15/08/59

SALES AND OPERATIONS PLANNING (S&OP) LOGISTICS SHOWCASE #8 2559

เอกรัตน์ รุ จิรเศรษฐกุล , CPIM, ESLog, MILT [email protected], +66883991988

Working Experiences 20+ years ใน Supply Chain and Logistics for AECs. Education and Professional qualification. - M. Eng - RMIT Melbourne - B. Eng - KMITNB - B BA Marketing สุ โขทัยธรรมาธิราช - Professional Diploma Level 5 in Logistics and Transport, CILT - CPIM, APICS รวบรวมโดย อ. เอกรัตน์ รุ จิรเศรษฐกุล, CPIM โทร 0883991988

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Topics  Why do you need S&OP?  Sale and Operations Planning Process (S&OP)  What is S&OP?  Objectives of S&OP.  S&OP approach and its core processes.  Case study  New version of S&OP  Wrap up

Why Do you need S&OP? – Sale and Operations Planning (S&OP)

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Traditional Approach – Disconnected High latency, limited collaboration, no consensus forecasting Your Company Financial Planning

Production Planning

New Product Planning

Sales Quotas

Manual processes Multiple data sources

Marketing Forecasting

Measurement and Reporting

Multiple, non-integrated systems

Low forecast accuracy Departmental orientation to demand forecasting Misalignment between metrics and objectives Not tied to Sales and Operations Planning process

?

Better Approach Real-time demand sensing and collaborative consensus forecasting • Eliminate decision making latency by focusing on excellence in demand visibility • •

Sense demand more frequently and closer to the point of consumption Replace spreadsheets with one number demand management Collaborate with all constituents

• Improve your forecast accuracy •

Use advanced analytics and statistics

• Shape demand •

Promotion excellence and decomposition

• •

Leverage granular demand signals (customer, channel, store, shelf) Identify and simulate cross selling opportunities

• Evolve to real-time S&OP • • • •

Profitable demand response Identify supply side opportunities Define and monitor customer based metrics Get real time visibility to sales tactics (price breaks, promotions, deals)

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Demand Driven – Significant Benefits Demand Driven leaders have: • 15% less inventory • 17% stronger order fulfillment • 35% shorter cash-to-cash cycle times

350 300 250 200

Which translates to: • 60% better profit margins • 65% better EPS • 2-3x the ROA

150 100 50 0 Strong

Improved Demand Management is the first important step !

Perfect Order Cash-to-Cash

Weak

Inventory SCM Costs

Source: AMR Benchmark Analytix

Sale and Operations Planning (S&OP)

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S&OP is …  A Capability Improvement Process  Proactive vs. Reactive Business Management approach  Demand Driven, requiring cross-functional collaboration and the use of demand insight  A fundamental organizational change effort involving the entire organization

What is S&OP to the Business An Integrated Business Management Process with the objective of matching/reconciling plans throughout the business to the latest information inside and outside of the company, thus ensuring:  one company agenda  with one set of priorities  managed through one integrated set of figures

Regular S&OP review (monthly cycle) reduces actual-to-demand variance and allows timely and necessary corrections across the value chain to achieve  operational excellence (top & bottom line)  with sustainable service

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Global S&OP - objectives The objective globally is to:  At a Regional (local) level  Balance Supply and Demand  Establish Relevant Strategy & Policy to achieve Financial and Operating plans  Enable regional planning & action with global

visibility to support  

Excellent, Sustainable Service with Superior Operational Performance

S&OP – Benefits More accurate budget forecasting Better promotion planning Improved product life-cycle management Improved visibility of demand/supply across the company Improved inventory management Improved:  OTIF  Gross Margin  Profitability  Customer Retention

Companies that are better able to forecast have 15% less inventory , 17% better fulfillment and 35% less cash to cash cycle times than their peers per AMR

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Key indicator to improve customer satisfaction (external) and working capital (internal)

Global S&OP Approach  Educate the relevant functions in all regions on “Class A”

S&OP processes and performance by ensuring the core team is trained and maintains current knowledge of “best practices” in S&OP  Develop standard metrics and reporting formats to be used in all regions  Implement a consistent S&OP organizational model with defined and consistent roles across all regions  Establish a standard, repetitive (monthly) and disciplined process for managing S&OP locally and reporting regional plans & performance globally

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Global S&OP review Regional Review of Sales & Operations Plan  Business & Financial Plan  Plan variance explanation  Establish Relevant Strategy & Policy to achieve Financial and

Operating plans  Review Key Innovations

Previous Period and Period-to-date performance against KPI’s:  Customer Service (OTIF)  Sales Forecast Error  Inventory  Portfolio Performance (Avg Sales $$/SKU)

Core Processes Strategic Planning

Business Planning

Financial Re-Planning

Operational Planning

PRODUCT MANAGEMENT

DEMAND MANAGEMENT

SUPPLY MANAGEMENT © Oliver Wight

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Sales & Operations Planning MANAGEMENT BUSINESS REVIEW LATEST VIEW & RECOMMENDATION

STRATEGY BUSINESS PLAN PERFORMANCE

SUPPLY REVIEW SUPPLY POINT MANAGEMENT

SUPPLY EXECUTION

DEMAND REVIEW

SALES PLANNING

PRODUCT MANAGEMENT REVIEW PROJECT & RESOURCE MANAGEMENT

EXECUTION

DEMAND EXECUTION

A Formal Process © Oliver Wight

The 4 steps of the monthly cycle 1. Product & Services Reviews • • • •

Portfolio performance Innovation funnel management Phase-in / phase-out re-planning Resource capacity planning

2. Demand Reviews   

Sales re-planning by sector, key account Demand re-planning by SKU Selling Contribution re-planning

3. Supply Review    

Inventory / replenishment re-planning Supply / capacity re-planning Service level performance Sourcing issues & forecasting

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The 4 steps of the monthly cycle

4. Management Business Review  Operational & financial review  Gap-closing actions / decisions  Integration actions / decisions  Approval updated integrated plans  Direction, business goals and communication

Bottom-up Plans versus Top-Down Targets

Where top-down (strategy) meets bottom-up (operations)

Top Down Process What is causing the gap?

Strategic Plan 4/5 years horizon Annualized Budgets 1/2 year horizon

Target

Is it transient or a trend?

What plans can we put in place to close the gap?

Plan

Bottom Up Process

S&OP – 24S&OP Months – horizon 24S&OP Months – horizon 24S&OP Months – horizon 24S&OP Months – horizon 24S&OP Months – horizon – horizon 24S&OP Months 24 Months horizon

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3 areas of integration … Supported by processes and tools

–

Behaviours need to be understood first. The behaviours then need to be supported by effective processes and tools

–

Requires commitment and leadership

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Monthly Demand & Supply Planning process Demand planner • • • •

1

Create Baseline History

Objective: Decide how to close the gaps between the demand plan, and supply plan to get consensus

Promotions Product Phase in/Phase out Customer wins/losses Other Sales/Market activities Sales Forecast Review

Demand planner

2

3

Build statistical forecast

Review and enrich forecast

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Initial Forecast

Demand and supply planner

Supply Plan Review

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8

Review initial forecast Preparation of S&OP meeting

SAP/Demand planner Reviewed Forecast

Optional based on major gaps identified Demand planner

Monthly S&OP meeting

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6 Unconstrained sales forecast

ABP Review and build unconstrained demand plan

Demand Planning

Build and review supply plan

Implement changes and communicate consensus plan

Supply & Production Planning

Monthly Demand & Supply Planning process integrated with area in-charged and time horizon

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Discussion Agendas S&OP KPIs (15 mins) S&OP Leader  Financial Reconciliation & Updates (20 mins) Finance controller  Product Portfolio Management (Updated New Product)  F&B (20 mins) Marketing  I&L (20 mins) Marketing  Demand Management (15 mins) Dmd Mgt,  Supply Management  Supply Status (10 mins) Supply Chain  Update 3PM (10 mins)  Technical & Regulatory issues (20 mins) RDE  Complaint and Quality issues (10 mins) QA and Customer Service  Wrap up & Summarize the action plans S&OP Leader Facilitator S&OP Leader Chair Country leader 

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Financial reconcilation BU1 Sector1 BU1 Sector2 BU1 Sector3 BU1 Sector4 BU1 Sector5 BU1 Sector6 BU1 Sector7 BU1 Sector8 BU1 Total BU1 Budget update formula Diff BU2 Section 9 BU2 Section 10 BU2 Section 11 BU2 Section 12 BU2 Total Bu2 Budget update formula Diff 0 Sector 13 0 Sector 14 0 Sector 15 0 Total Budget Diff

0 0

0 0

0 0 0 0

Sum of Dec12 9,630,232 8,066,315 5,201,045 20,003,383 27,241,103 17,232,251 8,308,244 17,297,624 112,980,197 169,236,545 (56,256,348) 15,349,651 29,913,449 13,319,144 21,770,675 80,352,920 106,468,725 (26,115,806) 13,949,444 1,533,496 546,575 209,362,631 275,705,271 (66,342,639)

Sum of Jan13 Sum of Feb13 8,242,359 7,349,718 6,939,309 6,292,503 4,966,882 4,933,108 18,539,644 17,660,160 23,410,028 21,780,107 17,218,940 17,221,940 7,816,586 7,734,533 16,597,563 16,582,901 103,731,310 99,554,971 103,731,310 99,554,971 14,321,490 11,742,634 27,835,045 27,032,361 12,373,008 12,115,861 20,612,995 20,415,085 75,142,538 71,305,940 82,571,429 86,857,143 (7,428,891) (15,551,203) 13,830,357 13,644,990 980,597 620,838 489,617 489,727 194,174,420 185,616,467 82,571,429 86,857,143 111,602,991 98,759,324

Sum of Mar13 Sum of Apr13 7,609,850 6,306,204 6,472,392 5,425,731 4,978,683 4,685,917 18,110,077 16,210,830 22,395,974 18,951,252 17,226,080 17,205,414 7,804,163 7,477,307 16,595,885 16,373,639 101,193,104 92,636,294 101,193,104 92,636,294 12,188,400 11,180,897 27,286,280 25,064,464 12,268,463 11,303,839 20,859,669 18,915,420 72,602,813 66,464,621 97,285,714 94,571,429 (24,682,902) (28,106,807) 13,679,080 13,539,969 642,793 554,800 489,727 424,704 188,607,517 173,620,389 97,285,714 94,571,429 91,321,802 79,048,960

Sum of May13 To Go 2012 YTD Sale Est Total Year 12,906,667 9,630,232 114,618,007 124,248,239 13,552,843 8,066,315 113,727,976 121,794,291 5,438,279 5,201,045 68,251,511 73,452,556 21,402,202 20,003,383 215,661,177 235,664,559 29,851,117 27,241,103 272,495,067 299,736,170 17,239,251 17,232,251 200,428,514 217,660,765 9,469,310 8,308,244 199,513,433 207,821,677 17,577,123 17,297,624 194,181,692 211,479,316 127,436,793 112,980,197 1,378,877,377 1,491,857,574 169,236,545 1,623,071,911 127,436,793 (56,256,348) 1,378,877,377 (131,214,337) 16,317,324 15,349,651 196,907,438 212,257,090 29,894,413 29,913,449 305,387,517 335,300,967 14,847,158 13,319,144 141,875,532 155,194,676 22,600,738 21,770,675 246,127,238 267,897,913 83,659,633 80,352,920 890,297,726 970,650,646 88,857,143 106,468,725 1,128,571,428 (5,197,510) (26,115,806) 890,297,726 (157,920,783) 13,991,327 13,949,444 234,353,754 248,303,197 1,286,024 1,533,496 5,351,311 6,884,807 496,058 546,575 22,767,996 23,314,571 226,869,836 209,362,631 2,531,648,164 2,741,010,795 88,857,143 275,705,271 2,751,643,339 138,012,693 (66,342,639) 2,531,648,164 (10,632,544)

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Slow On Track

PRODUCT PORTFOLIO MANAGEMENT

On Target

CIP

OPC

:

PH

:

Other

Estimate cost,PIF,Item

Lab Trial

Trial at customer site

(3 weeks)

( 1-2 Months)

First order 3 mths sales tracking

(1 month) Exclude registration

Sales forecast error

8/15/2016

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Service Excellence Analysis and action proposed.

KPIs - OTIF (BP619) 100%

93.2%93.9%92.8%92.1% 91.3% 90.6% 90.9%

95% 86.4% 83.5%84.8%

90% 85% 80% Jan 12

Feb Mar Apr May Jun Jul 12 Aug Sep 12 12 12 12 12 12 12 Gross Inv

Xxxxx Xxxxxx

Oct Nov Dec 12 12 12

OTIF

KPIs (BP619) 99.7% 97.9%98.4%98.2%99.0%98.9%99.3%98.8%98.9%99.0%98.6%98.5%

100%

Millions 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0

Unit Filled

95% 90%

93.2%93.9%92.8%92.1% 91.3%90.9% 90.6%

85% 86.4% 84.8% 83.5%

80%

ม.ค. 12ก.พ. 12มี.ค. 12 เม.ย. พ.ค. 12มิ.ย. 12ก.ค. 12ส.ค. 12ก.ย. 12ต.ค. 12พ.ย. 12ธ.ค. 12 12 OTIF

Unit Fill Rate BP 619

4,000 3,500

10.0%

3,000 8.0%

2,500

6.0%

Thousands

Inventory management, BU xx

12.0%

Analysis and action proposed.

2,000 1,500

4.0%

1,000 2.0%

500

0.0%

ม.ค. 12 ก.พ. 12 มี.ค. 12 เม.ย. 12 พ.ค. 12 มิ.ย. 12 ก.ค. 12 ส.ค. 12 ก.ย. 12 ต.ค. 12 พ.ย. 12 ธ.ค. 12 Net Inventory Stock Value ($) TOTAL INV to LTM sales %

6.0%

4,000 3,500

5.0%

3,000 2,500 2,000

3.0%

1,500

2.0%

1,000 500

1.0%

Thousands

4.0%

(500)

0.0% ม.ค. 12 ก.พ. 12 มี.ค. 12 เม.ย. 12 พ.ค. 12 มิ.ย. 12 ก.ค. 12 ส.ค. 12 ก.ย. 12 ต.ค. 12 Net Inventory Stock Value ($) Obsolete & Slow Moving Inventory ($)

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Example of Functional (supply) updates Key Issues/Concerns

Decision/Support required

Risk of OOS

Xxxxx

Potential OOS items

xxxxx

The template of the meeting is • Concise • Proactive • integrated functional approach. • Highlight what solved and require management support • Action-oriented.

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What is Integrated Business Management?

Integrated Business Management is…  The evolution of the Sales and Operations Planning process  The standard approach to managing the gap between company

strategic goals and everyday activity  The prime tool for keeping all parts of the company to:  a common agenda  a common set of priorities

 The process to:  manage the entire business through one set of numbers  ensure timely decisions to maintain management control

Process owner: the President

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Pre-requisites    

Company vision and strategy Strategic priorities Strategic Business Objectives Annualized Targets

Mostly set Top-Down Team-Based and reviewed periodically

What IBM does…          

monthly… bottom-up… re-planning… of activities and financials… across all prime processes (product, demand, supply)… and geographies… formallyreviewing… gaps versus strategic goals and annualized targets… and issues / mis-alignments… both operational and financial Time horizon: 24-months rolling

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The Oliver Wight Integrated Business Model

Planning process - monthly cycle - 24-month horizon

MANAGEMENT BUSINESS REVIEW

STRATEGY BUSINESS PLAN PERFORMANCE PRODUCTS & SERVICES REVIEW

SUPPLY REVIEW

• Supply Chain Mgt • Supply Point Mgt • Supplier Mgt

• Portfolio Mgt • Project Mgt DEMAND REVIEW

• Resource Mgt

• Market Mgt • Demand Mgt • Sales Mgt

The 5 steps of the monthly cycle 1. Product & Services Reviews (Region and Countries) • • • •

Portfolio performance Innovation funnel management Phase-in / phase-out re-planning Resource capacity planning

2. Demand Reviews (Countries and Region)   

Sales re-planning by sector, key account Demand re-planning by SKU Selling Contribution re-planning

3. Supply Review (Region)    

Inventory / replenishment re-planning Supply / capacity re-planning Service level performance Sourcing issues & forecasting

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The 5 steps of the monthly cycle 4. Integrated Reconciliation (Region) • • • • • •

Company-wide projects re-planning Cross-functional alignment issues Financial re-planning & consolidation Gap-closing solutions & recommendations Risk and continggency planning IBM process improvement

5. Management Business Review (Region)     

Operational & financial review (EMA scorecard) Gap-closing actions / decisions Integration actions / decisions Approval updated integrated plans Direction, business goals and communication

Integrated Reconciliation Review Regional RECONCILIATION REVIEW Chair & Facilitator: IBM Director

Attendees  BU Finance Directors  EMA Business Controller

Agenda  Issues arising through this cycle & proposed resolution  Major change & impact  Latest financial view  Vulnerabilities & opportunities  Conclusions from gap closing scenarios  Agree recommendations  IBM process effectiveness

 BU Product Coordinators

MANAGEMENT BUSINESS REVIEW

STRATEGY BUSINESS PLAN PERFORMANCE

PRODUCT MANAGEMENT REVIEW

SUPPLY REVIEW

 Dir. VC Planning DEMAND REVIEW

EAME 0125-03

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Management Business Review MANAGEMENT BUSINESS REVIEW

Agenda Key performance indicators  Revenue/ profitability  Customer satisfaction  Demand planning performance  New products on-time  Supply performance  Pricing performance

STRATEGY BUSINESS PLAN PERFORMANCE

PRODUCT MANAGEMENT REVIEW

SUPPLY REVIEW

DEMAND REVIEW

Regional MBR

Business trends Major changes analysed: internal & external Key issues reviewed by BU:  Alternatives presented  Opportunity/ vulnerability  Operational & financial impact  Decisions taken

Chair: EMA President Facilitator: IBM Director

Attendees

Latest view aligned to:  Annual business plan  Strategy

 RMC Members  EMA Business Controller  Global RD&E member

Plans agreed Input to next cycle (Gate Reviews) EAME 0151-02

3 Supported areas by ofprocesses integration and tools …

–

Behaviours need to be understood first. The behaviours then need to be supported by effective processes and tools

–

Requires commitment and leadership

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Wrap up- success factors  Art and Science .  Manage ‚mutual‘ expectation and common goals.  People Management – Roles and responsibilities are

defined and communicated.  Implement quickly and improve each month  Manage by exception – and focus on the key issues  Gap closure (volume, revenue, and profit expectations)  Resource issues  Alignment of demand, supply, and new product plans  Performance issues 43

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