S&op
- 1. 1 S&OP Process in HighPerformance Organizations Syed Yasir Saeed
- 2. 2 Business Model Strategic Plans FinancialPlans Business ObjectivesDemand-Side Plans Supply-Side Plans BusinessImperatives Operations Planning MPS Master Production Scheduling BusinessImperatives Sales Planning DataAccuracy Procurement Process Shop Floor Process DataAccuracy Customer Service MRP Marketing Plans Pull Systems BOM, Inv., Item Master S&OP Process Supplychain Syed Yasir Saeed
- 3. 3 What is theS&OP? l Risk management for demand, capacity and profit l Spreadsheet for review and accountability – Revenue – Operations – Inventory – Profit l Does not have to have the “books closed” l 12-months rolling plans l Same time every month l HEADLIGHTS! Syed Yasir Saeed
- 4. 4 Why S&OP inManufacturing Need good plans for stakeholders Capacity and inventory agreements with the plants/resources Syed Yasir Saeed
- 5. 5 Simple S&OP Example 2025 23 23 28 20 20 21 21 21 21 22 22 22 Beginning Inventory = 17 Top Management directive for inventory at end of period 7 = 8 17 8 Operations Plan = Demand Plan plus delta in inventory divided by the number of periods 20+25+23+23+28+20+20=159-9/7=150/7=21.4 18 14 12 10 4 6 8 Demand Operations Inventory O Ring Compression Molding - Make to Stock (MTS) (Numbers in 000’s) Syed Yasir Saeed
- 6. 6 Structure of Supply-Side CorporatePlans Plant 1 Plant 2 OtherPlants OtherPlants OtherPlants Other Plants Syed Yasir Saeed
- 7. 7 Data Stream, Demand Corporate Plans VPSales & MarketingCustomers Distribution Customer Sales Reps Plant 1 Plant 2 Suppliers Other Plants Syed Yasir Saeed
- 8. 8 Data Stream, Demand DemandManager Operations Coordination VP Sales & MarketingCustomers Distribution Customer Sales Reps Plant 1 Plant 2 Suppliers Other Plants Syed Yasir Saeed
- 9. 9 Objectives of anS&OP Process •Improve competitive advantage for the business •Handshake between Demand and Supply sides of the organization •Risk management for the business •New product introduction •Product transfers •New suppliers •Capacity risks in general •Supplychain management •Inventory! •Backorders and customer service! •Keep the top management team in sync with the rest of the business •Send clear messages to the team on priorities and objectives •Headlights to the supply-side Syed Yasir Saeed
- 10. 10 S&OP Data StreamStandards S&OP Information Standards Static Data Sudden Changes Missing Data Syed Yasir Saeed
- 11. 11 It starts withDemand l Business inputs l Customer inputs l Sales inputs l Historical inputs l Etc. Syed Yasir Saeed
- 12. 12 Demand Planning lDemand planningis a process consisting of actions and planned expectations to affect customer behaviors (bookings) by product family. lIt is stated by product family. lOne deliverable is the resulting forecast of anticipated customer orders (bookings) received by product family. lBookings are stated in both currency and units by product family. lThe demand plan is measured by plan accuracy of units by product family. Syed Yasir Saeed
- 13. 13 Forecast Detail Logic Target $ Itemnumbers (SKUs) high low Syed Yasir Saeed
- 14. 14 Factors in ProductGroupings l Common components l Common capacity l Common constraint l Common inventory strategy l Similar pricing strategy l Other commonalities l What ever makes sense in your business Syed Yasir Saeed
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- 17. 17 Demand Planning Demand Review orPre-S&OP S&OP Demand Planning Forecast by product family Syed Yasir Saeed
- 18. 18 Demand Planning Business Plan DemandReview S&OP What products What markets What Customers Revenue Profit/Pricing Cost Drivers Economic Assumptions Forecast by product family Demand Planning Syed Yasir Saeed
- 19. 19 Demand Planning Business Plan Marketing DemandReview S&OP Affecting customer behaviors Marketing/Demand Development Promotions New Product Introductions Channel Management Forecast by product family Demand Planning Syed Yasir Saeed
- 20. 20 Demand Planning Business Plan Marketing DemandReview S&OP Sales The funnel review Know opportunities Know closure rate Know closure cycle time Calculate results Forecast by product family Demand Planning Syed Yasir Saeed
- 21. 21 Demand Planning Business Plan Marketing DemandReview S&OP Sales History Experience by product family Forecast by product family Demand Planning Syed Yasir Saeed
- 22. 22 Characteristics of a GoodForecast l 12-months rolling by product family l Reviewed at least monthly for validity and measured for accuracy, short term l Communicated appropriately to operations l Sales/Marketing is accountable for accuracy – What did we learn? – What are we going to do differently? l Appropriate historical information l Appropriate market/customer information l Marketing influences and expectations taken into consideration l Performance is measured and posted Syed Yasir Saeed
- 23. 23 Demand Process Owner lResponsible for data gathering process l Responsible for accuracy of data l Responsible for root cause analysis l Responsible for actions l Responsible for trends Syed Yasir Saeed
- 24. 24 Demand Review orPre-S&OP l Happens between the master scheduler(s) of the business and the demand-side of the business. l Demand Review 3 weeks of the month l Pre-S&OP last Friday prior to the S&OP Syed Yasir Saeed
- 25. 25 Demand Review or Pre-S&OP lSame time every month l Responsibility well defined (demand process owners) l Prep for S&OP l Agenda – Review last 30 day performance – Discuss likelihood of hitting plans out 30-90 days – Firm and adjust plan for S&OP Syed Yasir Saeed
- 26. 26 Performance Metric – DemandPlanning l Forecast Accuracy of each Product Family l Delta from plan (no % above 100) l Average Performance l Tolerance – Total Dollars ($) = 95-100% – Product Family Units = 90-95% Syed Yasir Saeed
- 27. 27 Orders Received perDay 0 20 40 1 27 53 79 105 131 157 183Days Received Series1 Customers can be unruly! Syed Yasir Saeed
- 28. 28 Beginning of new month Endof month 0 30030 Beginning of new month End of month Pre-S&OP S&OP Pre-S&OP Timing * * * * * * * = Weekly Demand Review Syed Yasir Saeed
- 29. 29 Manager in charge -? Data Messenger - ? Demand Process Owner – ? Operations Process Owner - ? Finance Process Owner - ? Develops the spreadsheets Reconciles Demand Performance Asks the tough questions Reconciles Operational Performance Reconciles Profit Performance S&OP Process Syed Yasir Saeed
- 30. 30 S&OP Agenda l Reviewperformance to plan, last 30 days (Metric) – Business plan (Profit) – Demand plan (Forecast) – Operations plan (Capacity) l Review next 30, 60, 90 day plans l Review 12-month rolling plans l Review any open actions and document new actions Syed Yasir Saeed
- 31. 31 Separate the Riskson the Spreadsheets l New products l New Customers l New equipment l New shifts l New suppliers (major impact) l Other risks? Syed Yasir Saeed
- 32. 32 Supply-side (Operations Plan)Process Owner(s) l Responsible for data gathering process l Responsible for accuracy of data l Responsible for root cause analysis l Responsible for actions l Responsible for trends Syed Yasir Saeed
- 33. 33 Thoughts to go awaywith l S&OP = Risk management l The Demand Plan is not necessarily equal to the Operations Plan. l Good service is not necessarily dependant on accurate forecasts l Business strategy (inventory strategy) is a prerequisite in understanding how to run the business cost effectively as a high performance enterprise l Top Management must own the S&OP Syed Yasir Saeed
- 34. 34 Semi-Annual •Talent Review •Strategic Review Weekly •OperationalPlan Accuracy •Project Review •Weekly Performance Monthly •S&OP •Financial •Operational Quarterly •Portfolio Review •Business Review Daily •Schedule Adherence Rigorous Management System Class A ERP Management Systems S&OP Syed Yasir Saeed
- 35. 35 Implementation Planning l Education lPerformance Metrics l S&OP Organization - Infrastructure for Reporting (accountability) l Implementation Plan – Choose the level of detail for Product groupings – Define the data flow – Demand and Operations – Assign accountability – Determine schedule for review l Handshake Management Syed Yasir Saeed
- 36. 36 Performance for this lastmonth Prod Fam 1 Prod Fam 2 Prod Fam 3 Total 87% Actions Names Dates xxxxx xxxxx xx/xx/xx xxxxx xxxxx xx/xx/xx xxxxx xxxxx xx/xx/xx xxxxx xxxxx xx/xx/xx xxxxx xxxxx xx/xx/xx Inventory Accuracy Trend Chart Pareto Chart Common Reporting Format Syed Yasir Saeed
- 37. 37 Handshake Management Includes (notlimited to): Rules of engagement Stock levels (MTS & MTO) Competitive lead-times Inventory buffer placement Time fence policy Assumptions and risk management Drumbeat from MPS Process ownership and accountability Flexibility from forecast Communication of headlights Syed Yasir Saeed
- 38. 38 Potential Improvement PotentialImpact Reduce inventory levels Reduce capital investment in inventory Reduce time-to-market Increase revenues through increased sales Increase capacity Increase revenues Increase customer satisfaction Increase revenues through increased sales Reduce rejects/rework Decrease material costs; greater ROI Speed up delivery time Increase revenues Business Impact Syed Yasir Saeed