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Sales&OperationsPlanning. What is happening 6-12 months from now?

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Presentation on theme: "Sales&OperationsPlanning. What is happening 6-12 months from now?"— Presentation transcript:

1 Sales&OperationsPlanning

2 What is happening 6-12 months from now?

3 Maturity Scan How do you characterize the S&OP process in your team? Stage of Evolution Characteristics Ad hoc decisions, fire fighting problems, no specific sequence Functional organization with each function making separate decisions in its own silo, not sharing it with the others Joint decision making with a rough logical sequence, not formalized or detailed. Limited preparation on trade offs Formalized logical sequence of joint decision making. Individual preparation of decisions and trade offs beforehand Stage I React Stage II Anticipate Stage III Collabor ate Stage IV Orchestr ate

4 A definition S&OP is a process discipline that brings together the sales & marketing ambitions, supply capabilities, customer needs and financial constraints and objectives to balance them and create a single, achievable plan for the tactical horizon

5 S&OP can be an effective bridge between Strategic Business Planning and Execution Strategic Management / Business Planning Tactical Planning & Decision Making (Tactical) Execution S&OP Align functional plans Create the right context 2-18 months horizon Prepare for different scenarios Recognise and address gaps Sense and respond Predict and prepare

6 S&OP is business planning in 5 steps… Sales and Ops Planning Meeting Meeting Reconcile with financial plans Supply Reconcile demand and supply Demand From Forecasting to Demand Shaping From Capacity Planning to Supply Network trade offs & design “What if?” Rather than “Yes/No” Getting the right info to make decisions into the last 60 minutes of the process

7 The process seems simple but some principles are a challenge…. –Discussions should be fact-based –There must be clear ownership of each element of the process and of the decisions made –The operating plan must be formally linked by assumptions to a financial plan –There needs to be a formal balancing of demand and supply across a rolling horizon –Gaps (vs set targets…) must be recognised and action plans formulated to close them taking into consideration the relevant lead times –Trade - offs must be clearly articulated and commercially evaluated

8 Common pitfall: believing that S&OP is a monthly meeting Slide 8 15.00–18.00 S&OP If S&OP is only a monthly meeting, it will not deliver the targeted results: a good process consists of well-prepared and fact-based discussions on key topics only, resulting in optimal decisions for the company as a whole

9 What do you think about this discussion? : Sales: “We have received a tough target of 5% additional sales next year and we have accepted the challenge” Marketing: “We are designing a new campaign and will invest €10m, so we think that volumes should increase by 6%” Supply Chain: “The statistical forecast indicates 2% growth” Compromise reached after long fight in S&OP meeting: 4% growth Slide 9

10 Aligning with finance does not mean that the forecast has to become the target! Slide 10 Forecast Plan Target The best estimate of anticipated events (a likely future outcome) A set of actions designed to achieve a defined outcome A goal or objective (a desired future outcome) ≠ ≠

11 Realising that there are gaps is good! This helps to timely drive the right actions Slide 11 History Time Horizon Demand plan Short term Next 3 Months Medium Term 3-18 months Long Term >18 months GAPGAP GAPGAP Target Forecast Recognising that gaps exist between forecast and target is very useful: in the S&OP process you can decide to do something about it!

12 It is all about the gaps Comparing the bottom-up forecast with financial targets will give better understanding of the expected outcomes Slide 12 Volume plan Planned net average sales prices Bottom-up financial forecast Business targets Gaps?

13 13 Source figure: Red Pepper. Modified E&Y 1999 ● Functional silo approach ● Ineffective behaviour ● Fire fighting ● Lots of ad-hoc meetings ● Lots of effort, little reward ● Key decision making forum ● Manage together ● Routine things done routinely ● Issues addressed early – efficient response & anticipation oneconsensusplan Sales: we can sell 200 Marketing: the promotion will sell 400 Marketing: the promotion will sell 400 Manufacturing: they will only sell 150 Finance: we have budget of 300

14 Who Brings What to the Table? Marketing Product Development Product Demand Capital MPS and Supplier Constraints Business Plan Workforce Availability Adapted from: Launchbury, Keith J. Principles of Planning Omeric, 1999. Finance Materials Operations Human Resources Engineering General Management Capacity Customer Interface Sales

15 How to translate this to The Fresh Connection Servicelevel Demand pattern Shelflife Adapted from: Launchbury, Keith J. Principles of Planning Omeric, 1999. Supply Chain Operations Purchasing Sales Leadtimes Quality Reliability Trade Unit Capacity Improvements Frequencies Stocklevel Fixed period Strategy

16 Decision making sequence sequence SalesOperations Supply chain Purchasing Decision making –Who is involved? –What sequence makes sense?

17 Decide about portfolio/ customer service Forecasting demand (pattern) Production resources and allocation Production policy (interval / fixed period) Inventory policy finished product (safety stock) Production capacity plan (shifts/projects) Capacity plan outbound warehouse Inventory policy raw mat. (batch size, safety stock) Capacity plan inbound warehouse SalesOperations Supply chain Purchasing The value proposition Supplier selection and agreements Set up a logical sequence of decisions and roles involved for The Fresh Connection

18 2.Portfolio / customer service 3.Forecasting demand 4.Production resources and allocation 5.Production policy (interval / fixed period) 6.Inventory policy finished product (safety stock) 5.Production capacity plan (shifts/projects) 7.Capacity plan outbound warehouse 9.Inventory policy raw mat. (batch size, safety stock) 10. Capacity plan inbound warehouse SalesOperations Supply chain Purchasing 1.The value proposition Cus-tomer Product group Finished product Compo- nents 8.Supplier selection and agreements 10 steps to success Iterate

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