Sopworkshop 12964193114545 Phpapp02

TruEconomy Consulting The Supply Chain Experts
S&OP Workshop

How to Understand It
How to Implement It with Low Risk and
Low Cost
TruEconomy Consulting
Arjen Bakker
09 Juni 2010
TruEconomy Consulting The Supply Chain Experts 30 January, 2011 2
Agenda
Introduction
Introduction S&OP
The Supply Chain
The S&OP Process
Data gathering
Demand management
Supply Planning
Pre-Meeting
Executive Meeting
Implementing the Live Pilot
Needed capabilities and best in class examples
Welcome and introductions
Please introduce yourself, giving the following information:
What is your name and position?
Why are you interested in S&OP?
What do you want to get out of this workshop?
Agenda
Introduction
Introduction S&OP
The Supply Chain
The S&OP Process
Data gathering
Demand management
Supply Planning
Pre-Meeting
Executive Meeting
What is S&OP
A number of business processes
That consist out of:
Executive S&OP
MPS Master Production Scheduling
Detailed planning for production and suppliers
(MRP)
What is S&OP?
Creates a balance between supply and
demand

What is S&OP?
Makes use of item groups - consolidated
(numbers and dollar value)
Is a monthly cycles
Is cross-functional
General management
Sales
Manufacturing
Finance
R&D
The S&OP connection
Strategic Planning
Business Planning
Disconnect!!!
Detailed Planning,
Scheduling &
Execution
Without S&OP
Strategic Planning
Business Planning
S&OP
Detailed Planning,
Scheduling &
Execution
Including S&OP
S&OP Optimizes Enterprise by Resolving Competing Objectives
Manufacturing:
Maximize output
Finance:
Minimize manufacturing and distribution costs
Maximize profit
Marketing/Sales:
Increase Sales

Sales &
Operations
Planning
Engineering/Design:
Increase speed to market
Distribution:
Maximize on-time delivery
TruEconomy Consulting The Supply Chain Experts 30 January 2011 10
Multiple,
non-integrated
systems
Manual processes
Multiple data sources
Financial
Planning
New Product
Planning
Sales
Quotas
Production
Planning
Measurement
and Reporting
Marketing
Forecasting
Your Company
Introduction Traditional Approach Disconnected
High latency, limited collaboration, no consensus forecasting
No connection between plans, plans not tied to execution
Misalignment between metrics and objectives
Unreliable forecasts and production plans
?
Supply chain planning processes
Procurement Production Distribution Sales
Strategic Network Design
Master Planning
Demand
Planning
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Allocation
Planning
Transport
Planning
Transport
Scheduling
Production
Planning
Production
Scheduling
Strategic
Tactical
Operational
Inventory Planning
Supply Chain Visibility
11
S&OP focus and level of granularity (1/2)

Operational

Tactical
Strategic
Strategic Network Design
Master Planning
Demand
Planning
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Allocation
Planning
Transport
Planning
Transport
Scheduling
Production
Planning
Production
Scheduling
Inventory Planning
S&OP
12
S&OP focus and level of granularity (2/2)
Process
Rolling
Horizon
Horizon
Granularity
Review
Frequency
Level of
Aggregation
Focus / Objectives
Sales &
Operations
Planning
12-18 months Months Monthly Group or family
- 3 months into the future and beyond
- Review NPI and demand outlook
- Align supply (make/buy/move) with demand
Master
Planning
2-6 months Weeks Weekly Product
- Within the next months
- Create feasible short-term plan
- Plan make/buy/move within constraints
Scheduling 1-4 weeks Days Daily Product
- Within the next weeks
- Schedule make/buy/move
- Manage unplanned events such as sudden material
shortages and demand changes
Sales &
Operations
Planning
- - -
Master
Planning
Scheduling
m+18 m+2 m+3 m+4 m+5 m
w+3 w+4 w+5
m+1
w+2 w+6 w+7 w+8 w+9 w+10 w+11 w w+1
13
What are the potential benefits of S&OP?
"Hard" benefits
Higher customer service
Lower inventories
More stable use of supply chain resources
Faster new product introductions
Reduced obsolescence

"Soft" benefits
Tighter link between strategy and tactics
Better decisions with less effort
One set of numbers (units, )
Enhanced teamwork across functional boundaries
14
What does it cost?
In contrast to these sizeable benefits, the costs to
implement Executive S&OP can be small

The primary "costs" in making the process work are not
financial, but are in time, energy and the need to change
A - People
B - Process
C - Data
D - Software
15
Agenda
Introduction
Introduction S&OP
The Supply Chain
The S&OP Process
Data gathering
Demand management
Supply Planning
Pre-Meeting
Executive Meeting
The supply chain
Suppliers
(multiple tiers)
Each industry has its own supply chain structure and issues, but many
principles are common
Manufacturing
sites
Consumers
Business
customers
Retailer DCs
Other
manufacturers
Retail stores
Manufacturer
DCs
Demand information
Product flow
17
Supply Chain Operations Reference model
Every company has its own internal supply chain and is also part of an industry
supply chain
A companys supply chain is managed by five high-level processes: plan,
source, make, deliver, return
The supply chain is a subset of the companys value chain, which also includes
processes that enable a company to bring products from concept to market
SCOR v9.0
Develop
Products
Sales &
Marketing
18
Variability in the electronics industry
-60.00
-40.00
-20.00
0.00
20.00
40.00
60.00
80.00
100.00
1961 1965 1969 1973 1977 1981 1985 1989 1993 1997 2001
Year
%

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,

Y
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Y
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World GDP ECC Output Semi Shipments Semi Equipment Shipments
Source: Upstream Volatility in the Supply Chain: The Machine Tool Industry as a Case Study, E. Anderson, C. Fine and G. Parker, Production and Operations Management, 2000
19
Variability in the automotive industry
-80
-60
-40
-20
0
20
40
60
80
1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991
%

C
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Y
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GDP Vehicle Production Index New Orders Machine Tool Industry
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Variability in the pasta industry?!
Source: Designing and Managing the Supply Chain: Concepts, Strategies and Case Studies, D. Simchi-Levi, P. Kaminsky, E. Simchi-Levi, 3
rd
edition, 2008
1994 by the President and Fellows of Harvard College. Case study written by Janice H. Hammond of Harvard Business School.
21
Demand variability is amplified in the supply chain:
upstream echelons face higher variability

What you see is not what they face
The bullwhip effect
Tier 1 Supplier
Factory Distributor Customer Retailer
Equipment
22
Consequences of the bullwhip effect (1/2)
Increased safety stock
Reduced service levels
Service
Level
L H
H

L
Inventory Level
100%
For a given inventory level ,
service level is reduced
For a given service level ,
inventory level is increased
23
Consequences of the bullwhip effect (2/2)
Increased safety stock
Reduced service levels
Inefficient allocation of resources
transportation, storage, handling etc.
24
Key cause of the bullwhip effect
Demand forecasting
by each stage of the supply chain
based on orders from the next
without visibility of end-customer demand
mistaking behavior for trend
Chinese whispers
25
Other causes of the bullwhip effect
Batch ordering
volume discounts
transportation discounts
sales quotas / incentives
invoicing payment terms (e.g. EoM T+30)

Price fluctuations (e.g. promotions)
stock up when prices are low

Shortage gaming
fair share logic
artificially inflated orders during shortage periods
26
Agenda
Introduction
Introduction S&OP
The Supply Chain
The S&OP Process
Data gathering
Demand management
Supply Planning
Pre-Meeting
Executive Meeting
Monthly Executive S&OP Process
Step 1
Data
Gathering
Step 2
Demand
Planning
Step 3
Supply
Planning
Step 4
Pre-
Meeting
Step 5
Exec
Meeting
Actual Demand,
Supply, Inventory, &
Backlog + Statistical
Forecasts and
Worksheets
Management Forecast
1st-pass spreadsheet
Resource Requirements
Plan Capacity Constraints
2nd-pass spreadsheet
Decisions,
Recommendations,
Scenarios & Agenda for
Exec Meeting
Decisions
& Updated
Game Plan
End of
Month
Bron: Sales & Operation Planning, The How-To Handbook: T.F. Wallace & R.A. Stahl
Step 1
Description
Data Gathering
Activities
Collection of forecasts
Collection of last month sales/performance
Collection of stock/inventory data
Perform statistical analysis
Complexity by
Complexity of Supply Chain
Countries (Currency, Unit of Measure)
Number of Participants in the Supply Chain
Clock-speed of Products and Development
Accuracy of Data
Level of IT integration and In-house knowledge of data systems
The need for Point of Sales Data
Possible tools
Excel, for simple Supply chains
Demand Consensus, suitable for tracking of forecast accuracy and consolidation
Demand Forecasting, suitable for Statistical Analysis and Future Assumptions
Data Gathering
Participants
IT, ERP specialist
DM Manager
S&OP Process Owner

Agenda
Updating the files with
data from the month just
ended
Sales analysis data
Statistical forecast
reports
Data trends
Disseminating this
information to the
appropriate people
30 January, 2011 30
Introduction - Forecasting
Laws of forecasting

1. The forecast is always wrong

2. The longer the forecast horizon, the worse
the forecast

3. Aggregate forecasts are more accurate
32
Spare Parts and Forecasting
What is the nature of spare parts?
Difficult to predict
Intermittent demand
Not having parts costs probably more than costs of the
part
Shortening life cycle (Clock Speed) parts, service life
cycle remains the same

30 January, 2011 33
Insights in SPM
Service business provides an attractive margin
for manufacturers
After-sales provides additional revenue to product sale
Profit share is much higher than for product sales
Source: AMR
Revenue Profit
Service
product
24%
45%
76%
55%
Service carries significant
higher profit margins than
product sales.
34
Service vs. product supply chain
35
Spare Parts
Installed Base
Maintenance Schedules
Service Level Agreements
Design for Maintenance FMEA
Kits
Intermittent forecast engines
Input for the Demand Planning step

30 January, 2011 36
Strategy based on type of service and costs
Material
Requirements
Planning
(MRP)
II
Spare Parts
Management
(SPM)

IV
I

MRP/SIC
III
Statistical
Inventory
Control
(SIC)
30 January, 2011 37
Preventive Corrective
E
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Segmentation
Flexibility
Required Response Time
Lead Times
Demand Uncertainty
Economies of Scale
Demand Uncertainty
Cost of Lost Sales
Bulk Purchase Price
Segmentation

Product
Value
M
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Low
L
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High
Base Service
Differentiated
Service
Differentiated
Service
Mission Critical
Service
Service Parts
Customers
S
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What Level of Service Provider?
30 January, 2011 40
Examples algorithms for SPP
MTBR Forecast use the Mean Time
Between Repairs Forecast computation to
forecast demand for parts for which you
have no historical data.
Modified Crostons method when demand is
intermittent
30 January, 2011 41
Software landscape Oracle Services
Service Contracts
Handles contract management and provides centralized repository for entitlement
information. Customer specific contracts through pre-defined validation and
automatic creation and updates of warranties from bills of material.
Installed Base
Oracle Installed Base is the core building block for all Service Applications. It tracks
installed base products throughout their entire lifecycles, providing product specific
feedback.
Spares Management
Covers logistics and planning for the service supply chain. Handles replenishment of
service vans and service organization. When used together with Advanced
Scheduler parts availability can be factored in maintenance and service schedules.
Depot Repair (CSD).
Covers reverse logistics and all aspects of in-house repairs. Integration with Service
Contracts and Field Service for aftermarket service, warranties and billing.
30 January, 2011 42
Software landscape Oracle Service Parts Planning
Works with Oracle Service
Integration to Oracle Spares Management for external repairs and technician
inventory .
Integration to Oracle Depot Repair for internal repairs
Service Planner Workbench
with integrated forecasting and replenishment planning to efficiently support service
parts planners
Unique capabilities to support high volume forecasting and replenishment
Incremental planning and interactive re-planning
Auto-release rules to automatically release planning recommendations to service
execution
Demantra for forecasting
30 January, 2011 43
More solutions possible
30 January, 2011 44
Step 1
Data
Gathering
Step 2
Demand
Planning
Step 3
Supply
Planning
Step 4
Pre-
Meeting
Step 5
Exec
Meeting
Actual Demand,
Forecasts and
Worksheets
Management Forecast
Decisions,
Recommendations,
Exec Meeting
Decisions
& Updated
Game Plan
End of
Month
Stap 2: Demand Planning
Analyzing data
Analyzing forecast accuracy previous months
Generating a new forecast (what if)
Use the knowledge of Sales and Marketing
Existing and New products
Describing assumptions
Is the first S&OP sheet
Approved by the CSO
The demand review meeting
Participants
Demand Manager
Forecast Analyst
New Products Coordinator
S&OP Process Owner
Customer Service Manager
Accounting Manager
Salesperson
Sales Administration
Manager
Product Manager
Sales Manager
Supply Chain Manager
Spare Parts Planner
Agenda
Review history and KPIs
Review forecast
Focus on top changes
Review financial impact
Agree corrective actions

47
The forecasting process
Forecast
Consensus
Forecast
Sales/Demand
History
Orders
Shipments
Demand
Market Intelligence
Market Trends
Market Activity
Events
Promotions
Campaigns
Forecasting
Input
Review
Amend
Agree
Publish
Measure
Stages
Customer
Information
PoS
Forecasts
Statistics
Judgment
Finance
Planning
Marketing
Sales
Operations
48
Importance of forecasting
Loss of volume price breaks
Higher freight costs
Higher finished goods inventory
Reduced Production productivity
Higher finished
goods inventory
& warehousing
costs
Higher
shipping
costs
Lower revenues
Raw Material
Expediting
Schedule
Changes
Inaccurate
Production
Schedules
Poor
Demand
Planning
Erratic
Demand
Customer
Switching
Stockouts
And Late
Orders
Increased
Safety Stock
Small Shipments
And Shipping
Between
Warehouses
49
Sandbagging
Over 60 Percent say competing departmental
incentives cause sandbagging games.
Sales
Distribution
Marketing
Low forecast =
Easy to reach bonus
goals.

High forecast =
Produce extra stock
to cover orders.
High forecast =
To obtain approval of
Marketing plan
Introduction - Benefits
Quantified Benefits of Improved Forecast Accuracy using Demand
Planning
Customer
Service (5-15%)
Throughput (2-5%)
Planning Cycle Time (95%)
Operating Expenses
(overtime) (-10% to -50%)
Inventory--raw, WIP, FG (-10% to -25%)
Order lead time (-10% to -40%)
Production lead time (-10% to -50%)
revenues expenses
assets
ROA
Statistical forecasting pitfalls
Demand vs. sales

New products (incl. impact on old products)
Promotions
This time its different!
Economy
Competition
Legislation
Fashion
.
Id like....
.
we dont have ....
DEMAND
.
but we do have ....
.
OK, Ill buy it....
SALE
52
Forecasting summary
Forecasting is a process
One number
Internal and external stakeholders involved
Choose the right level and frequency
Use statistical forecasting, but understand its limitations
and dont overdo it
Integrate financials in the forecasting process
Measure and reward good performance
Accuracy and bias
53
NPI defined
Product phase-in and phase-out

Related activities
engineering changes
transfers
etc.
from the moment a decision is taken
(launch, transfer etc.)
to the moment that data is available for planning
54
NPI meeting
Participants
Sales & Marketing
Product Development
Supply Chain
Operations
Agenda
Review phase-in
Review phase-out
55
Consensus planning functionality
Consensus planning
Hierarchies
Product
Market
Time
Measures
Sales, marketing, planning, BU,
finance, customer etc.
Demand and supply
Units and
etc.
Views
Hierarchy level and measures
depending on role
Aggregation / disaggregation
Bottom-up forecasting
Top-down forecasting
What-if forecasting
Calculations
Sales
Mgrs
Sales
Forecast
Sales: Plan by Product Line
Plant
Mgrs
Operations
Forecast
Manufacturing: Plan by Plant
Sales Reps
Marketing
Forecast
Marketing: Plan by Region
Asia Americas
Finance
Forecast
Finance: Budget in Dollars
56
Automation functionality
Internal integration with ERP system(s)
Master data
Products
Customers
Transactional data
Sales orders
Customer shipments
Invoices
Stock
External integration with customers/suppliers ERP systems
POS
VMI
SMI
Statistical forecasting
New product planning
KPI calculations
Archiving
57
Productivity functionality
Workflow-based and exception-based planning
Alerts (process/data)
Task logs, notifications and reminders
Integration with Excel
Offline mode
Comments and audit trail
Authorizations
58
Step 1
Data
Gathering
Step 2
Demand
Planning
Step 3
Supply
Planning
Step 4
Pre-
Meeting
Step 5
Exec
Meeting
Actual Demand,
Forecasts and
Worksheets
Management Forecast
Resource and material
Requirements Plan
Capacity Constraints
Decisions,
Recommendations,
Exec Meeting
Decisions
& Updated
Game Plan
End of
Month
Step 3
Description
Supply Planning
Activities
Use Routings and Work Center Data for defining the bottlenecks
Use Supply and Transportation Data for constraint analysis
Use of control charts for verifying data
Calculation of Capacity as requested in the demand plan
Complexity by
Accuracy of Routings and Work Center Parameters
Complexity of Routings (Aligned of non-Aligned resources)
New Products with no or not tested data
Complexity of Supply Chain, what will be the bottleneck?
Complexity of Supply Chain, transportation between Supply Chain Partners
Possible tools
ERP, Perform Rough Cut Capacity Planning with consolidated data (difficult to separate
from daily operations), Check critical items
S&OP software with linkage to the ERP Routings, Work Center data and BOM.
S&OP with Strategic Network Optimization, perform Rough Cut Capacity Planning in
consideration of the whole Supply Chain
The supply review meeting
Participants
Accounting Manager
Distribution Manager
Logistics Manager
Master Scheduler
Materials Manager
New Products Coordinator
Plant Manager
Production Control Manager
Purchasing Manager
QA/QC Manager
S&OP Process Owner
Agenda
Review top demand
problems and root
causes
Most critical items
Highest quantities
Review top inventory
problems
61
The supply planning process
Demand
Consensus Forecast
Orders
Master Data
SC Model
Locations, BOMs,
BODs, Resources etc.
SC Parameters
LTs, Stock Targets,
Frozen Periods etc.
Supply
Planning
Input
Review
Amend
Agree
Publish
Measure
Stages
Automatic
Modifications
Finance
Planning
Marketing
Sales
Operations
Transactional Data
Stock On-Hand
Stock In-Transit
Open P/Os
Capacities
etc.

Plans
Shipment Plan
Production Plan
Procurement Plan
Confirmed Forecast
62
Supply chain parameters
SUPPLIER MANUFACTURING DISTRIBUTION CUSTOMER
Service
C
o
s
t

Stock
Lost Sales
Inventory vs. Service
Order Size
C
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s
t

Stock
Admin
Economic Order Quantity
Capacity
C
o
s
t

Capital
Stock
Capacity vs. Pre-Build
There are a series of trade-offs across the supply chain
Setting parameters determines how the trade offs are resolved!...
63
Why lower inventory levels?
Product
Quality
Design
Price
Higher margins
Lower investments per product unit
Faster reactions
Reliable Delivery dates
Shorter Lead Times
Fabricage met een hoog voorraadniveau
Fabricage met een laag voorraadniveau
Kwaliteitsbeheersing
Productmodificatie
Hoge Marges
Investering per eenheid
Het stipt nakomen van levertijden
Constrained vs. unconstrained planning
Constrained planning
Create supply feasible plan by
considering constraints as hard
How much demand can be
satisfied?
What / where / when is needed
to buy / make / ship?
Unconstrained planning
Identify bottlenecks by
considering (some) constraints
as soft
If all demand is to be satisfied
on time, what is needed?
Capacity
Wk 11 Wk 12 Wk 13 Wk 14 Wk 15
Extra capacity needed:
for negotiation
Supply
Problems
Capacity
Wk 11 Wk 12 Wk 13 Wk 14 Wk 15
Extra demand:
dropped or delayed
Demand
Problems
Step 1
Data
Gathering
Step 2
Demand
Planning
Step 3
Supply
Planning
Step 4
Pre-
Meeting
Step 5
Exec
Meeting
Actual Demand,
Forecasts and
Worksheets
Management Forecast
Decisions,
Recommendations,
Exec Meeting
Decisions
& Updated
Game Plan
End of
Month
Step 4
Description
Sales and Operations Planning
Activities
Consolidated view of Demand and Supply
Perform What-If analysis on product Mix and or Volume
Perform optimization based on:
Which customers do you want to be served?
What outcome gives me the highest profit?
Storage of the assumptions made and learning from assumptions in the past
Complexity by
The need for Graphs
The need for Real-Time analysis
Translation of quantities into dollar value
Security on data and calculations
Possible tools
S&OP software with integrated DM and RRP
S&OP software with integrated DM, RRP and SNO for the more complex Supply Chains
The pre-meeting
Participants
People from previous
steps
Plant manager
Logistics manager
Product manager
Customer service manager
Master scheduler
Accounting manager
One person (at least)
from the finance area
The owner of the S&OP
process.
Agenda
Review top demand
problems and root
causes
Most critical items
Highest quantities
Review top inventory
problems
75
Example of Demand/Supply strategies
Per product family we decide on:
Make-to-Stock
1. Customer Service Level
2. Inventory levels finished goods
Make-to-Order
1. Customer Service level
2. Customer Order Lead time
Example Make-to-Stock Sheet
30 January, 2011 77
0
10
20
30
0
50
100
150
200
250
300
Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar
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The Acme Widget Company Medium Widget Sales & Operations Plan Make-to-Stock
ACT SALES
ACT OPERATIONS
ACTUAL INVENTORY
NEW FORECAST
NEW OPERATIONS
PLAN
PLANNED DAYS ON
HAND
TARGET DAYS ON
HAND
Example Make-to-Order Sheet
30 January, 2011 78
0
2
4
6
8
10
0
5
10
15
20
25
30
Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar
B
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k
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(
W
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s
)

0
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The Acme Widget Company Large Widget Sales & Operations Plan Make-to-Order
ACT SALES
ACT OPERATIONS
ACTUAL BACKLOG
NEW FORECAST
NEW OPERATIONS
PLAN
PLANNED BACKLOG
TARGET ORDER
BACKLOG
Step 1
Data
Gathering
Step 2
Demand
Planning
Step 3
Supply
Planning
Step 4
Pre-
Meeting
Step 5
Exec
Meeting
Actual Demand,
Forecasts and
Worksheets
Management Forecast
Decisions,
Recommendations,
Exec Meeting
Decisions
& Updated
Game Plan
End of
Month
Executive meeting objectives

The purpose of the Executive meeting
is to update the business plan
(sales, operations, finances)
as a result of changes
in the external and internal environments
80
Executive meeting
Participants
President (General
Manager, COO)
Vice-President of:
Sales
Marketing
Supply Chain
Operations
Product Development
Finance
Logistics
Human Resources
Agenda
Macro Business review
Customer Service
Performance
New Products
Family-by-Family review
and decisions
Production/Procurement
Rate changes
Collective Impact of
Business Plan
Recap of Decisions
Made
Critique of Meeting
81
KPIs defined

A key performance indicator (KPI) is a
performance measure that enables the
organization and the individuals in the
organization to determine whether or not
they are meeting their objectives
82
KPI framework
Business
Value
Revenue
Operating
Costs
Working
Capital
Service level
Obsolescence cost
Inventory cost (%COGS)
Forecast accuracy
Cost of organization
SC cost (%COGS)
Forecast bias
Stat. forecast accuracy
Inventory turns
Finished good inventory
Materials inventory
Service to request
Service to promise
Service to VMI
Manufacturing cost
Transportation cost
Warehousing cost
Utilization
FTE cost
IT cost
Process
Plan adherence
Process adherence
Non-compliance
Procurement cost
83
Agenda
Introduction
Quick S&OP review
The Supply Chain
The S&OP Process
Data gathering
Demand management
Supply Planning
Pre-Meeting
Executive Meeting
Two Important things
1. Even though the logic of S&OP is simple,
implementing is not. Implementing it
requires people to make changes to do
some aspects of their jobs differently up
to and including the senior executive in
charge of the business.
2. It will take an investment of time to fully
digest and become comfortable with the
new methods because this is not an
extension of past experience.
30 January, 2011 85
S&OP Implementation Path
Months
Fase I
Live Pilot
Fase II
Expansion
Fase III
Financial
Integration
Fase I Live Pilot
1
ste
Month
Assignment of Responsibilities
Kickoff Education & Planning
Development of the Project Schedule
Product Families, Subfamilies & Resources
Data Requirements, Sources & Displays
2
de
Month
The Demand Planning Processes
The Supply Planning Processes
3
de
Month
Pilot Preparation & Execution
and Go/No-Go Decision
Assignment of Responsibilities (1)
Executive Champion/Sponsor
Keeping executive attention focused on initiative
Removing impediments
Acquiring needed resources
Supporting the people doing the heavy lifting
Core Team Members
Good People skills
Proactive and well organized
Able to lead a meeting effectively
Knowledge of the business (politics)

30 January, 2011 88
Assignment of Responsibilities (2)
S&OP experts role:
Teach and thus help create a credible vision of
the future
Encourage
Provide expert advice on the technical aspects
families, units of measure, formats,
composition of the teams and so on
Head of problems before they occur
Help solve problems that have already occurred
Communicate directly with the President on
problems, impediments, issues, and so forth

30 January, 2011 89
The First Executive Meeting
The first Executive Meeting is intended to be
primarily a learning experience.
Understanding how the process will work.
It wont be perfect and may not even be
highly polished
We may not have all the data we need
Were working to get all the data, but we do
not want to delay the implementation by
waiting for it
30 January, 2011 90
S&OP Implementation Path
Months
Fase I
Live Pilot
Fase II
Expansion
Fase III
Financial
Integration
Unit sales plans should drive the S&OP process, but the
latest financial plans are an additional input
A good financial view of unit plans should be readily
available during the sales planning process
Financials in sales planning
List Price
Invoice Price
Pocket Price
Cost Price
etc.
etc.

Sales history
Statistical forecasts
Sales plans
Sales targets
Financial budgets
Consumer Price
92
Creation of financial plans
Confirmed unit plans should drive financial plans
not the other way around
Management overrides should be backed up by reasoning
30 January, 2011 93
Unit
Sales Plan
(Wish)
Unit
Sales Plan
(Confirmed)

Financial Plan
(Initial)

Financial Plan
(Final)
Management Overrides

S&OP
Financial Planning
Alignment of financial and S&OP processes
The frequency and timing of the S&OP and financial
processes should be aligned
S&OP S&OP S&OP S&OP S&OP S&OP
Annual
Budget
Quarterly
Budget
Dec Nov Jan Feb Mar Apr
94
Agenda
Introduction
Quick S&OP review
The Supply Chain
The S&OP Process
Data gathering
Demand management
Supply Planning
Pre-Meeting
Executive Meeting
TruEconomy Experience - Philips
Introduction planning
hierarchy
Implementation S&OP
process
Focus on developing
consensus realistic
planning
Changed organization
roles & responsibilities
Introduced new KPIs
30 January, 2011 96
TruEconomy provides us with
a unique portfolio of
knowledge and skills, which
are very important in large and
complex supply chain
management environments
like ours. They are truly supply
chain experts

Piet van der Plas,
Sr.Director, Philips Consumer
Lifestyle
TruEconomy Experience High-tech France
Assessment of the
current S&OP process
S&OP process
improvements
Help with item
classification and
aggregation
New forecasting
procedures and new
forecasting KPIs
Project Deliverables:
5m inventory reduction
1m annual savings
30 January, 2011 97
TruEconomy Experience - Bugaboo
Assessment of the
current supply chain
Improvements in the IT
landscape
Implementation of the
S&OP process
Implementation of new
KPIs
Project Deliverables:
25% increase in forecast
accuracy
5% improvement in fill rates
40% improvement in OTIF
20% reduction in order lead time

30 January, 2011 98
Enable Event-Driven S&OP
BEST PRACTICE EXAMPLE
Company Overview
Holcim is one of the largest suppliers of Portland
and blended cements and related mineral
components in the U.S., with 16 plants and around
76 distribution centers
Focused on
Optimizing sourcing with full consideration of
transportation costs and make-vs.-buy options
Managing higher and volatile costs
Synchronizing its strategic sourcing modeling with
its S&OP process to ensure that it was perpetually
running with optimum network and sourcing models
Resulting in
Significant reduction of barge demurrage fees
Improved supply chain risk management
Quickly evaluated supply/demand options for
minimizing the impact of natural disasters and other
supply chain disruptions (such as strikes)
Cost optimization across the supply chain
Source: Tim Payne, Gartner. Case Study: Holcim Uses Network Optimization to Manage Supply Chain Risk and Optimize Costs; July 6, 2009
2 3 4 5 1
Enable Event-Driven S&OP by Employing
Robust What-If" Capabilities
Rapidly Assess Constrained, Profit-Optimized Scenarios
99
Enforce Executive / Strategic S&OP Decisions
BEST PRACTICE EXAMPLE

Company Overview
Leading producer of aluminum and aluminum products,
with annual revenues over $20 billion
Focused on
Determining profit-optimized mix of products to produce
on bottleneck equipment, managing around
High relative cost of transportation for shipping aluminum
Risks posed by due to commodity market price fluctuations
Widely varying margins of products produced on common
capital equipment such as smelters and rolling mills
Improving forecasting process integration, accuracy
Ensuring smelters execute to strategic, globally
profit-optimized production and transportation plan
Resulting in
Scheduling cycle time cut from 1-2 weeks to minutes
Reduction in inventory and transportation costs
Increased profitability of products produced in smelters;
mitigating risk of commodity price changes
Improved customer svc: more accurate ship dates based
on supply and resource allocations in the S&OP process
Source: Tim Payne, Gartner. Case Study: Alcoa Leverages Oracle to Enable Its Demand Planning and S&OP Processes; February 5, 2009
Enforce Executive / Strategic S&OP Decisions at the Operational
Planning Level
Integrate Plans and Planning Processes
100

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TruEconomy Consulting The Supply Chain Experts

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