2019 ipsm conference_sop_workshop_muddassir_ahmed

Sales and Operations Planning
(S&OP)
Presented by: Dr. Muddassir Ahmed
Overview, Process Steps, Practical Considerations and Benefits
June 5-6 2019 Kyiv, Ukraine

Our Agenda for Today
Introduction
What we will learn today
2
Who we are
Meet who are behind the curtain.
S&OP Position in Supply Chain
Planning & Overview
Detail Introduction of 5 Steps of
S&OP Process
Practical Challenges in S&OP
Deployment
Working Session

4
In this workshop, you’ll learn how to:
• S&OP Position in Supply Chain Planning & Overview – 9:00 – 09:45
• Detail Introduction of 5 Steps of S&OP Process – 09:45 – 10:45
• Break – 10:45 – 11:05
• Practical Challenges in S&OP Deployment (sharing my 11 years of experience) & Survey
Results – 11:05- 11:50
• Working Session - In this session Participants Groups will create Agenda, Participants list,
Objectives, Purpose and expected Input & Outputs of the respective S&OP Process steps
assigned -11:50 – 13:00

Productivity is
never an
accident. It is
always the result
of a commitment
to excellence,
intelligent
planning, and
focused efforts
Paul J. Meyer

S&OP Position in Supply Chain
Planning
&
Overview

What is S&OP
7
S&OP is a process to help you delivery better customer service, lower inventory, shorter lead times,
more stable production rates, better management control of the overall business, and a team
building mechanism across the whole of the senior management organisation.
It is a cross-functional Planning process designed to keep demand and supply in balance. This is
achieved by continually monitoring external market demand changes (through the Sales
department) and communicating these changes to the internal organization. Personnel in the
Supply Chain, Finance and Production departments utilize this information to optimize purchasing
(Inventory) and production (Operations) planning decisions

What is S&OP
8
• It is board level agenda item.
• Integrated ‘business management process’ that aligns demand, supply and financial planning.
• It drives gap-closing actions between what you target and what is business reality.
• It intends to delivery management commitment in a transparent way.
• It deploys the business strategy, and make it under stable to all layers of the organization.

S&OP – What Its Not?
9
• S&OP is NOT another set of meeting on top of already existing meeting.
• S&OP is NOT a black box, automatically delivering improved results rapidly.
• S&OP is NOT just another Supply Chain Process!
• S&OP is NOT a planning system.

S&OP in 5 Levels of Supply Chain Planning
12

Need S&OP - Importance of Balancing Supply & Demand
13

Benefits S&OP
15
Typically, organizations that have used S&OP have experienced improvements in Customer
Service, Days-On-Hand (DOH) and Operating Costs.
–Improved customer service levels
the right product at the right place at the right time (and in
the right quantity)
Typical
Achievements
15 - 30%
10 - 30%
5 - 20%
–Reduced operations costs due to:
manufacturing, transportation, temporary storage, product
scrap/obsolescence, manpower
–Reduced inventory levels

16
• Reduced Spare Parts Inventory 15-35%
• Improvement Yields 5-20%
• Reduced Obsolete and Stale Inventory 40-50%
• Savings in Transportation Costs 7-12%
(load consolidation, better sequencing to outward demand/shipments)
• Return On Investment 3-12 months
• Increased Sales (Improved Customer Loyalty) 3-10%
• Improvements in Manufacturing Efficiencies 10-20%
Benefits S&OP

S&OP Process Overview – Quiz 1
17
1. S&OP – What Its Not?
2. What are the top 3 benefits of S&OP?
3. What are the key objectives of S&OP?
4. Why you need one set of numbers to run S&OP?

Coffee Break -1
Take your time and relax!

Introduction of 5 Steps of S&OP
Process

S&OP Process Overview
20
Five Step Process:
1.Data Gathering & Statistical
Analysis
2.Demand Planning
3.Supply Planning
4.Consensus / Integration
5.Regional & Global Executive
reviews
Global Executive Review to engage
the senior leadership in sync with the
financial rolling forecast
Data
Gathering
Demand
Planning
Supply
Planning
Consensus
Executive
Review

S&OP - Data Gathering & Statistical Analysis
21
Critical Characteristics:
• Prior Month actuals recorded in a standard
tool or Excel
• Statistical analysis baseline
• Economic indicators obtained
• Product planning inputs with sales &
inventory impacts
• Updated baseline with economics and
Product planning inputs factors
• Demand input templates provided to in-
region sales and to partner-region S&OP
teams
Important Changes:
• Economic trend input (still need
to establish source)
• Sales & Inventory agreement
and tracking with Product
Planning
• Structure for different demand
inputs

S&OP - Data Gathering & Statistical Analysis
22
Statistical Forecast by Customer

S&OP - Demand Planning Review
23
• Customer Sales FC is based on input from
Sales and Marketing
• Forecast Metrics and Bias reviewed as input
to forecast
• Unconstrained Demand plan passed to
next step
• Reconcile the Customer Demand with Profit
Plan, developing gap closing initiatives
• Work with a single Demand Plan across the
corporation
Important Changes:
• Forecast by Product Family or Group
• Expanded forecast horizon to 18 months
• Create a realistic Demand Plan for the
next 12 months
• Months 13-18 based on Strategic Plan
and Statistic
• Drives alignment of S&OP with Profit
Plan

S&OP - How Demand Forecast is Produced?
24

S&OP – Demand Review Dashboard Example
25
Period 2014/Jan 2014/Feb 2014/Mar 2014/Apr 2014/May 2014/Jun 2014/Jul 2014/Aug 2014/Sep 2014/Oct 2014/Nov 2014/Dec
Last Y K 1,890 K 1,989 K 2,290 K 2,517 K 2,617 K 2,239 K 2,270 K 2,067 K 1,954 K 2,235 K 2,092 K 1,423
Prior SIOP K 2,349 K 2,124 K 2,335 K 2,261 K 2,229 K 2,266 K 2,222 K 1,891 K 2,319 K 2,332 K 1,903 K 1,463
Current SIOP K 2,406 K 2,158 K 2,463 K 2,296 K 2,319 K 2,296 K 2,214 K 2,003 K 2,379 K 2,287 K 2,051 K 1,515
Current Firm K 2,187 K 2,108 K 1,463 K 1,033 K 730 K 357 K 225 K 290 K 249 K 119 K 153 K 106
% Firm 91% 98% 59% 45% 32% 16% 10% 14% 10% 5% 7% 7%
Profit Plan K 2,406 K 2,322 K 2,418 K 2,608 K 2,627 K 2,680 K 2,453 K 2,210 K 2,328 K 2,052 K 2,030 K 1,716

S&OP – Demand Review Agenda
26
Chairman: Sales & Marketing
Director (Or S&OP Director)
• Facilitator: Demand Manager/
S&OP Manager
• Attendees:
• Marketing
• Sales
• Customer Service
• Key Account Managers
• Finance
• Agenda:
• Performance Analysis
• Review Assumptions
• Review market and sales plans
• Volume, price, revenue, timing
• Understand changes, seasonality
• Review upside / downside
• Impact on committed plan
• Agree demand plan

S&OP – Supply Review
27
• Unconstrained Demand plan presented to
manufacturing sites
• Supply requirements plan presented to key
suppliers
• Inter-Region Supply Agreements established
(if applicable)
• Site and Supplier capacity plans maintained
and compared to unconstrained demand
• Constrained Supply Plan passed to the next
step
Important Changes:
• Inventory Forecasting and Follow-up
owned by S&OP facilitation team. Rough
cut inventory plan (total $INV by site) is
created at this step.
• Capacity planning owned by S&OP
facilitation team.
• Concept of a well documented
constrained demand plan

S&OP – Supply Review Dashboard Example
28
Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19
Predicted demand 4264 6730 5289 3767 5277 4565 3694 7863 3816 2576 2488 3396
Total capacity (Including 20% Over Time) 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000
Predicted excess capacity -736 1730 289 -1233 277 -435 -1306 2863 -1184 -2424 -2512 -1604
What are the options to chase capacity in Feb-19 and August -19?

S&OP – Supply Review Agenda
29
Chairman: Supply Chain Director
• Facilitator: Supply Planning
Manager
• Attendees:
• Operations
• Supply Chain
• Purchasing
• Finance
• Agenda:
• Review Performance
• Supply plan to balance supply and
demand
• Resource implications (people/machine)
• Inventory levels or order book to
support service, cost and strategy
• Change and consequences
• Impact on committed plan
• Review and agree alternative scenarios
with implications

S&OP – Consensus Review
30
• Cross-Functional attendance
• Review S&OP process performance metrics
• S&OP facilitator presents:
• Unconstrained demand
• Constrained supply plan; Capacity, Gaps, and
Actions
• Inventory Forecast (Total by site)
• Team discussion, updates, and final agreement
documented
• Complete S&OP communication package passed to
next step
Important Changes:
• Assess capacity and material availability
for the next 12 months
• Plan and manage inventories and
logistics costs at an aggregated level
• Identify strategic sourcing issues for
raw material or contract manufacturing
• Manage direct labour and overtime

S&OP – Consensus Review Agenda
31
Chairman: Operations Director
• Facilitator: S&OP Manager
• Attendees:
• Operations
• Supply Chain
• Forecasting
• Sales & Marketing
• Finance
• Agenda:
• Discuss Consolidated Plan
• Sign off new operating plan
• Agree scenarios and consequences
• Understand gaps to budget and
record advise on gap-fill actions

S&OP – Executive Review
32
• Review S&OP process performance metrics
• S&OP facilitator presents:
• Unconstrained demand
• Constrained supply plan; Capacity, Gaps, and
Actions
• Inventory Forecast (Total by site)
• Executive inputs and approval documented
• Inventory Forecast developed
• S&OP consensus forecast loaded into the ERP
• Gross Inventory or Days On Hand (DOH)
review
Important Changes:
• Detailed inventory forecast prior to
Financial Rolling Forecast
• Inventory forecasting and DOH
confirmation led by S&OP team, in
coordination with the sites and Finance
• S&OP Forecast and Financial forecast
must align

S&OP – Executive Review
33
Chairman: Chief Executive /
MD/VP
• Facilitator: S&OP Manager
• Attendees:
• Front Line Reports
• Board / Senior Management
Team
• Agenda:
• Key Performance Indicators
• Revenue / profitability
• Customer satisfaction
• Demand Planning Performance
• Supply Performance
• Business trends
• Major changes analyzed; internal & external
• Key issues reviewed by “family or product line”
• Alternatives presented
• Opportunity / vulnerability
• Operational and financial impact
• Decisions taken
• Latest view aligned to:
• Annual business plan
• Strategy
• Plans Agreed (sign-off)
• Input to next cycle

S&OP Process Overview - Quiz
34
1. What is Unconstrained Demand?
2. Who own capacity plans and why?
3. Should you understand supplier capacity to learn
successful S&OP Process steps?
4. What type of forecast should be loaded in ERP/MRP
system and why?
5. What you expect from Executive Review?

Practical Challenges in S&OP
Deployment
&
& Survey Results

S&OP is a major effort in orchestrating cross functional
teams interactions
36

S&OP – Why Gone Wrong?
J. Andrew Grimson, David F. Pyke, (2007) “Sales and operations planning: an exploratory study and framework”, The International Journal of
Logistics Management, Vol. 18 Issue: 3, pp.322-346

My S&OP Experience – How Did We Fix
S&OP Pillars Key Learning
People & Change
Management • Conduct a pilot – “play” with the new templates
• Recruit Master Scheduler/Demand Planner(s)
• Intense stakeholder communications
S&OP Process
Elements
• Agenda and Input / Output should clearly defined for each review.
• Data breakdown & preparation for effective meetings
• Create attended sheet for reviews based on RACI Matrix!

My S&OP Expereince – How Did We Fix
S&OP Pillars Key Learning
IT Systems/Tools
• First understand the S&OP process before changing or buying any IT
System or fancy Forecasting software.
• Excel will help in most cases!
• Make it easy for people to use as easy as possible
Project Management
/Execution
• Make it a project! When initiative deployment!.
• Gain Leadership support
• Structured way of working
• Plan all project meetings at the start
• Project team with senior people
• Central role to transfer learnings and keep the speed...
• Use S&OP for efficient decision making process
• focus on longer term horizon has reduced “fire fighting”

S&OP Self Assessment Survey Results
40
The Sales and Operations Planning Process Self Assessment tool has 29 questions
under below mentioned 6 categories:
• S&OP Process Policy and Documentation
• S&OP Organization, Meetings and Collaboration
• S&OP Plan Integration, Planning Horizon and Scope
• Measurements- Use of KPI in S&OP Process
• The maturity of 5 Steps S&OP Process on Scale of 1-5 (1- Lowest & 5 Highest)
• S&OP Advance Stage Questions
Amazingly 6 people has responded!

41
S&OP Process Policy and Documentation

42
S&OP Organization, Meetings and Collaboration

43

44

45

46
S&OP Plan Integration, Planning Horizon and Scope

47

48

49

50
Measurements- Use of KPI in S&OP Process

51
Measurements- Use of KPI in S&OP Process

52
Maturity of 5 Step S&OP Process on Scale of 1-5 (1- Lowest & 5 Highest)

53

54

55
S&OP Advance Stage Questions

56
S&OP Advance Stage Questions

Coffee Break 2
Take your time and relax!

Working Session
59
• In this session Participants Groups will create Agenda, Participants list,
Objectives, Purpose and expected Input & Outputs of the respective
S&OP Process steps assigned.
• For examples, the group who is assigned S&OP Demand Planning
Meeting will present above exercise task in group. After
presentation, I will and other participants can give them feedback

60
Get in Touch
Here to help!
Email / Website
Muddassir@scmdojo.com
http://www.scmdojo.com/

PFEP Introduction
61
It is expected that every Plant/Location is committed to reviewing the static data in their ERP system in the
following cycles using the following tools…

How to Conduct ABC Analysis
62
OR Try this tool for free- Super Quick!
http://www.scmdojo.com/abc-analysis-tool/

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