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Debrief 2.

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Presentation on theme: "Debrief 2."— Presentation transcript:

1 Debrief 2

2 Debrief after round 2 Strategy in The Fresh Connection
What is your strategy? How did you translate it into action? Was everything clear? Please give us your reflection in headlines Review team results Ask the teams for their strategy? How did they translate it into action? Assign a spokesperson per team Have all teams briefly reflect and drive the discussion towards S&OP

3 Maturity scan: Alignment and collaboration
Stage of evolution Characteristics Stage I: React Ad hoc decisions, no connection with business strategy, no specific sequence Stage II: Anticipate Functional organization with each function making separate decisions in its own silo, little or no connection with business strategy Stage III: Collaborate Joint decision making with a rough logical sequence, not formalized or detailed. Limited preparation on trade offs, connected to business strategy Stage IV: Orchestrate Formalized logical sequence of joint decision making based on business strategy. Individual preparation of decisions and trade offs beforehand

4 Sales & Operations Planning

5 What is happening 6-12 months from now?

6 A typical board meeting: Let’s eavesdrop
President: “This shortage situation is terrible. When will we ever get our act together? Whenever business gets good, we run out of product and our customer service is lousy.” VP Operations: “I’ll tell you when. When we get some decent forecasts from Sales and Marketing…” VP Sales (interrupting): “Wait a minute. We forecasted this upturn.” VP Operations: “… in time to do something about it. Yeah, we got the revised forecast – four days after the start of the month. By then it was too late.” VP Sales: “I could have told you months ago. All you had to was ask.” VP Finance: “ I’d like to be in on those conversations. We’ve been burned more than once by building inventories for a business upturn that doesn’t happen. Then we get stuck with tons of inventory and run out of cash.” Source: Thomas F. Wallace, Robert A. Stahl, ‘Sales & Operations Planning’, 3rd ed., 2008

7 What is causing these type of discussions?

8 No connection between business strategy and execution
No ownership, high forecast bias, no identification of gaps between forecast, plan, budget etc… Execution Business Strategy We all mean well, but we get nowhere

9 We all mean well, but we get nowhere
Where does S&OP fit? No ownership, high forecast bias, no identification of gaps between forecast, plan, budget etc… Execution Business Strategy S&OP We all mean well, but we get nowhere

10 What is S&OP? S&OP, at heart, is a very simple idea:
make forecasts of what you are going to sell and what you can make (or buy) take actions to balance the equation supply = demand over the whole horizon you have decided you need to look at look at the financial consequences of those actions versus your targets initiate actions to address the difference between the target and the current, balanced forecast

11 S&OP is business planning in 5 steps…
From Forecasting to Demand Shaping Getting the right info to make decisions into the last 60 minutes of the process Demand Reconcile demand and supply Reconcile with financial plans Sales and Ops Planning Meeting Supply “What if?” Rather than “Yes/No” S&OP is a means of aligning targets and objectives across the different functions by taking sales & marketing ambitions, supply possibilities and financial goals and balance them to create a single, achievable plan. It must be a cross-functional business activity which needs to be led from and owned by the Board or the senior decision making body of the company or business unit. Generating, shaping, and orchestrating the demand Identifying supply capabilities Aligning Demand & Supply Financial Considerations Reconciliation with Financial From Capacity Planning to Supply Network trade offs & design Source: Deep Parekh, Partner, Equus Group, LLC

12 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

13 In Practice – it’s a balancing act
Demand Shaping Marketing programs New product introductions Promotions Trade deals Sales incentives Price management Supply shaping/run-out strategies Capability response Postponement Improve transparency: e.g VMI Design for supply. Reuse. Logistics policies Adaptive networks Flexible manufacturing strategies Tie agility strategies to demand shaping Source: AMR

14 S&OP is also about behavior and collaboration
“You have done well: you have consistently beaten your forecast.” “You consistently under-forecast; please look into your process.” “Your forecast is well below your target; this is unacceptable.” “What options have you considered already and what can be done more to close the gap.” “This is our bottom up forecast; this is our best outlook based on current plans; there is nothing I can do”. “Our bottom up forecast fell short of target. We are working to improve our Q3/Q4 promotional program.”

15 Benefits of a well functioning S&OP
Improved Customer Service by aligned, anticipated action Simplicity of decision making framework Alignment of actions, incentives in the organisation Visibility of Information Empowerment/Development and motivation of people Clarity on Roles & Responsibilities Ownership of Key Inputs

16 Functional silo approach Ineffective behaviour Fire fighting
Sales: we can sell 200 Marketing: the promotion will sell 400 Manufacturing: they will only sell 150 Finance: we have budget of 300 one consensus plan 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 Source: Red Pepper, Modified E&Y, 1999

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

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

19 Strategy into action Levels in version 2013
Theme Sales SCM Operations Purchasing Level 1 Reliability Service level Order deadline Shortage rule Safety stocks # Shifts # Pallet locations # FTE Delivery window Delivery reliability Level 2 Batches and frequencies Shelf life Trade unit Lotsizing in production and purchasing SMED Increase speed Level 3 Speed and quality Payment terms Frozen period Intake time Preventive maintenance Solve breakdowns training Raw materials inspection Supplier selection Quality Transport mode

20 Extensions in version 2013 Theme Sales SCM Operations Purchasing
Extension a S&OP Promotional pressure Category management Forecasting Production interval tool Resource selection Dual sourcing Extension b External collaboration Promotion horizon VMI Outsourcing warehouse (MCC) Inflate PET Supplier development Extension c CO2 footprint Sustainabilty CO2 sla Decrease of water usage Decrease of energy usage Decrease of start up productivity loss Extension d KPIs and targets KPI selection Extension e Supply chain risk management Risk events Relaunch (horizon) Scenarioplanner Tracking & tracing Quarantine Pooling warehouse FTE Contract duration

21 Decision making Decision making sequence Who is involved?
Sales Operations Supply chain Purchasing sequence Decision making Who is involved? What sequence makes sense?

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

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