global sales & operations planning; operations planning
DESCRIPTION
S&OP, Sales and Operations Planning is an integrated business management process that has been adopted across many industries. In March 2009, I led the implementation of Global S&OP at a Fortune 150 company with significant success. How’s a 30 year view of your business ... For the rest of the story, click here.TRANSCRIPT
WATCH YOUR BUSINESS COME INTO FOCUS WITH GLOBAL SALES & OPERATIONS PLANNING
Sales & Operations Planning (S&OP) is an integrated
management process through which the executive team
continually achieves focus and alignment between all the
functions of the organization.
The S&OP process regularly and routinely reviews
customer demand and supply resources
and “re-plans” quantitatively and qualitatively across an
agreed-upon rolling planning horizon (typically 18 to 24
months). The re-planning process occurs at least monthly.
Implemented correctly the process focuses on change from
the previously agreed-upon Sales & Operations Plan. The
process helps the management team understand how the
company achieved its current level of performance but is
primarily focused proactively on future actions and
anticipated results.
The output of the S&OP process is a consensus on one set
of operating numbers which the members of the executive
team hold themselves accountable to execute. The output
includes an updated sales plan, production plan, inventory,
customer lead time (backlog) plan, new product
development plan, strategic initiative plan, and financial
plan. Industry “best practices” are to conduct the S&OP
process with open and honest communications and an
agreement among the members of the management team
that they will each “do what they say they are going to do”.
The process is used by many companies to build and/or
strengthen the management team.
Managing a multi-billion dollar global business in today’s
competitive market is a tough challenge. So, you’re a new
executive in an organization that is growing at a 10x growth
rate and it didn’t take you long in the assessment to find out
that the organization is not aligned. So, I called Terry
Johnson, Senior Principal with Oliver Wight America’s to
assist. During the assessment he found no formal planning
and communication structure, poor visibility and fidelity,
lack of control resulting in high costs and diminishing
customer service. Getting everyone on the same sheet of
paper while the storm is raging is near impossible. S&OP
brings clarity and focus to an environment where chaos
lived before. Some people thrive in chaos and make
decisions based on experience and gut instinct. Instinctive
decision making is not good enough in today’s global
economy with competitor’s constantly improving their
offerings and capabilities. Having the right visibility, focus
and alignment across key players in the organization is
critical to making the right decisions.
SUPPORT & MEASURE THE BUSINESS PLAN |ENHANCE THE EXISTING PERFORMANCE OF A BUSINESS THROUGH INTEGRATED PLANNING
S&OP helps you determine whether your original financial expectations (budget), current sales plan, and
operations plans are in sync with each other through monthly reviews.
REALISTIC & ACHIEVABLE PLANS |FORMAL REVIEW AND SIGN OFF BY MANAGEMENT TO ENSURE ACCOUNTABILITY
Key players participate in formulating the new plans to ensure that all recommendations are supported.
MEASURE PERFORMANCE |MONTHLY ACHIEVEMENT OF THE BUSINESS PLAN TARGETS
The main purpose to bring the out-of-control situation to the surface so that an evaluation and recommendation
can be made and corrective action taken to resolve the business issue.
BUILD TEAMWORK |RESULTING IN A BETTER PERFORMING PLAN
The process not only provides a means of updating the operating plan to bring it into step with changes in
the customer base, it also instills a spirit of teamwork and a shared set of goals in achieving the company plan.
BALANCE SUPPLY AND DEMAND
INCREASE YOUR COMPANY’S VALUE AND MAXIMIZE SHAREHOLDER VALUE
The implementation of a standardized global sales
and operations process will uncover demand and
supply misalignment and out of balance conditions.
Most organizations continue to operate with a local
focus. A GLOCAL view where a global plan is agreed
upon and local implementation occurs best optimized
resources. S&OP gets everyone on the same page...
same definitions, standards, data views, and
decisions. Once demand and supply are in balance,
the next issue that will surface is that the most current
S&OP plan is not in sync with the business or
financial plan. At the last company I was with, “fire
fighters” were give hero status. These hero’s spent all
day chasing non-value added activities. This method
of management is not sustainable or effective. When
supply and demand are misaligned chaos ensues.
GLOBAL COMMERCIAL DEMAND REVIEW
NEW PRODUCT DEMAND REVIEW
STRATEGIC VALUE INITIATIVES
EXECUTIVE VISIBILITY
MAXIMIZE YOUR RETURN AND MINIMIZE YOUR RISK WITH IMPROVED DECISION MAKING
As a company implements the S&OP process, the
executive team will realize that this process provides
visibility and regular communications to enable them
to make the difficult choices required to balance
customer and financial decisions. It’s when financials
are coupled with supply and demand at the product
family level that you see the full picture of how
profitable your business is or not. It’s easy to make
decisions when you see the outcomes right in front of
you. An executive team committed to implementing
Class A S&OP will typically see significant
improvements in profitability. When your organization
is not in position to give you the information that you
need in a timely manner, poor decisions are made.
Frustration sets in and a lot of good people take the
blame. Change the game with GS&OP...
DEMAND & SUPPLY REVIEWS
INTEGRATED RECONCILIATION
MANAGEMENT BUSINESS REVIEWS
INTEGRATED BUSINESS MANAGEMENT
SYNCHRONIZE YOUR BUSINESS WITH GLOBAL SALES & OPERATIONS PLANNING
Terry Johnson, Senior Principal with Oliver Wight
America’s recommended their “Proven Path”
methodology and “Fast Track” approach. Terry guided
the team through audit and assessment, education,
design, implementation and follow up.
In my last company I sponsored the design and
implementation of GS&OP and implemented the
solution in sixty days with significant success. The
“Fast Track” approach coupled with executive focus
allowed the company to gain immediate visibility to key
issues quickly.
The final results of the Global S&OP implementation
were compelling. A thirty year view of global supply and
demand. Customer prioritization and segmentation.
Visibility of supply constraints and capacity on a
monthly basis. Global Production Optimization of load
across the entire network. One view, language, metrics
and standards to fairly evaluate decisions. Better
decisions based on facts and data and the S&OP
output drove the business plan. However, we had not
quite delivered our goal of full financial integration when
I left the company.
As a final note, Sales & Operations Planning is really a
disciplined communication and decision making
process. It is a logically simple but tremendously
powerful process that brings with it the benefits of
obtaining focus, alignment and engagement by the
members of a company’s management team.
JIM DIXON
INTEGRATED BUSINESS MANAGEMENT DECISIONS DRIVE THE EVOLUTION OF YOUR BUSINESS.