combining supply chain integration with sales & operations planning mark williams –...

Combining Supply Chain Integration with Sales & Operations Planning

Mark Williams – Professional Services Consultant, Supply Chain Solutions Center – Demand Management , QAD

Collaboration: Aligning Demand & Production Across the Enterprise

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The following is intended to outline QAD’s general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, functional capabilities, and should not be relied upon in making purchasing decisions. The development, release, and timing of any features or functional capabilities described for QAD’s products remains at the sole discretion of QAD.

Safe Harbor Statement

Supply Chain Collaboration

• The Situation- Case study- Search for solutions

• Customer focused collaboration- Defining the relationship- Joint forecasting

• Internal collaboration- Demand planning process- Supply planning process- Final agreement

Agenda


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• Surprise!• Lose a customer?• Plans, plans & more plans!

Do You Need To Collaborate?


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• Forecast accuracy = 27 percent

• On-time shipments= 85 percent

• New product sell-through = 20%

• Annual spoilage = $50 million dollars

The Problems• $400 million dollars in

annual sales• 4 major divisions• 50,000 SKU’s• QAD Mfg/Pro• Customers

- Mass merchants- Drug chains- Grocery chains

CPG Company

Case Study: The Situation


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• Collaborate internally• Detailed sharing of

information• Promotes

responsibility

Internal – S&OP• Collaborate with major

customers• Detailed sharing of

information• Can be applied to

suppliers as well as customers

External – CPFR®

Tools for Collaboration


Let’s Look At Each – Starting With CPFR

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Collaborative Planning, Forecasting & Replenishment (CPFR)


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• Collaborative Planning, Forecasting & Replenishment

• Developed by Voluntary Interindustry Commerce Standards association (web site: www.cpfr.org

• Useful for sharing data between major retailers and suppliers

• Our focus – the five collaborative forecasting steps of CPFR

Definition of CPFR


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http://www.cpfr.org/

Arrange

collaboration

Joint business plan

Create sales

forecast

Identify excepti

ons

Resolve excepti

ons

CPFR: 5-Step Collaborative Forecasting Process


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• Goals and objectives• Information sharing• Confidentiality• Expectations• Problem resolution• Output – published agreement

Step 1: Arrange Collaboration


Arrange collaboration

Joint business plan

Create sales forecast

Identify exceptions

Resolve exceptions

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• Corporate & partnership strategies• Item management• Exception criteria• Metrics

Step 2: Create Joint Business Plan



Joint business plan


Identify exceptions

Resolve exceptions

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• Both parties create forecasts

• Compare item forecasts in QAD Demand Management Viewer

Step 3: Create Sales Forecast



Joint business plan


Identify exceptions

Resolve exceptions

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• Two opinion line forecasts reviewed against exception criteria

• Differences within exception criteria – no problem

• Differences exceeding exception criteria – demand planner & buyer must resolve

Step 4: Identify Exceptions


Arrange Collaboration

Joint Business Plan

Create Sales Forecast

Identify Exceptions

Resolve Exceptions

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Step 4: Identifying Exceptions


Part # CustomerOpinion Line

Forecast

YourOpinion Line

Forecast

% Difference

A-763 12,786 14,346 12.2%

R-349 36,475 65,789 80.4%

F-921 122,838 132,445 7.8%

B-637 192,789 155,089 -19.6%

S-795 211,897 222,731 5.1%

Agreed exception level: +/-15%


Joint business plan


Identify exceptions

Resolve exceptions

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Step 5: Resolving Exceptions


Part # Customer Forecast

(CF)

Your Forecast

(YF)

% Difference

Resolution

A-763 12,786 14,346 12.2%

R-349 36,475 65,789 80.4% YF based on last years promo – use CF

F-921 122,838 132,445 7.8%

B-637 192,789 155,000 -19.6% YF based on RM allocation –

use YF

S-795 211,897 222,731 5.1%

Arrange Collaboration

Joint Business Plan

Create Sales Forecast

Identify Exceptions

Resolve Exceptions

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• Increased understanding of customers needs and promotional activities

• Improved communication channels• Improved forecast accuracy from 27% to

70% in less than one year

Now for the hard part, internal collaboration!

Benefits of CPFR


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Sales & Operations Planning – Internal Collaboration


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The Monthly S&OP Process


Run reports

Demand planning

Supply planning

Pre-S&OP meeting

Executive decision

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• A monthly process • Performed at aggregate level• Reconcile all supply, demand, new product

and financial plans • Goal: ONE plan for executing business

strategy

Key Elements of S&OP Process


Run reports

Demand plannin

g

Supply plannin

g

Pre-S&OP

meeting

Executive

decision

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• Key players – demand planning & IT• Update sales, production, inventory

information from the month just ended• Provide statistical forecast information

needed to revise forecasts• Provide actual production & inventory

information Vs. last month’s goals

Step 1 – Run Sales Forecast Reports


Run reports

Demand plannin

g

Supply plannin

g

Pre-S&OP

meeting

Executive

decision

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• Key players – demand planning, sales, marketing

• Demand planning analyzes statistical data to provide input to marketing

• Sales & marketing review last month’s performance and explains significant misses

Step 2 – Demand Planning Process


Run Report

s

Demand plannin

g

Supply plannin

g

Pre-S&OP

meeting

Executive

decision

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March April May Totals

Sales Plan** 24,000 24,000 24,000 72,000

Actual Sales* 22,000 23,000 21,000 66,000

Difference -2,000 -1,000 -3,000 -6,000

Cummulative

Difference -2,000 -3,000 -6,000

Sales – A Bit Soft


Run reports

Demand plannin

g

Supply plannin

g

Pre-S&OP

meeting

Executive

decision

*Data obtained from QAD Enterprise Applications

** Data obtained from Demand Management

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• Promotions not meeting targets- Review advertising budget and methods

• Product shortage- Review cause – determine preventive steps

• Unexpected customer promotion- Determine reason for lack of notification

Document Causes & Corrective Actions


Run reports

Demand plannin

g

Supply plannin

g

Pre-S&OP

meeting

Executive

decision

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• Old forecast + growth in market- <decline in market>

• + New customers - <lost customers>

• + Promotions• + New product launches

1st Pass Spreadsheet Developed


Run reports

Demand plannin

g

Supply plannin

g

Pre-S&OP

meeting

Executive

decision

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• Key players – demand planning & operations groups

• Review last month’s performance against goals

• Examine reasons for variances against goals and determine actions to compensate

• Revise product level operations plans

Step 3 – Supply Planning Process


Run reports

Demand plannin

g

Supply plannin

g

Pre-S&OP

meeting

Executive

decision

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March April May Totals

Production Days 21 22 22 65

Planned Production* 45,000 45,000 45,000 135,000

Actual Production* 43,000 41,000 40,000 124,000

Difference -2,000 -4,000 -5,000 -11,000

Cummulative Difference -2,000 -6,000 -11,000 -11,000

Production– Getting Further Behind


Run reports

Demand plannin

g

Supply plannin

g

Pre-S&OP

meeting

Executive

decision

*Data obtained from QAD Enterprise Applications

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• Supplier issues• Capacity issues• Personnel issues

Document Causes & Corrective Actions


Run reports

Demand plannin

g

Supply plannin

g

Pre-S&OP

meeting

Executive

decision

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• 1st Pass spreadsheet forms baseline• Review 1st pass spreadsheet against

capacity, labor and material constraints• Must by achievable

Operations Produces 2nd Pass Spreadsheet


Run reports

Demand plannin

g

Supply plannin

g

Pre-S&OP

meeting

Executive

decision

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• Key players – department heads

• Review 1st & 2nd pass spreadsheet differences

• Resolve differences if possible

• Determine areas where agreement cannot be met

Step 4 – Pre—S&OP Meeting


Run reports

Demand plannin

g

Supply plannin

g

Pre-S&OP

meeting

Executive

decision

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• Key players – top company executives

• Review of last month's sales & operations metrics against plan

• Review status of new products

• Review major problems/opportunities

Step 5 – Executive S&OP Meeting


Run reports

Demand plannin

g

Supply plannin

g

Pre-S&OP

meeting

Executive

decision

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• Approve changes on each product family

• Approve changes in product/procurement rates that have a major impact

• Approve decisions made in Pre-S&OP meeting

• Output – One Sales & Operations Plan

Step 5 – Executive S&OP Meeting


Run reports

Demand plannin

g

Supply plannin

g

Pre-S&OP

meeting

Executive

decision

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• The situation- Case study- Search for solutions

• Customer focused collaboration- Defining the relationship- Joint forecasting

• Internal collaboration- Demand planning process- Supply planning process- Final agreement

Agenda


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• Improved forecast accuracy from 27% to 70%• Improved on-time shipments from 85% to

95%• Reduced annual spoilage by 90%• Reduced inventory investment by 15%

Conclusion: In Less Than One Year…



Joint business plan


Identify exceptions

Resolve exceptions

Run reports

Demand plannin

g

Supply plannin

g

Pre-S&OP

meeting

Executive

decision

S&OP

CPFR

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Metrics Affected


Process Benefit Value

Build forecast by territory, brand, product SKU, etc. Top down or Bottom up.

•Improved fill rates and customer service

5% to 10%

Leverage sophisticated forecasting methods, and detect fluctuations in forecasts and demand as soon as they happen

•Inventory reduction -10 to 25%

Comparison of forecast to actual with ‘best-fit’ analysis

•Reduced obsolescence -5% to 10%

Web based entry points for all interested parties to give their forecast ‘opinion’

•Improved customer service

20 to 30%

Enables regional and customer review and input to forecast formulation

• Improved fill rates 5 to 10%

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• Ask your account manager to arrange a Q−Scan

Next Steps


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Mark K. Williams [email protected]

Questions & Answers


mailto:[email protected]

combining supply chain integration with sales & operations planning mark williams –...

Documents

qad collaboration

supply chain integration

exceptions cpfr

enterprise slide

collaborative planning

annual sales

forecast accuracy

customers external cpfr