S&OP outline

Sales and Operations Planning

Peter KarranFellow IOM

S&OP

What is it?

Formal Business Process spread over 18-24 Months of planning Horizon

Product Families (not items) Volume (not Mix) Monthly review Cycle Both product and financial units

2

Principles

3

More Principles

4

Suggested Process

Buffer Management

5

Inputs by Function

6

Some Rules

7

Agenda

8

Put Simply

End of month

STEP 1Data

Gathering

STEP 5Exec SOPMeeting

STEP 4Pre-SOPMeeting

STEP 3Supply

Planning

STEP 2DemandPlanning

Statistical forecastsField sales worksheet

Management forecast1st pass spreadsheets

Capacity constraints2nd pass spreadsheet

RecommendationsFor executive S&OP

Decisions

Wallace: 2nd edition Sales & Operations Planning

9

Step 1 – Data gathering

Month end data Actual sales Inventory Production

Sales and marketing

All pertinent information

10

Jan Feb Mar Apr May June Jul AugForecast 100 100 100 120 120 120 120 130Acutal sales 90 95 85Difference -10 -5 -15Cum. difference -15 -30

Jan Feb Mar Apr May June Jul AugPlanned production 100 100 100 110 120 120 120 130Actual production 98 100 101Difference -2 0 1Cum. difference -2 -1

Jan Feb Mar Apr May June Jul AugPlanned inventory 100 100 100 142 142 142 142 142Actual inventory 111* 116 132Difference 11 16 32

*January Inventory=103

Comparing actual to forecast Product Family A

Alternatively Time or Capacity Buffer

Management

History Present FutureVol=Widgets

11

Total S&OP summarises family plans

S&OP

Family A Volume

=> £

Family B

Volume => £

Family C

Volume => £

Family D

Volume => £

Family E Volume

=> £

Family F Volume

=> £

12

Step 2 – Demand planning

Sales and marketing review information received from Step 1

Sales forecast By product By family Total

13

Demand planning team

Demand manager

Product manager

Forecast analyst

Sales manager

Salesperson

Customer service

Accounting manager

Supply chain manager

14

Forecasting

INPUTS OUTPUTSForecasts That:

• Are reasoned

• Are realistic

• Are reviewed

• Represent demand

THEPROCESS

Current Customers

New customers

Competition

Economy

New products

Pricing

Bids

Promotions

Management directive

History

Other

15

Step 3 – Supply planning

Bill of resources

Rough-cut capacity

Demand/Supply Strategies

16

Resource Planning Process

17

Bill of Resource

18

Resource Planning Process

19

Rough-cut capacity planning

Resource Bill

20

If you want this from an ITSM then please contact me

Demand/Supply Strategies-Constraint Management

Product Family: 11. Make-to-stock

2. Target customer service level 99%

3. Target finished goods inventory 1 month

Product Family: 21. Make-to-order

2. Target customer service level 98%

3. Target customer lead time 2 weeks

21

Step 4 – Pre-SOP meeting

Make decisions to balance supply/demand

Resolve differences where possible

Identify areas of disagreement

Develop scenarios

Set agenda for Executive S&OP meeting

22

Step 5 – Executive S&OP meeting

Make decisions

Authorise changes in S&OP plan

Confirm assumptions

Resolve risks and issues

Review performance, product issues, special projects, etc.

23

What are critical success factors for S&OP?

S&OP

Top Management Involvement

Ongoing Routine S&OP

Meetings

Structured meeting agendas

Cross-functional

participationParticipants empowered

to take decisions

Internal Collaborative

process

Measurement of Process

Supported by Integrated

Supply-Demand Planning

Technology

24

25