Sales & Operations

Planning
A Centralized approach of
Planning at all levels of
organizations
Harshal Badgujar
Learning Session
1
What are the conficts in
Traditional Planning Approach of
working in SILOs
Marketing
Marketing
Production
Production
Finance
Finance
Function

High Revenues

High Availability

High Revenues

High Availability

Low Production cost

Long production Runs

Low Production cost

Long production Runs

Low nvest!ent " #ost

Few Fi$ed #osts

Low nvest!ent " #ost

Few Fi$ed #osts

Objectives Implications
#usto!er
Service
#usto!er
Service
High
High
Low
Low
%isruption to
Production
%isruption to
Production
Many
Many
Few
Few
nventories
nventories
High
High
Low
Low

Let consider a case of confict in

Traditional Planning approach ! A
"ideo #
http$%%www&slideshare&net%'ade(lo)al%oracle*sales*operations*planning*video
+
,

&'()*s + ,eed -or ntegrated %ata syste!s -or planning

&'')*s + Birth o- .RP syste!s

Late /))) + Birth o- Planning Module so-tware with .RP packages

But the real 0uestion is + .ven a-ter i!ple!entation o- organi1ation2wide .RP

&'()*s + ,eed -or ntegrated %ata syste!s -or planning

&'')*s + Birth o- .RP syste!s

Late /))) + Birth o- Planning Module so-tware with .RP packages

But the real 0uestion is + .ven a-ter i!ple!entation o- organi1ation2wide .RP

Reason Functions were still operating in SILOs
Reason Functions were still operating in SILOs
Have companies realized the proclaimed benefits of
R! and Return on huge investments made in its
implementation"""
Have companies realized the proclaimed benefits of
R! and Return on huge investments made in its
implementation"""
Hence the ,eed -or a #ollaborative
Approach led to
Sales # Operations !lanning
Hence the ,eed -or a #ollaborative
Approach led to
Sales # Operations !lanning
-
Agenda * Overview

3hat is S"4P5

How does it di--er -ro! traditional Planning5

3here does S"4P -it in levels o- Planning5

A case o- Auto2#o!ponent Manu-acturer

S"4P Process 4verview + how is it practiced by

organi1ations5

#ritical Success -actors o- S"4P i!ple!entation

Bene-its o- S"4P
.
What is S/OP0

$ decision%ma&ing # 'usiness (anagement process

)o ensures that the tactical plans in all business

functions are

$ligned and in support of the compan* strateg*

and the business plans and goals+

$ decision%ma&ing # 'usiness (anagement process

)o ensures that the tactical plans in all business

functions are

$ligned and in support of the compan* strateg*

and the business plans and goals+

Single Environment for optimally

synchronizing
Demand, Inventory, and Supply plans

While considering costs, revenue and proft

objectives of organization

Single Environment for optimally

synchronizing
Demand, Inventory, and Supply plans

While considering costs, revenue and proft

objectives of organization
1
What is S/OP0

For!al Business Process spread over &(2/6 Months o-

planning Hori1on

Product Fa!ilies 7not ite!s8

9olu!e 7not Mi$8

Monthly review #ycle

Both product and -inancial units

For!al Business Process spread over &(2/6 Months o-

planning Hori1on

Product Fa!ilies 7not ite!s8

9olu!e 7not Mi$8

Monthly review #ycle

Both product and -inancial units

2
What is p3rpose of S/OP0
)he objective is

:o reach consensus on a single

operating plan

that allocates the critical

resources o- people; capacity;
!aterials; ti!e; and !oney

to !ost e--ectively !eet the

!arketplace in a pro-itable way< ,emand
S#O!
Finance
Suppl*
-pdated
Forecasts
-pdated
Forecasts
S#O!
!rocess
S#O!
!rocess

Sales !lan

!roduction !lan

Inventor* !lan

'ac&log !lan

.!, !lan

Strategic Initiatives !lan

Financial !lan

Sales !lan

!roduction !lan

Inventor* !lan

'ac&log !lan

.!, !lan

Strategic Initiatives !lan

Financial !lan
4
Wh5 is S/OP Planning0

Factors responsible -or i!balance between

Supply " %e!and

Pro!otions

,ew Product ntroductions

Packaging #hanges

#hanging de!and patterns =3reck havoc in planning

#o!panies that use S"4P + stand competitive advantage

by gaining the visibilit* and agilit* to i!prove product !anage!ent and pro!otional
planning;

Help !ini!i1e unnecessary build2ups o- inventory and better predict revenue

>ives a complete picture o- -orecasted de!and; supply capacity and

corresponding -inancial in-or!ation

S"4P is a vehicle for communication that puts the vision; strategy; -inancial and
tactical plans o- a business into one uni-ied operating plan in order to opti!i1e the
allocation o- critical resources
6
7ow 8oes S/OP 8i9er fro:
Traditional Planning0

Review o- Planning
activities happen at a
Higher Level; on a
!onthly and yearly basis

nvolves Senior
Manage!ent to drive
consensus

Review o- Planning
activities happen at a
Higher Level; on a
!onthly and yearly basis

nvolves Senior
Manage!ent to drive
consensus

Review o- Planning
activities happen at a
products Level; on a
daily or weekly basis

nvolves only
depart!ent heads and
!anagers

Review o- Planning
activities happen at a
products Level; on a
daily or weekly basis

nvolves only
depart!ent heads and
!anagers
S#O !lanning
S#O !lanning
)raditional !lanning
)raditional !lanning
1;
Where does S/OP <t in =ig
Pict3re of Planning0
11
7ierarchical >at3re of Planning
Items
!roduct lines
or families
Individual
products
/omponents
(anufacturing
operations
Resource
Level
!lants
Individual
machines
/ritical
wor&
centers
!roduction
!lanning
/apacit*
!lanning
Resource
re0uirements
plan
Rough%cut
capacit*
plan
/apacit*
re0uirements
plan
Input1
output
control
Sales and
Operations
!lan
(aster
production
schedule
(aterial
re0uirements
plan
Shop
floor
schedule
$ll
wor&
centers
(edium Range
(edium Range
Short Range
!lanning
Short Range
!lanning
1
Let 3s 3nderstand S/OP process
thro3gh a case of A3to*Co:ponent
S3pplier :an3fact3rer

!agine a case that President o-

%ivision + new to the position

He could not understand why

with &?))) co!ponents; he
heard proble!s like

Shortage o- -ew te!s

nco!plete production runs

.$cessive nventory

@nhappy custo!ers with poor

delivery per-or!ance
1,
Case of A3to*co:ponent S3pplier$
If he were introduced to 23444 people in stadium5"
If he were introduced to 23444 people in stadium5"
23444 (R!
/omponents
1-
Case of A3to*co:ponent S3pplier$
How about he inviting 264 people into a large
conference room7
How about he inviting 264 people into a large
conference room7
264 (!S Items
23444 (R!
/omponents
1.
Case of A3to*co:ponent S3pplier$
How if we brought FO-R people into his office++7
How if we brought FO-R people into his office++7
11
So5 8oal of the /ompan* was decided -nderstand ,emand for
each of these 9 Families and then suppl* accordingl*
So5 8oal of the /ompan* was decided -nderstand ,emand for
each of these 9 Families and then suppl* accordingl*
&?))) MRP
#o!ponents
&/) MPS te!s
6 S"4P
Fa!ilies
Rate of
!roduction
!roduct (i:
!erformance
12
7ow is it practiced )5
organizations0
The :onthl5 sales and operations planning process
.nd o- !onth
S:.P &
%ata
>athering
S:.P ?
.$ec S4P
Meeting
S:.P 6
Pre2S4P
Meeting
S:.P A
Supply
Planning
S:.P /
%e!and
Planning
Statistical -orecasts
Field sales worksheet
Manage!ent -orecast
&2st pass spreadsheets
#apacity constraints
/2nd pass spreadsheet
Reco!!endations
For e$ecutive S"4P
%ecisions
3allaceB /
nd
edition Sales " 4perations Planning
14
Step 1 ! 8ata gathering

Month end data

Actual sales

nventory

Production

Sales and !arketing

All pertinent in-or!ation

16
Who )rings what to the Ta)le0
;
Sales Prod3ct ?a:il5 A

Jan Feb Mar Apr May June Jul Aug

Forecast 100 100 100 120 120 120 120 130
Actual sales 90 95 85
Difference -10 -5 -15
Cum. difference -15 -30
3allaceB /
nd
edition Sales " 4perations Planning
1
Prod3ction Prod3ct ?a:il5 A
Jan Feb Mar Apr May June Jul Aug
Planned
production 100 100 100 110 120 120 120 130
Actual production 98 100 101
Difference -2 0 1
Cum. difference -2 -1
3allaceB /
nd
edition Sales " 4perations Planning

Inventor5 Prod3ct ?a:il5 A

Jan Feb Mar Apr May June Jul Aug
Planned
inventory 100 100 100 142 142 142 142 142
Actual inventory 111* 116 132
Difference 11 16 32
CDanuary nventory E &)A
3allaceB /
nd
edition Sales " 4perations Planning ,
Co:paring act3al to forecast Prod3ct
?a:il5 A
3allaceB /
nd
edition Sales " 4perations Planning
-
Step ! 8e:and planning

Sales and !arketing review in-or!ation

received -ro! Step &

Sales -orecast

By product

By -a!ily

:otal
.
8e:and planning tea:

%e!and !anager

Product !anager

Forecast analyst

Sales !anager

Salesperson

C3sto:er service

Acco3nting :anager

S3ppl5 chain
:anager
1
?orecasting$ Inp3ts@ Process@
O3tp3ts I.!-)S
O-)!-)S
Forecasts :hatB

Are reasoned

Are realistic

Are reviewed

Represent de!and
:H.
PR4#.SS
#urrent #usto!ers
,ew custo!ers
#o!petition
.cono!y
,ew products
Pricing
Bids
Pro!otions
Manage!ent directive
History
4ther
2
Step , ! S3ppl5 planning

Bill o- resources

Rough2cut capacity

%e!andFSupply Strategies
4
Aeso3rce Planning Process
6
=ill of Aeso3rce
3allaceB /
nd
edition Sales " 4perations Planning
,;
Aeso3rce Planning Process
,1
Ao3gh*c3t capacit5 planning
3allaceB /
nd
edition Sales " 4perations Planning
:otal Load
G Load E
:otal Load F
Available #apacity
,
Resource Bill
8e:and%S3ppl5 Strategies*
Constraint Banage:ent

Product Fa!ilyB &

&< Make2to2stock
/< :arget custo!er service level ''G
A< :arget -inished goods inventory & !onth

Product Fa!ilyB /
&< Make2to2order
/< :arget custo!er service level '(G
A< :arget custo!er lead ti!e / weeks
,,
Step - ! Pre*SOP :eeting

Make decisions to balance supplyFde!and

Resolve di--erences where possible

denti-y areas o- disagree!ent

%evelop scenarios

Set agenda -or .$ecutive S"4P !eeting

,-
Step . ! CDec3tive S/OP
:eeting

Make decisions

Authori1e changes in S"4P plan

Relate Rup version

Resolve issues

Review per-or!ance; product issues; special projects;

etc<
,.
What are critical s3ccess factors for
S/OP0
,1
=ene<ts of S/OP Process

Links business plan to depart!ental operations

Provides a !eans to work -or a co!!on goal

.li!inates counterproductive hidden or unilateral

decisions

>reater visibility o- de!and and supply across

the co!pany

!proved Product Li-ecycle Manage!ent process

Better co!!unication between groups

!proved inventory !anage!ent

More predictable revenue !anage!ent

Links business plan to depart!ental operations

Provides a !eans to work -or a co!!on goal

.li!inates counterproductive hidden or unilateral

decisions

>reater visibility o- de!and and supply across

the co!pany

!proved Product Li-ecycle Manage!ent process

Better co!!unication between groups

!proved inventory !anage!ent

More predictable revenue !anage!ent

,2
S3::ar5
:hank Hou=
:hank Hou=
,4