S&OP Alignment-Sales-Ops-Finance-Biel-07-17-11

Jim Biel, Ph: 847.687.5379, E-Mail: [email protected], http://www.linkedin.com/in/jimbiel (July 7, 2011)

Sales & Operations Planning (S&OP)Aligning the Sales, Operations, & Financial Functions

July, 2011

Jim BielManagement Consultant

E-Mail: [email protected]: 847.687.5379

http://www.linkedin.com/in/jimbiel

Additional S&OP Resources Available Here:http://www.slideshare.net/jimbiel

1

Note: S&OP may also be known as IBF (Integrated Business Forecasting), SIOP (Sales, Inventory, & Operations Planning), and other names.


Professional Bio – Jim Biel

• 20 Years Multi-Functional Experience, Concentrated in CPG Industry (Sara Lee, Unilever, Chiquita, Pepsi) – Retail & B-to-B (Foodservice)

• Experience in Business Forecasting, Sales Operations & Planning, S&OP, Sales Systems, ERP, CRM, Demand Planning, Business Information Management, Supply Chain, Trade Promotion Management, IT, HR, Training & Development, and Finance (Corporate & Public Accounting, CPA)

• Core understanding of multiple supply chains – frozen, fresh, cold, dry, liquid

• Independent Management Consulting for large and small entities

• Client Services position with a SaaS (software as a service) provider of trade promotion software (Adesso Solutions)

• Practiced public accounting for 4+ years – McGladrey; Corporate Finance FP&A Roles

• Adept at integrating relevant business concepts and processes with enterprise-wide systems, a strong business process understanding and acumen including S&OP (boot strap and retrofit S&OP implementations)

2


Discussion Topics• Introductions

• Review of Discussion Topics

• S&OP Defined

• Cross Functional Alignment

• Performance Management & Metrics

• One Forecast

• S&OP Time Fences

• S&OP Tool Box

• Implementation Steps

• S&OP Resource Guide

• Summary & Close

3


S&OP Defined

• APICS defines S&OP as the function of setting the overall level of manufacturing output (production plan) and other activities to best satisfy the current planned levels of sales (sales plan and/or forecasts), while meeting general business objectives of profitability, productivity, competitive customer lead times, etc., as expressed in the overall business plan.

4


Alignment/Integration Defined• One Integrated Process (Process)• People/Functional Alignment (People)• One Common Set of Metrics (Performance)• One System of Record (Platform)• All Demand Streams (Demand Supply)

• Integrate All Available Data (Internal & External)

• One Forecast (Used by All Functions * )

• An Integrated Business Management Model• Buy-In, Accountability, & Trust• Transparency

* With Some Caveats

5


“Connecting the Knobs”(Why Integration is Important)

• “Before we had Executive S&OP in the Company, I Spent A Lot of Time Turning Knobs That Weren’t Connected To Anything”

– VP & GM Quote From Tom Wallace’s Book, Sales & Operations Planning, The Executive’s GuidePage 24

6


Cross Functional Alignment / Effective Communication – The S&OP Flow

Demand

SupplyDaily

WeeklyMonthly

Balancing

FinanceGenerates Proformas,Cost, Risk /

Ops Monthly;As Needed In

Interim

Utilize DemandOutputs as BasisFor Forecasts,Annual Plans,

Strategic Plans, Add Risks / Opps /

Other Lifts / Discount Factors

As Needed

GMControls Monthly

S&OP

+ Results+ Metrics Review+ Var to Bus Pl+ Future Frcst+ Assumptions

+ Bulk of Meeting:Gaps, Opps in

Future Frcst

+ Create Business Rules (Between Demand/Supply)+ Forecast Time Fence: Rolling 12-24-36 Months+ Functional Leads & Leader Participate in Monthly S&OP Review

7


Connection – Integration, Performance Management (Metrics), Results

INTEGRATION

Leadership(Strategic Direction)

Demand FeedsSupply; Balancing /

Capacitization(Ops Execution, Future Forecast)

Finance($ Scorekeeper, Forward Looking

Economic Advisor)

Leadership(S&OP Process Owner)

DESIRED RESULTSPositive P&L Outcomes

Positive Working Capital OutcomesProductivity Improvements

Decision Making ImprovementsCustomer Service Levels

PERFORMANCE METRICSRevenue, Cost Targets

Forecast Accuracy,Working Capital Targets,

Inventory TargetsNew Product Launch Success

Cycle Time / Quality - ProcessesService Level Targets

8


Cross Functional Alignment

Provides P&L Proformas & Risk / Opportunity Assessment

Counsel, Input, Risk Assessment, Pro-Formas of Future Forecasts

Economic Oversight / Counsel

Finance

Daily, Weekly Interaction with Demand & Finance; Owns Monthly Supply Component of S&OP

Owns the Fulfillment of the” Constrained”Demand Forecast at Least Cost (Balancing with Demand Planning)

Fulfillment of “Constrained Demand”, Least Cost

Supply > Finished> Raw

Daily, Weekly Interaction with Supply & Finance; Owns Monthly Demand Component of S&OP

Owns the Demand Forecast; Accountable for Excess Inventory Generated by a Forecast Miss

Translates Strategy intoDemand Generation; Dem Planning Reports to a Demand Leader;Unconstrained Demand

Demand > Sales> Marketing

Owns Monthly S&OP Meeting; Consulted Daily/Weekly as Needed (Exception)

Owns the Overall Process – The Process Owner

Strategic DirectionGeneral ManagerCommunicationS&OP RoleBusiness RoleFunctional Role

9


Accountability Systems For Internal Stakeholders

• Metrics – Common– 5 Basic Metrics:

• Forecast Accuracy (Demand Owner)• Perfect Orders (Cust Serv, Supply)• Revenue (Units & Mix)• Profitability (Mix, Margins, Costs)• Inventory (Demand Owner + Supply Owner)

– Simple Scorecard– Improvement From a Baseline

• Active Involvement By All Functions –– Accountability & Roles / Responsibilities

• Daily• Weekly• Monthly (Decisions Made + Follow-Up Assigned)

• Transparency Through Dynamic Communication Flow

10


One Forecast Caveat(Linkage – S&OP to Other Plans)

Latest Est / Frcst

S&OP

Business Plan

Demand Plan

SupplyPlan Financial

StrategicTarget /

Intent

StrategicPlan

Demand Plan

SupplyPlan Financial Annual

Plan

Demand Plan

SupplyPlan Financial Interim

Forecasts

Future Execution/ Forecast

FinancialSupplyPlan

Demand Plan

Use S&OPAs a GutCheck

Use S&OPAs Key

Input / Core, Plus Risks/Ops

Use S&OPAs Key

Input / Core, Plus Risks/Ops

Future ExecutionForecast / Details, Active Risk / Ops

Discussion

S&OP Outputs Validate, Support Other Planning Processes

11


Alignment Between Corporate Strategy and Operational Execution

Revenue TargetsMargins

Working CapitalNew ProductsNew Markets

New CustomersNew ChannelsExit Strategies

Capital Investment

Corporate Strategy Business Plan S&OP




Capital Investment




Capital Investment

Strategic Intent 3-5 Yrs Annual Plan / Frcsts Rolling 36 Mo Review

Amount of Detail (Increases through various processes)

> Working Backwards from S&OP, Provides Validation of Plan & Strategy> S&OP Focuses on Gap / Opportunity Assessment vs. Plan

12


S&OP Time Fences

Short-Term

(1-3 Months)

Mid-Term

(4-12 Months)

Long-Term

(13-36 Months)

DemandDem Pl – SKUs

All Demand Streams

Sales

Customers

Promotions

New Products

SupplyFulfillment

Cust Serv

Finished Goods

Supply Contracts

DemandDem Pl – Prod Fam

All Demand Streams

Marketing

Customers

Promotions

New Products

SupplyFulfillment

Finished Gds, Raw

Supply Contracts

Demand - StrategyDem Pl – Prod Fam

All Demand Streams

Marketing

Customers

Promotions

New Products

Supply - StrategyFulfillment & Sourcing

Ingred Contracts

Plant/Cap Network/Invest

13


Tool Box Needed to Execute

Systems of Record & Collaboration Tools- ERP System- Spreadsheets- Collaboration Tools - Purpose Built S&OP System Capability (i.e. SteelWedge)- Inventory Management System (i.e. SmartOps) - Metrics Scorecard Capability

Need a well thought-out and efficient S&OP Reporting Toolto support Meetings and interactions

> Numbers> Metrics Reporting> Assumptions

Make your analysts “analysts” – not data and report generators

14


Implementation Steps

• Education• Assessment• Process Design• Roles / Responsibilities• Metrics• Tools / IT Solutions• Execution / Implementation• Process Improvement• Business Performance Improvement

15


Closing Remarks

• Key Learnings From My Experience– The Concept is Easy

– The Initial Buy-In is Fairly Easy

– The Change Management Required Can Be Hard• New Process• New Technologies / Systems• New Accountabilities / Roles• Traditional Functional Ownership Dies Hard – Silos• Transparency Hard For Some to Swallow

– Consistency & Month-to-Month Execution is Hard

– Leader Needs to Keep Functional Leads Feet to the Fire

– May Need a Process Coach

16


Resources• A Book: Sales & Operations Planning, The

Executive’s Guide, Thomas Wallace & Robert A. Stahl

• “Sales & Operations Planning: Transformation From Tradition” White Paper, AMR Research, May, 2009

• “The Transformation to Demand-Driven Industry Leader” White Paper, Oracle/Demantra, September, 2006

• More Available Here: http://www.slideshare.net/jimbiel

17