Sales and Operations Planning An entry Visa into the competitive Present

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Sales and Operations Planning An entry Visa
into the competitive Present

• SAPICS Summer Conference, Cape Town 2008
• Farayi Kambarami 17 October 2008

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Agenda

• 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

• 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

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The Business Challenge(s)

• 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

• A subset of the synchronisation problems is
  typically answered through one of the business
  functions/departments e.g.

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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 co-ordination
  action and huge cost in terms of either lost
  sales or incorrect inventories.
• 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

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Sales and Operations Planning as a co-ordinated
response

• 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.

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How does it work

• Traditionally organised around four meetings with
  specific pieces of work being done in between
  them.
• Demand Review Meeting
• Supply Review Meeting
• Pre-SOP Meeting/Integrated Reconciliation
  Meeting
• Executive SOP/ 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

• Advanced forms of SOP 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.

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Demand Review Meeting

• With clarity on products to be marketed, the next
  set of questions answered in the SOP process
  are
• 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
• 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
• 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

• 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
• 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
• Metrics Reviewed
• 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-SOP Review

• Depending on tool availability/support
• The outcome of the Supply Review are sent to the
  financial team for financialisation.
• Pre-SOP 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.
• 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 SOP meeting run by the senior
  managers
• The process output
• Recommended final Company Sales and Operations
  Plan for discussion in the main SOP 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 SOP

• 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

• 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
From Dr Larry Lapide MITs article SOP A
Diagnostic Model JBF Spring, 2005
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Implementation Readiness- An alternative view
Phase 4 Integrating all business processes with
technology
Phase 3 Automation Knowledge Based Automation of
all processes
Time
Phase 2 Business Process Control Eliminating
failure in business process
Phase 1 Co-ordination Eliminating unplanned
events - do routine things routinely
Journey to Excellence Source Oliver Wight,
Successful SOP through Integrated Business
Management
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Setting it up

• 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 SOP

• 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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• Useful References
• Business Forecasting edited by Chaman L. Jain
• Oliver Wights Successful SOP through
  Integrated Business Management
  (www.oliverwight.com)
• IBFs Journal of Business Forecasting Archives
  (various articles by various authors) only
  available to IBF members

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• Questions?
• Comments?
• Anything else?