S&OP

Sales and Operations Planning

An entry Visa into the
competitive Present
SAPICS Summer Conference, Cape
Town 2008
Farayi Kambarami 17 October 2008

Agenda

S&OP

Business and the competetive environment

The Business Challenge(s)
Generic Responses to the Business Challenge(s)
Challenges within the Typical Business Response
Sales and Operations Planning as a co-ordinated
response
How does it work
How do you go about putting it in place
What benefits does it bring
Some concluding remarks
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Business and the competetive

environment

S&OP

Business
(qualified definition) an activity carried out for profit
legally recognised entity designed to provide goods or services to consumers
Two important factors Consumers/Markets and Profit

Business Competition
Same consumers targeted by almost all businesses to buy their goods/services.
(more important as economic crisis escalates)
Most important aspect happens at customer/consumer interface: 2 moments of
truth
Purchase do they buy it
Use do they like it, and thus will they buy it again

Question around the extent to which Supply Chains must compete

To Compete
Business MUST meet consumer/customer demand profitably and consistently
Internal business processes must facilitate delivery of product

there are proven best practices for organising business to achieve this in an efficient
manner without distracting from your own customer/consumer proposition

The Business Challenge(s)

S&OP

Synchronise internal business processes

with the customer/consumer demand so
as to give them
What (product(s) /service(s)) they want
When they want it(/them)
Where they want it(/them)
In the right quantities
At the right Price and Quality
In a sustainably profitable manner.
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The Business Response

S&OP

A subset of the synchronisation problems is typically answered through one

of the business functions/departments e.g.
Department

Questions of concern to
department

Questions Answered

Marketing

What products, Where, When, What

Quantity, What Price, What Quality

What products, What Price, What

Quality

Planning Sales Forecasting

What Products, When, Where, In

what Quantities

What Products, When, Where, In

what Quantities

Production/Operations

What Products, In what quantities,

when, what quality, what price

What Products, In what quantities,

when, what quality, what price

Distribution/Logistics

What Products, In what quantities,

where, when

What Products, In what quantities,

where, when (What quality)

Sales

What Products, What Quantity,

Where, When, What Price, What
Quality

What Products, What Quantity,

Where, When, What Price, [What
Quality]

Finance

What Products, What Price, What

Profitability

What Profitability

Buying/Purchasing

What Products, What Price, What

Profitability,

What Price, What Profitability

The Challenges within the Typical

Business Response

The existence of several potential respondents to the business challenge

typically creates several answers within the same organisation.
Typically there is a proliferation of forecasts by function leading to poorly coordination action and huge cost in terms of either lost sales or incorrect
inventories.

S&OP

Financial Budgets
Strategic Plans
Sales Forecasts
Production Plans

This results in waste and jeopardises the companys ability to compete

Organisational design and processes need to co-ordinate the responses to
the questions that the business faces in the market place.
Specifically how does the company ensure that all stakeholders have the same
view of and response to the customer/consumer demand
Share the same understanding of the companys profitable response to this
demand
Move to the same drum beat in meeting that same demand

Sales and Operations Planning as

a co-ordinated response

S&OP

Aims at aligning all stakeholders in the business towards one goal

meeting customer/consumer demand profitably in a manner that
ensures delivery of the companys strategic agenda
Clearly identifies the product domain in which the company plays
through the Product Management Review if done as part of an
Integrated Business Management Process
Formalises the generation and adoption of a Company Demand Plan
through the Demand Review
Provides a transparent view of the companys response to the Company
Demand through the Supply Review
Ensures that the Supply and Demand views are reconciled and
evaluated against financial targets in the Management Review
Whilst delivering one clear plan that answers all the customer/consumer
demand questions that the organisation faces.

How does it work

S&OP

Traditionally organised around four meetings

with specific pieces of work being done in
between them.

Demand Review Meeting

Supply Review Meeting
Pre-S&OP Meeting/Integrated Reconciliation Meeting
Executive S&OP/ Management Review Meeting

Evolving to include 5th meeting

Product Management Review Meeting as starting
point (In Oliver Wight IBM Model)
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Product Management Review

Meeting

S&OP

Advanced forms of S&OP start with the questions

What products do we offer our customers/consumers?
What are the trends in the customer/consumers world that we need to
keep in touch with?
What else could we offer them that is in line with our strategic intentions
as an organisation?
How well are the products that we currently offer doing?
What changes, if any do we need to make, to our existing range going
forward?

The outcome is a clear view of the products that the company will
market, those that it will launch and when they will be launched, and
the ones that it will discontinue complete with timings.
Recommended frequency is monthly, however most orgs make this
a quarterly or at least seasonal review.

Demand Review Meeting

With clarity on products to be marketed, the next set of questions answered in the
S&OP process are:

some statistical baseline of the demand based on history

Input from Sales and Marketing about deals, promotions, competitor activity, the effect of
launches on the projected statistical sales forecast so called market intelligence
assumes pre-work
Each assumption that is made on the state of demand needs to be explicitly documented
The demand numbers should be challenged sufficiently during this meeting, but once
agreed become binding for the whole organisation

Metrics Reviewed

What is the quantitative demand for each of the products that we market for any future given
period?
How is this demand constituted by customer, region,etc?

Critical for this review

S&OP

Forecast Accuracy/Error (MAPE), Forecast Bias

Process output

Detailed Company demand plan official view of unconstrained customer demand

Challenge is how to ensure demand is truly unconstrained if customer service is erratic how do you
capture true demand into your company?
(in my last job, this was in weekly buckets for the next 13 weeks, and in months from month 4 to 24.)
Plan is sales units (tons/kg/units and not rand/$)

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Supply Review Meeting

S&OP

Once a view of the demand has been generated, focus is then on the supply chain
components that create the needed products to fulfil this demand
The main questions answered here are

How shall we meet this demand at the appropriate times, and in the right places
A detailed supply plan (Depot Requirements Plans, Master Production Schedule, Materials
Requirements Plans) is drawn in an attempt to meet the demand.
The supply plan is based on the proven capacity of the manufacturing and delivery
operations and on the basis of any known/anticipated improvement plans

Metrics Reviewed

Issues of plant/material constraints are discussed in this review.

Consistent shortfalls in meeting demand are reviewed and fed back into Capacity Improvement/
Capital Expenditure plans

Factory order fill, OEE, Customer OTIF, Customer Case Fill

Process Output

Company Supply Plan companys manufacturing response to the known demand

Detailed production plans for next four to six weeks, by week. (This is also a volumetric (i.e.
sales units) plan
Top level plans by month going into the future as dictated by material lead times (for MRP
generation)

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Pre-S&OP Review

Depending on tool availability/support

The outcome of the Supply Review are sent to the financial team for financialisation.
Pre-S&OP aims at resolving any discrepancies between Supply and Demand given
the financial and other strategic implications
This review looks at the different prioritisations and makes recommendations to the
senior management on the best options to take given the financial implications of
each alternative.

S&OP

Where the trade offs are pretty routine, this can be standardised/ incorporated into a
template
Sometimes this is collapsed into the agenda of the Supply Review making it a longer
meeting
This meeting serves as a preparation for the final Executive S&OP meeting run by the
senior managers

The process output

Recommended final Company Sales and Operations Plan for discussion in the main S&OP
meeting
Any unresolved issues/prioritisation for senior managements attention/resolution
This plan is communicated ahead of time to the senior managers to facilitate the final
discussion

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Executive S&OP

S&OP

The ultimate aim of the Sales and Operations Review is to sign off the
final plan for the business for any given time period.

It answers all those fundamental questions that the business strives to solve:

What products will we be selling, in each of our markets at any given future time?
How much of each product do we hope to procure/produce and hence ultimately sell?
If this is different from what we need to meet our Strategic and other plans, what are we
going to do to close the gap? (Who will do what?
When do we expect to sell what volume?

A review of the previous plan, any key performance indicators and key business and
macro-economic and socio-political trends is carried out first
Based on the information provided from the Supply and demand review, senior
management make final calls on specific prioritisation options.
The risks to the plan are discussed and contingencies put in place with clear
accountabilities for delivering the plan.
Process Output

Company Sales and Operations Plan detailing

the demand that the company is aiming to meet

The manner in which it will meet this demand
The financial implications of meeting this demand in the specific manner that is planned

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Process Enablers

S&OP

Executive Support Must have the

sponsorship of the most senior
manager(s) in the business
Collaborative culture
Staff commitment to process
Tool support for Sales Forecasting
(software and process) and Scenario
Planning (what if analysis)
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Different Stages of Implementation

S&OP

From Dr Larry Lapide MITs article

S&OP A Diagnostic Model JBF
Spring, 2005

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Implementation Readiness- An
alternative view

S&OP

Phase 2: Business Process Control

Eliminating failure in business process

Time

Phase 4
Integrating all business processes with
technology
Phase 3 Automation
Knowledge Based Automation of all processes

Phase 1 Co-ordination
Eliminating unplanned events - do routine things routinely

Journey

to Excellence
Source: Oliver Wight, Successful S&OP
through Integrated Business Management

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Setting it up

S&OP

Workshops to understand current state of

business
Process Map as is process
Share best practices and develop plan to
assimilate these into org
Develop action plan to implement new process
Must be sensitive to current state of business
Should not seek immediate improvements, target
sustainable change

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Benefits of S&OP

S&OP

One Business One Plan

Rallies all the troops towards one target
meeting consumer needs and making money
out of this
Knock on effects on
Customer Service
Provides the company an opportunity to START competing
Remember only products that the customer/consumer sees
can compete

Cost
Internal efficiency and effectiveness
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S&OP

Useful References:
1. Business Forecasting edited by
Chaman L. Jain
2. Oliver Wights Successful S&OP
through Integrated Business
Management (www.oliverwight.com)
3. IBFs Journal of Business Forecasting
Archives (various articles by various
authors) only available to IBF members
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S&OP

Questions?
Comments?
Anything else?

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