S&Op What Works What Doesnt Gerdau Pdf
- 1. Sales and Operations Planning What Works & What Doesn’t Joseph Kirchner, CPIM October 2010 1
- 2. Sales and Operations Planning - Defined S&OP is a process led by senior management that, on a monthly basis, evaluates revised, time-phased projections of supply, demand and the resulting financials. It’s a senior management decision making process that ensures that the tactical plans in all business functions are aligned and support the business plan. The objective of S&OP is to reach consensus on a single operating plan that allocates the critical resources of people, capacity, materials, time and money to most effectively meet the marketplace needs in a profitable way. Definition source: www.oliverwight.com 2
- 3. Sales and Operations Planning is a: Decision-Making Process to Balance Demand & Supply (at the Volume Level) and to Integrate Financial & Operating Plans 3
- 4. Differences in a Sales/Supply Meeting vs. S&OP Weekly Sales/Supply Meeting Characteristics o Detail oriented • What are today’s backorders? o Addresses today’s priorities • What do we need to expedite this week? o Results in the short-term execution plan • Should we adjust the forecast for 690’s? • Are we really going to sell the 5,000 E101’s Why It’s Not S&OP that the Account Manager forecasted? • Not product family oriented • No (direct) connection with business plan • Customer ordered 1,000 E202’s that were • President / GM not involved not forecasted by the Account Manager. • No discussion of $$ or profit Can we produce them? • No discussion of plant/supplier capacity • When will the XXX PO arrive? • No long term action items 4
- 5. Differences in a Sales/Supply Meeting vs. S&OP Monthly S&OP Meeting • Category X is 25% behind the YTD Budget. What is being done to correct this? Characteristics • Sales has cut the forecast for YYYY, but the Senior management involved. production plan has not changed. Inventory in Product family oriented, not SKU’s. August will be 45% over plan. • Inventory for PDIF is running at 30 days’ Aggregate sales, production & inventory supply, while the target is 60 days. • Customer announced that they will not order Longer-term horizon: 3 – 12 months during Sept. to reduce year end inventory. What is the impact on our forecast and production plan? Accountability to business plan • XXX is 50% below plan for the second year in a Driven by key performance measures row. Should we abandon the product line? Action plans to align operations with the business plan. 5
- 6. What are the Benefits ? Hard Benefits: Higher Fill Rates Lower FG & RM Inventories Shorter Customer Order Lead Times Shorter Purchase Lead Times More Stable Production Rates Less Unplanned Overtime Lower Operating Costs 6
- 7. Soft Benefits: Enhanced Teamwork - Operating Level Mgt. Enhanced Teamwork - Executive Mgt. Improved Access to Important Information Better Decisions with Less Effort and Time Better Financial Plans with Less Effort and Time Greater Accountability Greater Control Top Management’s Handle on the Business 7
- 8. S&OP Deliverables Sales Rolling 12 – 18 month product family sales forecast Fiscal year deviation from budget/plan Customer Service measure Realistic new product introduction schedule Production Rolling 12 – 18 month product family product plan Comparison of actual vs. planned production Plant manpower requirements Plant operating schedule – open / close dates 8
- 9. S&OP Deliverables Purchasing Supplier Performance Reporting Supplier Capacity Analysis Sourcing Plan Inventory Management Rolling 12 – 18 month inventory projections Deviation to budget Analysis of inventory turns and days’ coverage A More Accurate Forecast 9
- 10. The Monthly S&OP Process Step #5 •Decisions Executive •Company S&OP Meeting Game Plan Step #4 Pre-SOP Meeting • Recommendations & Agenda for Exec Meeting Step #3 • 3rd-pass spreadsheets (consensus, alternatives, what-ifs) Supply Planning • Capacity constraints • 2nd-pass spreadsheets (with new production plan) Step #2 Demand • Management Forecast Planning • 1st-pass spreadsheets (with new forecast) Step #1 Run Month End Reports •Statistical Forecasts •Field Sales Worksheets End of Month 10
- 11. S&OP: Key Points Balance demand & supply Harmonize units & dollars, one set of numbers Focus is volume and medium/long term Monthly cycle Cross-functional Decision-making Window into the Future Top Management’s Handle on the Business 11
- 12. S&OP What Works and What Doesn’t WORKS DOESN’T WORK Insist on Highest Level Try to Succeed With Mid-Low Participation as Possible Level Representation Have Cross-Departmental Limit the Participants to Participation Friendly Parties SCM Prepare, Analyze, Allow Sales to Own the Facilitate the Forecasting Forecasting Process Process Review Past, Focus on Future Dwell on the Past, Look Out (3-18 Months) Only 1 to 6 Months 12
- 13. S&OP What Works and What Doesn’t WORKS DOESN’T WORK Use the Forecast Before it is Expect the Forecast to Precisely Perfect Predict the Future Use Metrics to Measure Manage by Feel or Intuition Success Alone Use Pareto Analysis (Over & Assume all Products are Created Over) Equal Focus on the Business Think the System is the Silver Processes that are Needed Bullet 13
- 14. S&OP What Works and What Doesn’t WORKS DOESN’T WORK React to Near-Term Spikes Change the Forecast after the fact Learn to Speak in Terms of Use only APICS Jargon Each Participant Use Lag Time Analysis Review 1 Month Back/Forward Strive for Consensus Insist on Winning Every Argument 14
- 15. S&OP What Works and What Doesn’t WORKS DOESN’T WORK Take Notes & Follow Up Assume People Will Do What is Assigned to Them Prepare an Agenda – Run a Run a Disorganized Meeting Good Meeting Celebrate Successes Dwell on Failures 15
- 16. Summary • It’s the Business Process, not the software that makes the difference. • Get started now and perfect it as you go along. • Paretto, Paretto, Paretto • Assign Responsibility and Follow-Up • Gain Consensus Whenever Possible • Develop and Use Metrics (Not too Many) • Set Fair, Achievable Goals 16