Must reconcile supply, demand, new products at detail and aggregate, Be to Business Plan
• Company plan for new and intermediate term, covering horizon sufficient for resource planning
and the annual business plan process
• 5 Steps
• Mix of processes (gather data, demand planning, supply planning) and mee'ngs
(partnership mee'ng/pre-mee'ng and execu've mee'ng)
All mee'ngs are equal … except perhaps the Partnership/Reconcilia'on/Pre-Mee'ng
As Dogbert said, to the CEO and pointy haired boss, in a recent Dilbert strip:
“Maybe Next Time You Won’t Skip The Pre-meeting.”

6. Five Step S&OP Process
Step #1
Data
Gathering
End of Month
• Statistical Forecasts
• Sales & Marketing Inputs
Step #5
Executive
S&OP Meeting
• Decisions
• Authorized
Game Plan
Step #4
Partnership
Meeting
• Recommendations &
Agenda for Exec Meeting
• 3rd-pass time phased plan
(consensus, alternatives, what-ifs)
Step #2
Demand
Planning
• Management Forecast
• 1st-pass time phased plan
(with new forecast)
Step #3
Supply
Planning • Capacity constraints
• 2nd-pass time phased plan
(with new production plan)
1
2
3
4 5

7. q To Make S&OP Work, We'll Need New Software
q For Our Company, S&OP is S (and I) without the O!
S&OP Worst Prac/ces

8. q To Make S&OP Work, We'll Need New Software
Classic Approach to System Improvement
Get Computer
Get SoZware
Get Disappointed
Get New SoZware
Get Larger Computer
Get Discouraged
S&OP Worst Prac/ces

9. q To Make S&OP Work, We'll Need New Software
Classic Approach to System Improvement
Get Smaller Computers
Get New SoZware
Get Frustrated
Get New User Interface
Get More and Bigger Smaller Computers
Get Upset
S&OP Worst Prac/ces

10. q To Make S&OP Work, We'll Need New Software
Classic Approach to System Improvement
Get BIG DATA
Get Enraged
Get Rid of Computers … Go to the Cloud
Get Exasperated
Get a Life
S&OP Worst Prac/ces

11. q To Make S&OP Work, We'll Need New Software
But the Truth is …
the most widely used soZware for S&OP is s'll MS-Excel.
Thoughts and recommenda'ons on S&OP SoZware.
S&OP Worst Prac/ces

12. q Cogito ergo sum
q To Make S&OP Work, We'll Need New Software
q For Our Company, S&OP is S (and I) without the O!
S&OP Worst Prac/ces

13. q Cogito ergo sum
• S&OP Mee'ngs Trump S&OP Numbers
• We Can Have An Effec've Strategy Even Without Effec've Supply-
Demand Balance
• Make to Stock, Make to Order: Makes No Difference
S&OP Worst Prac/ces
We think we are doing S&OP, therefore we are!

14. q What Do You Mean, Time Fences?
q Cogito ergo sum – I think we are doing S&OP, therefore we are!
q To Make S&OP Work, We'll Need New Software
q For Our Company, S&OP is S (and I) without the O!
S&OP Worst Prac/ces

15. YTD Oct Nov Dec Jan Feb Mar April May Dec
Demand Plan 550 550 550 550 550 600 600 600 600
Actual 500 600 600 550 550 600 600 600 600
Deviation -50 50 50
Supply Plan 600 550 550 550 550 600 600 600 600
Actual 600 500 550 ? ? ? ? ? ?
Deviation 0 -50 0
Inventory Plan 550 550 550 550 550 550 550 550 550
Actual 500 600 500 450 550 550 550 550 550 550
Deviation 50 -50 -100
Product Family: D2
Make to Stock
Average Cumula've Lead'me : 12
weeks
Customer Delivery Lead'me : 3 Days Demand Plan Performance 50/1650 = +3%
Supply Plan Performance -50/1700 = -3%
Inventory Plan Performance 450/550 = 80%
Last
New
Last
Prop
Last
New
S&OP Worst Prac/ces

16. Time Fence? What Time Fence?
EMERGENCY
ONLY
STABLE FLEXIBLE
Changes
Costly
Material and Capacity
Limited
ONLY Capacity
Limited
Cri'cal Time Fence
P + M + F
TIME
S&OP Worst Prac/ces

17. Fence? What Fence?

18. q To Make S&OP Work, We'll Need to Freeze the Forecast
q What Do You Mean, Time Fences?
q Cogito ergo sum – we think we are doing S&OP, therefore we are!
q To Make S&OP Work, We'll Need New Software
q For Our Company, S&OP is S (and/or I) without the O!
S&OP Worst Prac/ces

19. q We'll Need to Freeze the Forecast
S&OP Worst Prac/ces
Because we can get better performance with out-of-
date data!

20. q We'll Need to Freeze the Forecast
S&OP Worst Prac/ces
• OZen promoted by Materials and Opera'ons
• Connected to Time Fence mismanagement
• Some'mes hand in hand with metrics based on cum lead 'me not last forecast
• Creates disincen'ves for forecast upda'ng and cross-silo communica'on
• Almost always because of bad assump'ons (forecast will be going up on all families)
and lack of flexibility or ability to respond to change
Freeze the forecast at the CTF?
Or alterna'vely:
Measure forecast performance based on the forecast at the CTF?

21. q We'll Need to Freeze the Forecast
S&OP Worst Prac/ces
Putting lies into the planning data is like putting a
little horse puckey into ice cream!

22. q More S&OP Families Are Better Than Fewer Families
q To Make S&OP Work, We'll Need to Freeze the Forecast
q What Do You Mean, Time Fences?
q Cogito ergo sum – I think we are doing S&OP, therefore we are!
q To Make S&OP Work, We'll Need New Software
q For Our Company, S&OP is S (and I) without the O!
S&OP Worst Prac/ces

23. q More Families Are Better Than Fewer Families
S&OP Worst Prac/ces
Often this is a misunderstanding about what S&OP is actually about.
Sometimes it is a reflection of an argument over Product versus Process families

24. q Laziness is a Virtue?
q More S&OP Families Are Better Than Fewer Families
q To Make S&OP Work, We'll Need to Freeze the Forecast
q What Do You Mean, Time Fences?
q Cogito ergo sum – I think we are doing S&OP, therefore we are!
q To Make S&OP Work, We'll Need New Software
q For Our Company, S&OP is S (and I) without the O!
S&OP Worst Prac/ces

25. q Laziness is a Virtue?
• What Do You Mean “Document Assump'ons”?
• What is an S&OP Policy?
• S&OP = Sum of MPS Detail
• When It Comes to Metrics for S&OP - One Size Fits All
S&OP Worst Prac/ces

26. An Effec/ve S&OP Process:
Aggregate NOT Detail
Volume NOT Schedule
Long Term NOT Short Term
Hard Numbers
Everyone Prepared
Trialing/NPD Integrated
Decisions NOT Discussions

27. Thank you
Ques'ons?

28. Differen/ated S&OP Metrics for Different Strategies
Product Leadership/DifferenFaFon
New products as % of profit/revenue
New product 'me to profit
Profit by brand/category
Brand health
Market share
Customer InFmacy/RelaFonships
Customer reten'on/life'me value
Revenue by customer/channel
Customer profitability
Low Cost Producer
Customer service
Asset u'liza'on
Forecast stability
Cost
Common to All
Inventory produc'vity (turns)
OTIF (DIFOT)
Sales Plan Achievement
Shipping Plan Achievement
Supply Plan Achievement
Inventory and/or Backlog Achievement
Class A “Vital Signs”