Best Practices in Sales &

Operations Planning
Jane Barrett
Noha Tohamy

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 Best Practices in Sales &
Operations Planning
Jane Barrett
Noha Tohamy

This presentation, including any supporting materials, is owned by Gartner, Inc. and/or its affiliates and is for the sole use of the intended Gartner audience or other
authorized recipients. This presentation may contain information that is confidential, proprietary or otherwise legally protected, and it may not be further copied,
distributed or publicly displayed without the express written permission of Gartner, Inc. or its affiliates.
© 2010 Gartner, Inc. and/or its affiliates. All rights reserved. © 2010 AMR Research, Inc. | Page 4
Agenda

•Sales & Operations Planning: Process Best

Practices
• Findings from 2009 study
• S&OP maturity
• The seven deadly challenges of S&OP

•Sales & Operations Planning : Technology Best

practices
• What are the functional capabilities needed to support S&OP?
• Findings from 2009 Study
S&OP Key Research Findings

- As the curtain closes on the recession, S&OP has gained steam

- Performance gaps have grown

- Metrics remain a stumbling block

- Gap between strategy, S&OP and execution

- Data accuracy and timeliness issues causing pain

- Better use of technologies drives S&OP maturity

- No clear definition of S&OP technology space

August 2009 Study of 182 Manufacturers and Retailers

 S&OP Process Definition Changes

1990s Early 2000 Demand-driven

Leaders
1. Develop a demand 1. Collect sales input 1. Collect sales and market input
forecast 2. Develop a forecast 2. Develop a demand plan
2. Balance demand 3. Shape demand 3. Demand consensus refinement including
with supply consensus refinement financial reconciliation
3. Consensus meeting 4. Develop a constrained 4. Shape demand based on what-if analysis
4. Publish the plan supply plan on demand for supply
5. Review and gain 5. Develop a constrained plan by supply
agreement through a 6. What-if analysis by supply to determine
Consensus meeting trade-offs on the measurements,
6. Publish the plan financials, and identify demand-shaping
opportunities
7. Review and gain agreement through a
consensus meeting
8. Publish the constrained plan
9. Measure and communicate the plan
 The benefits are recognized, but hard to attain………
Q. Please rate how important each of the following business benefits are.
Q. Please rate how well your company performs at achieving each of these benefits. Performance
[TOP 3 Box Summary] Gap Score

Increasing revenue
65%
38% 27%

Improving forecast accuracy

55% 27%
28%

Improving new product launch

53% 18%
36%

Improving logistics planning

48% 11%
37%

Better supply planning/chedule adherence

48% 14%
35%

47% 9%
Improvements in the perfect order/customer service
38%

Capital planning and asset management `

46% 8%
38%

Improving asset utilization

46% 14%
32%

Improve translation of demand into procurement 42% 9%

requirements/buy-side contract needs 34%

Developing and executing demand shaping programs

41%
32% 8%

Reduction of inventory
40%
36% 4%
N = 182 Total Respondents
 Managing demand is still an issue for most……..
Q. Please rate how important each of these S&OP capabilities are to the success of your companies 2009 business strategies.
Q. Please rate how well your company performs on each of these capabilities. Performance
[TOP 3 Box Summary] Gap Score

Collect sales/market input 70%

44% 26%

Develop a demand plan 68% 28%

40%

Communicate the plan/measure effectiveness 66% 23%

44%

Review /gain agreement of total demand, supply and financial plan 60% 19%
40%

Use S&OP for the annual planning process 55% 14%

41%

Evaluate implications of a constrained supply plan 51% 9%

43%

Use S&OP for demand plan execution 48% 12%

36%

What-if analysis by supply to determine trade-offs o 43% 18%

25%

Publish the constrained plan

41% -3%
44%

Shape demand based on w hat-if analysis of demand 37% 8%

29%
Importance
Demand consensus refinement 29%
26% Performance 3%
N = 182 Total Respondents
 S&OP Maturity Model
Stage I II III IV
Reacting Anticipating Collaborating Orchestrating

Balance: 27% 40% 19% 14%

S&OP OP OP S OP
67
OP
%
S S
of
S
co
Goal Development of an Demand and supply Profitability Demand sensing, and
m
pa
operational plan matching conscious tradeoffs for
ni
demand shaping to drive an
es

optimized demand-response
ca
nn
ot

Ownership S = Sales S = Sales and Marketing S = Go to Market Plans S = Go to Market Strategies and
g et

OP = Factory Plans OP = Design of demand Solutions

be

capabilities OP = Planning and factory driven plan, make & deliver OP = Translation of demand into
yo

capabilities processes plan, make, deliver, source and

nd

service strategies, with connection

st
ag
to execution
e
2

Metrics Order fill rate, asset Order fill rate, forecast Demand error, customer Demand risk, customer service,
utilization, inventory error, inventory turns, service, working capital, cash flow, market share and profit
levels functional costs total costs

Increase in Organizational Balance

Demand maturity must be synchronized with S&OP
maturity

Constraint- Opportunity-
Forecasts based S&OP based S&OP

Active Demand Translation

Demand Demand
MRP VMI
Visibility Shaping

Channel Market
Orders Orders
Sensing Opportunity

I II III IV
Reacting Anticipating Collaborating Orchestrating
Balance is Required

7 Demand-Shaping Levers 7 Levers of Agility

• Postponement/late-stage
differentiation
• Marketing programs
• Drive transparency through VMI
• New product introductions and SMI
• Promotions • Design for supply and reuse
• Trade deals
• Logistics policies
• Sales incentives
• Adaptive networks
• Price management
• Flexible manufacturing
• Supply shaping/runout strategies strategies
• Tie agility strategies to demand
shaping
Planning for new product introductions must improve

Q. Which of the following best describes your company’s plans for new product introductions as it relates to S&OP?

We use attribute-based
forecasting techniques
30%
along with market
intelligence

We wait until the new

product is through ramp-
20%
up before we include it in
the S&OP process

We use a rough cut sales

forecast from sales or 18%
marketing

Only 14% have an

New product launch is a
separate process
17% integrated process, yet
NPI is the top strategy
New product S&OP is focused on
introductions are fully
integrated in the process 14%
across the full planning
horizon

N = 182 Total Respondents

Example: Chemical Company Change Impacts

Primarily, DDBO is a change in MINDSET, as the

Mindset business moves from a Supply Driven to a Demand

Driven mentality.

The mindset is formalized through the Demand Driven

Business Operations PROCESS.
Process

Once the mindset and work process are established,

TOOLS enable individuals in executing specific tasks.
Tools Tools support work throughout the DDBO sub-tracks.

For Demand Driven Business Operations to be successful, people must change their
MINDSET to accept and learn the PROCESS using TOOLS as needed.

14
Getting out of Neutral – Why is it so hard?
The Seven Deadly Challenges of S&OP

- Clarity of goal
- Alignment to strategy
- Reward systems
- What is a good decision?
- Governance
- The Role of the Forecast 60% Change Management
- Connection of planning to execution 30% Process
10% Technology
S&OP: Technology
Key Capabilities Required:

• Data management and quality

• Integration into operational planning
• Visibility into financial plans
• Multilevel and multidimensional hierarchies
• Assumption tracking and management
• Workflow and process management
• Performance management
• What-if, scenario management, simulation
Functional Requirements
9-Step S&OP Cycle Next Generation S&OP

Enact and measure Enact and measure

the plan the plan

Publish the Plan Publish the Plan

Integrated Scenario Analysis Integrated Scenario Analysis

Supply what- Supply Financial

if what-if what-if
Base supply Base
Base supply plan plan financial plan

Demand consensus Demand consensus

Demand shaping what-If Demand shaping what-If

Base demand plan Base demand plan

Collect sales and market

Collect sales and market input input
Pre S&OP Foundational Pieces…

S&OP
1. Building the
operational
consensus plan

How closely integrated should each Pre

S&OP function be?
Depends on the vertical
Closing The Loop: Process Playbooks

Problem Root Cause Options

Change Product Mix
Change Product Mix

Competitor
Competitor Launch Promotion
Promotion Launch Promotion
Promotion

Sales Selling Wrong

Sales Selling Wrong Adjust Pricing
Product Mix Adjust Pricing

Outcome
Sales Below Target Product Mix
Sales Below Target
Promote Alternate
Pricing Issues Promote Alternate
Pricing Issues Product
Product
Actual Revenue Below
Actual Revenue Below
Target
Target Plan Overtime
Plan Overtime
Critical Part Shortage
Critical Part Shortage
Overflow
Overflow
Supply Shortages Production
Supply Shortages Lost Production Production
Lost Production
Capacity
Capacity
Inventory Transfer
Inventory Transfer
Lost Sales Due to Lack
Lost Sales Due to Lack
Of Supply
Of Supply
Hedge Supply
Hedge Supply
 S&OP – Just a business process?

Q. To what degree do you agree with the following statement: We believe that S&OP technology is essential to supporting S&OP process?
Q. To what degree do you agree with the following statement: S&OP is a business process, not a technology area. We don’t need any additional tools
to support our S&OP process?

Strongly Agree Agree Neither Agree/Nor Disagree Disagree Strongly Disagree

S&OP technology is essential

to supporting S&OP process 33% 53% 14% 0%

S&OP is a business process,

not a technology area. No 12% 35% 23% 25% 5%
additional tools are necessary.

N = 182 Total Respondents

Views on S&OP Technology
Q. Which of the following best describes your views on S&OP technology?

S&OP technology is a natural

29%
extension to ERP

S&OP technology is an extension to

sales forecasting and sales 29%
performance management tools

S&OP technology is an extension to

21%
BI tools

S&OP technology is an extension to

16%
SCM tools

S&OP technology should be a stand-

5%
alone functional capability

N = 182 Total Respondents

Views on S&OP Technology Among Extremely Effective Companies
Q. Which of the following best describes your views on S&OP technology?

Extremely
Extremely Effective
Effective Only
Only

S&OP technology is an extension to

41%
SCM tools

S&OP technology is an extension to

sales forecasting and sales 28%
performance management tools

S&OP technology is a natural

22%
extension to ERP

S&OP technology is an extension to

9%
BI tools

S&OP technology should be a stand-

5%
alone functional capability

N = 32 Respondents who feel their current S&OP process is extremely effective

 Top 3 decision making criteria for purchasing S&OP tools
Q. In order of importance, what three factors are most important when considering purchasing tools to support S&OP?
Most
[TOP 3 COMBINED] Important

Ease of use 49%

Flexibility 39%

Feature/function to support the S&OP process 37%

Integration with ERP systems 35%

Proof of capability in similar environments 29%

Existing Vendor relationship 24%

Integration with SCM tools 23%

Technical architecture 22%

Vendor services and expertise 22%

Collaborative capabilities 19%

N = 150 Respondents who invest or plan to invest in tools other than MS Excel, Access or PowerPoint
Penetration of formal S&OP
Q. Are you currently using an S&OP tool other than Microsoft Excel, Microsoft Access or PowerPoint?
Q. Which of the following describes your plans to invest in S&OP tools other than Microsoft Excel, MS Access or PowerPoint over the next 2
years?

Using tools other than MS Excel, MS Plans to invest in other S&OP Tools
Access or PowerPoint for S&OP over next 2 years

Plan to invest in
other S&OP
26%
tools next 12
months
No
51%
Plan to invest in
other S&OP
tools within the 39%
next 12 to 24
Yes months
49%
We currently
have no plans
to invest in 35%
other S&OP
tools

N =182 Total Respondents

 2009 average spend on deployment of tools to support S&OP
Q. Which of the following best describes the total amount your company will spend on deployment of tools to support S&OP in 2009

Less than $100K 14%

2009 Breakdown of spend

$100K to less than
20%
$250K

$250K to less than

22%
$500K

$500K to less than

20%
$1M

$1M to less than

17%
$2M

$2M or greater 8%

Average Spend in 2009:

$763K

N =162 Respondents who can confidently estimate spend

2010 Spend plans
Q. Is your planned spend on deployment of tools to support S&OP going to increase, stay the same or decrease in 2010?

2010 spending plans over 2009

Stay the
same
53%

Increase Decrease
40% 7%

Average change in spending in

2010 over 2009

+6.8%

N =162 Respondents who could confidently estimate spend

S&OP: Technology
Best Practices:

• Phase in technology support for S&OP after S&OP processes are

defined
• Resolve major outstanding issues with the underlying operational
planning systems before proceeding with S&OP technology
• Leverage SCP investments into S&OP lower level reviews
• Focus on support for technology-enabled collaboration in S&OP
tools
• Get the financial plan integrated with the S&OP plan
• Support scenario-based planning, & timeliness of scenario-based
planning at the right level of detail
 Recommended Research

© 2008 Gartner, Inc. and/or its affiliates. All rights reserved.

Gartner is a registered trademark of Gartner, Inc. or its affiliates.
Recommended Research -

Research conducted by the AMR Research Team:

• Conquering the Seven Deadly Challenges of Sales and Operations
Planning
• Sales and Operations Planning: Transformation From Tradition
• Toolkit: How to Select Technology Tools to Power Your S&OP
Process
• S&OP Technology Market Update: Picture Still Murky
• Embraco Transforms Its Value Chain Through Integration of S&OP
and Order Fulfillment
• A Chemicals Formula for S&OP Success
• Just How Long Do We Have To Wait for True S&OP in Life
Sciences?
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