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

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

July, 2011

Jim Biel
Management Consultant

E-Mail: bielconsulting@gmail.com
Phone: 847.687.5379

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

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

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

Jim Biel, Ph: 847.687.5379, E-Mail: bielconsulting@gmail.com, http://www.linkedin.com/in/jimbiel (July 7, 2011)

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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)

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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


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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.


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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


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“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 Guide
Page 24


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Cross Functional Alignment / Effective
Communication – The S&OP Flow
Demand Finance GM
Generates Controls Monthly
Proformas, S&OP
Cost, Risk /
Ops Monthly; + Results
As Needed In + Metrics Review
Interim + Var to Bus Pl
+ Future Frcst
Utilize Demand
Supply Outputs as Basis
+ Assumptions
For Forecasts, + Bulk of Meeting:
Daily Annual Plans, Gaps, Opps in
Strategic Plans,
Weekly Add Risks / Opps / Future Frcst
Monthly Other Lifts /
Discount Factors
Balancing As Needed

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

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Connection – Integration, Performance
Management (Metrics), Results

INTEGRATION PERFORMANCE METRICS
Leadership Revenue, Cost Targets
(Strategic Direction) Forecast Accuracy,
Working Capital Targets,
Inventory Targets
New Product Launch Success
Demand Feeds Cycle Time / Quality - Processes
Supply; Balancing / Service Level Targets
Capacitization
(Ops Execution, Future Forecast)

Finance DESIRED RESULTS
($ Scorekeeper, Forward Looking Positive P&L Outcomes
Economic Advisor) Positive Working Capital Outcomes
Productivity Improvements
Decision Making Improvements
Leadership Customer Service Levels
(S&OP Process Owner)


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Cross Functional Alignment
Functional Role Business Role S&OP Role Communication
General Manager Strategic Direction Owns the Overall Owns Monthly S&OP
Process – The Process Meeting; Consulted
Owner Daily/Weekly as
Needed (Exception)
Demand Translates Strategy into Owns the Demand Daily, Weekly
> Sales Demand Generation; Forecast; Accountable Interaction with Supply
> Marketing Dem Planning Reports for Excess Inventory & Finance; Owns
to a Demand Leader; Generated by a Monthly Demand
Unconstrained Demand Forecast Miss Component of S&OP

Supply Fulfillment of Owns the Fulfillment of Daily, Weekly
> Finished “Constrained Demand”, the” Constrained” Interaction with
> Raw Least Cost Demand Forecast at Demand & Finance;
Least Cost (Balancing Owns Monthly Supply
with Demand Planning) Component of S&OP
Finance Economic Oversight / Counsel, Input, Risk Provides P&L
Counsel Assessment, Pro- Proformas & Risk /
Formas of Future Opportunity
Forecasts Assessment


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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

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One Forecast Caveat
(Linkage – S&OP to Other Plans)
Strategic Use S&OP
Strategic Demand Supply
Financial Target / As a Gut
Plan Plan Plan Check
Intent

Use S&OP
Business Demand Supply Annual As Key
Financial
Plan Plan Plan Plan Input / Core,
Plus Risks/Ops

Use S&OP
Latest Demand Supply Interim As Key
Financial
Est / Frcst Plan Plan Forecasts Input / Core,
Plus Risks/Ops

Future Future Execution
Demand Supply Forecast / Details,
S&OP Financial Execution Active Risk / Ops
Plan Plan
/ Forecast Discussion

S&OP Outputs Validate, Support Other Planning Processes

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Alignment Between Corporate Strategy and
Operational Execution
Corporate Strategy Business Plan S&OP

Revenue Targets Revenue Targets Revenue Targets
Margins Margins Margins
Working Capital Working Capital Working Capital
New Products New Products New Products
New Markets New Markets New Markets
New Customers New Customers New Customers
New Channels New Channels New Channels
Exit Strategies Exit Strategies Exit Strategies
Capital Investment 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


S&OP Time Fences 13

Short-Term Mid-Term Long-Term

(1-3 Months) (4-12 Months) (13-36 Months)

Demand Demand Demand - Strategy
Dem Pl – SKUs Dem Pl – Prod Fam Dem Pl – Prod Fam
All Demand Streams All Demand Streams All Demand Streams
Sales Marketing Marketing
Customers Customers Customers
Promotions Promotions Promotions
New Products New Products New Products

Supply Supply Supply - Strategy
Fulfillment Fulfillment Fulfillment & Sourcing
Cust Serv Finished Gds, Raw Ingred Contracts
Finished Goods Supply Contracts Plant/Cap Network/Invest
Supply Contracts


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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 Tool
to support Meetings and interactions
> Numbers
> Metrics Reporting
> Assumptions

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


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


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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


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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


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