26/02/2021

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Creative Professional Development Associate (CPDA) AHM Shahadat Ullah

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Statistical Consensus Updated Forecast

Demand Forecast Forecast
Planning

Master Data Management & Workflows

Forecast Netting

Master Inventory

Order Management
Planning Planning Master
Planning

Sourcing
Manufacturing Rules Production Planning &
Planning & Scheduling
Scheduling

Distribution
(Deployment) Deployment Planning
Planning

Transportation Transportation Management System

Secondary Tertiary
Planning & Execution Shipment Consolidation Route Planning Optimization
Fleet Management

Creative Professional Development Associate (CPDA) AHM Shahadat Ullah

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▪ Absence of Scientific Demand Management Process

 Under/over estimations
 Target v/s Actual Sales
 Tracking Customer Service levels
 Difficult growth and revenue performance measurement

▪ Non-Synchronized Supply and Logistics Planning

 Fill Rate Management Challenge especially during Seasons
 Costly Product-Mix Decisions
 Capacity Under/Over Utilization
 Inter-Warehouse Movements
 Premium Freights at times
 FG Inventory mismatches with Norms

You simply need to know what to do (Next)”

Creative Professional Development Associate (CPDA) AHM Shahadat Ullah

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▪ Brown-Forman Corporation believes its approach to S&OP is

a better way to align supply and demand with the company’s
business requirements, build better internal communications,
and plan activities to meet customers’ needs.

▪ ExxonMobil Chemical leverages sales and operations

planning to improve customer service while controlling costs.

▪ Procter & Gamble credits its own version of S&OP with

creating a single set of sales and supply plans to optimize
resources to support the company’s business objectives –
assessing the financial implications of the plan as well as its
impact on both supply and demand.

▪ Sales and Operations Planning (S&OP) was originated

by Oliver Wight more than thirty-eight years ago

Creative Professional Development Associate (CPDA) AHM Shahadat Ullah

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Its all about collaboration

Creative Professional Development Associate (CPDA) AHM Shahadat Ullah

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▪ A formal process, consisting of series of meetings, where data

from various areas of business is discussed and decisions are
made.

▪ The goal is agreement between various departments on the best

course of action to achieve the optimal balance between supply
and demand and to meet profitability goals.

Demand Actual Supply Resources/

Forecasts Orders Inventory Orders Capacity

Demand Supply

S&OP
Process

Creative Professional Development Associate (CPDA) AHM Shahadat Ullah

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Supports and measures the business plan

Ensures that the strategic plans are realistic before being

passed to tactical planning
Enables the organization to effectively manage changes
to plans
Provides for the effective management of finished goods
inventories and order backlog to support customer
service
Enables performance measurement to identify when
actual performance has deviated from the plan
Enables the organization to be focused, aligned, and
engaged.

Customers are demanding: Increasing business risks of :

Accurate and timely commitments Too much inventory

Shorter lead times Inventory in the wrong place
Flexibility Ordering the wrong inventory
Product differentiation Missing delivery dates
Dedicated inventory Losing orders
Visibility into the supply chain Shipping the wrong products
High quality Increased expediting costs
Automation Losing customers
Lowest costs Increased obsolescence

Forcing businesses to better manage:

Inventories Supply/Demand Stocking policies

Ability to promise Forecasts VMI/SMI processes
Global suppliers Cycle time Replenishment

Creative Professional Development Associate (CPDA) AHM Shahadat Ullah

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Connects business planning to tactical planning

Balances supply and demand at the product family

level
Plans at the volume level using aggregate time
buckets, not the individual end-product mix level
Enables in a better understanding of the customer
and market opportunities and company capabilities
Involves sales, marketing, manufacturing, logistics,
finance, and other departments

Is a demand- and strategy-driven process

▪ Takes a monthly look at product groups at least 6- 12 months

across the planning horizon.

▪ Some companies go out as far as 18 months.

Creative Professional Development Associate (CPDA) AHM Shahadat Ullah

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Lack or no technology/ Limitation of the

Poor coordination of
demand and supply: lost
sales: Incorrect Inventories:
Loss/ lower profitability
systems to do the “what
processes to manage new
if” modeling and gaining product development,
agreement
innovation and /or
feasibility

Breakdown in Internal business processes

communication due to the Challenges does not facilitate delivery of
lack of quality and right – product/price/ qty/
availability of data qlty, at the right time, to the
right customer

Leadership Lack of Lack of integration

support in getting Lack of right coordination
metrics to drive with the financial
agreement on of multisite/ budgeting process
S&OP plans value or to cultural teams
determine same

We have overcome challenges and are seeing

significant results

We have stalled or are proceeding very slowly

We had a smooth implementation of S&OP and follow

best practices

We plan to start again, learning from challenges from

our past efforts

We have no plans to implement S&OP at this time

Creative Professional Development Associate (CPDA) AHM Shahadat Ullah

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Planning Cycle Planning Output

Sales
Annually Business Profit ROI
Plan

Monthly S&OP Product Group

Product Models
Weekly Master Scheduling & Options

Components
Daily Material & Service Planning
& workload

Supply

Demand Supply Pre-S&OP Executive

Planning Planning Meeting Meeting

• Access last period • Access SC Capabilities • Identify gaps

Demand
• Incorporate sales against Forecast • Gap conflict resolution
and customer inputs • Develop feasible supply • Recommendations and
• Build new baseline Plan Agenda for executive
demand plan • Develop P&L meeting
projections
• compare projections
against targets

End of Month Week 1 Week 2 Week 3 Week 4

Creative Professional Development Associate (CPDA) AHM Shahadat Ullah

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Product/ S&OP
Brand Plan

Marketing Plan Demand Demand Supply

Management Planning Planning
Sales Plan

Production Resources Inventory Distribution

Production Facilities Investment

Transportation
Plan Planning Targets
Master Labor Channel
Scheduling Warehousing
Planning Distribution
Detailed Labor and
Planning and Machine Shipment Equipment
Scheduling Planning Plan

▪ What has changed since last month?

• Review Revenue/ ▪ Are we on plan financially? • Orders booked
Profit Performance
▪ How are we performing to performance
• Review new product metrics? • Sales & shipment
development
▪ What new risk do we need to consider?
• Review • Backlogs
▪ What decision do we need to made now?
manufacturing
performance ▪ What decision need to be made in the
• Finished goods
• Review Inventory near future? Inventory
levels ▪ How are product families performing?
• Production
• Review External ▪ Are we on track with product
Factors • Performance
development?
measures by
• Review Future plans ▪ Do we have any critical constraints? product Group
▪ Is there any need to revise long term
plans?
Creative Professional Development Associate (CPDA) AHM Shahadat Ullah

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▪ Forecast Accuracy (%)

▪ Sales Volume & Value
▪ Production (%)
▪ Inventory – Days of Supply (DOS)
▪ Inventory Volume & Value
▪ Financial forecast Accuracy

▪ Current plan for each product group

▪ Current finished goods inventory
▪ Sales forecasts
▪ Purchase Orders received
▪ Materials available
▪ Manufacturing plans and capacity
▪ Distribution capacity
▪ Shipping capacity
▪ Performance measures
▪ Customer Service

Creative Professional Development Associate (CPDA) AHM Shahadat Ullah

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▪ Forecast error reduction……………20-25%

▪ Inventory reduction…………………..5-10%
▪ Inventory turn increase………………5-10%
▪ Service Level Increase………………5-10%
▪ Top line revenue growth……………..2-5%
▪ SKU rationalization………………….10-20%

Benefits for Solution Benefits

Sales Team Demand forecasting and Increased forecast accuracy

management. Analysis of historical Increased customer service
data, applies multiple models, and
adds promotions and other causal Right product mix planning in
factors to come out with proper distribution centers.

demand forecast numbers. Better Customer Predictability

Understanding the promotional,

seasonality and other events
impacts

Management of Targets across

all geography, product structure
and sales hierarchy level

Creative Professional Development Associate (CPDA) AHM Shahadat Ullah

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Benefits for Solution Benefits

Production Production Planning and Quick generation of robust and

Team Optimization
Arrive at the Demand driven
Production Plan that is
synchronized with Distribution Plan.
optimized rough cut production
plan considering all capacity
constraints, changeovers,
campaigns, seasonal pre builds
etc.

Increased capacity utilization

Increased productivity by better

resource planning and utilization

Optimized product-location mix

decisions to service effective
distribution

Quickly review and adjust master

plans to resolve any exceptions

Benefits for Solution Benefits

Supply Chain Optimized Distribution Plan Most optimal distribution plan

Team While balancing Demand-Supply Lower logistics service costs
dynamics arrive at distribution and
dispatch plan that optimizes the Maintaining service levels and
logistics costs and various service dispatch priorities

level constraint. Increased OTIF(on time in full)

and decreased Inventory

Improved overall fleet capacity

and overall asset utilization

Optimized product-location mix

dispatch decisions to service
effective distribution

Decreased costs of premium

freights, cross depot movements,
obsolesces, handling etc

Creative Professional Development Associate (CPDA) AHM Shahadat Ullah

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Benefits for Solution
Management Exception Management
Provide end to end supply chain
performance visibility and levers to
control the plans by exceptions
Creative Professional Development Associate (CPDA)
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Benefits
Enablement of Human
Independent Planning System
that provides the complete
visibility on company
performance against customer
demands with graphical and
enriched presentation
Smart workflow that spots the un-
tolerable exceptions within
existing plans and provides easy
and user-friendly resolution that
balances the conflicts and lead to
consensus plans
Provides KPI Measurements and
analysis views on various supply
chain performance aspects like
OTIF, Production Compliance,
Service Costs, Inventory Days,
Asset Utilization, PCR Accuracy
etc.
AHM Shahadat Ullah
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Executive Sets top management expectations, authorizes

sponsor necessary resources, and clears obstacles

S&OP process Leads the monthly S&OP planning process, manages

owner conflict, and guides the S&OP teams toward consensus
Determines the sales forecast, pricing and promotions.
Demand
Researches the marketplace, manages sales, products,
planning team and customer service
Supply Sets production plan to meet demand, details production
planning team rates and capacities, validates resource availability

Makes decisions on demand and supply balance,

Pre-S&OP
resolves problems, identifies issues, develops
team
alternatives, sends findings to executive S&OP

Creative Professional Development Associate (CPDA) AHM Shahadat Ullah

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Leadership accountability answers the

question “Who are the owners of the S&OP
process.” Effective process governance
S&OP process planning, control, execution,
and improvement.

• In any operating organization, it is important

to manage both demand and supply by:
• Managing Demand through various options
• Managing Supply through various options
• All chosen options have their own implications
on customer service levels and different costs
incurred

Creative Professional Development Associate (CPDA) AHM Shahadat Ullah

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• Through capacity reservation by shifting excess demand to a future

period without losing it – by doing advance booking or
appointments for future times

• Through differential pricing to reduce peak demands( higher prices

e.g. movie tickets) or build demand in off-season by lowering
prices/special discounts)

• Through advertising and sales promotions to even out demand

patterns at different times( lower telecom rates for night use)

• Through complementary products to even out seasonal demand

products – e.g. winter creams and suntan lotions

• Through inventory based alternatives by building excess

inventory during periods of lean demand and consuming
them during peak demand times; or by shifting production to
a future period beyond demand period; or deliberately
inducing stock-outs leaving customers to wait longer; final
choice depends on required customer service levels

• Through capacity adjustment alternatives by hiring/laying of

workers; working extra hours and shifts; use of part time
workers

• Through capacity augmentation means by outsourcing and/or

subcontracting, rescheduling maintenance programs and by
debottlenecking projects

Creative Professional Development Associate (CPDA) AHM Shahadat Ullah

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• Managing demand and/or supply involves choice

amongst many options with varying implications
• Some basic strategies to help make a choice are:
• Level strategy – not to disturb existing production system
at all; maintain a steady rate of regular time output while
meeting demand variations largely thro inventories
• Chase strategy – by matching capacity to demand and
don’t carry inventories; planned output for a period is set
at expected demand for that period( with lead-times
built in e.g. Jan production for Feb needs); capacity
related alternatives used flexibly
• Mixed strategy – use a combination of level and chase
approaches

Alternative Cost Implication

Managing demand Capacity reservation Planning & scheduling costs

Influencing demand Marketing oriented costs

Managing supply Build inventory Inventory holding costs

Backlog/backorder/ Shortage/loss of goodwill
stock-out
Overtime/under-time Overtime costs, Loss of
productivity
Varying shifts Shift change costs
Hiring/layoff workers Training/hiring costs,
employee morale
Subcontract/outsource Transaction costs
Debottlenecking/adding new Investment, debottlenecking
capacity costs

Creative Professional Development Associate (CPDA) AHM Shahadat Ullah

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The data and the application of analytics is at the heart of S&OP

Analytics-based reporting tells the S&OP planning

teams:
Where they are

What actions need to be taken and driven down into

tactical and operations S&OP processes
What results and trends are emerging from their
decisions
What corrective steps do the S&OP planning teams
which to take

Creative Professional Development Associate (CPDA) AHM Shahadat Ullah

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Current
Past Periods Forecasted Periods
Period
SALES January February March April May June July August Sept Oct
FORECAST 2,000 2,000 2,000 2,050 2,100 2,100 2,100 2,150 2,150 2,150
ACT SALES 2,150 1,950 2,200 2,150
DIFF. MO 150 -50 200 100
CUM 150 100 300 400
DIFF. % 7.50% 2.50% 5.00% 4.97%

PRODUCTION
PLAN 2,000 2,000 2,050 2,100 2,200 2,300 2,300 2,300 2,300 2,300
ACTUAL 1,950 2,000 2,000 2,150
DIFF. MO -50 0 -50 50
CUM -50 -50 -100 -50
DIFF. % -2.50% -1.25% -1.65% -0.61%

FINISHED GOODS INVENTORY

PLAN 1000 1000 1050 1100 900 1100 1300 1450 1600 1750
ACTUAL 950 1000 800 800
DIFF. MO -50 0 -250 -300
CUM -50 -50 -300 -600
DIFF. % -5.0% -2.5% -9.8% -14.5%
DAYS ON HAND 9.7 9.1 7.4 7.6 8.6 10.5 12.1 13.5 14.9

2,500

2,000

Forecast

1,500 Actual Sales

Prod Plan
Actual Prod
1,000
Inv Plan
Actual Inv
500 Target Inv

0
January February March April May June July August

Creative Professional Development Associate (CPDA) AHM Shahadat Ullah

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“An S&OP project is 60 percent change management, 30

percent process development, and 10 percent technology”*

Effective drivers of change management:

Effecting acceptance towards ownership and
restructuring of roles and responsibilities
Developing necessary adjustments to company
culture and capabilities
Training employee’s around the appropriate changes
Winning support of employees with persuasiveness
about the appropriateness of the adjustments

“A never-ending effort to expose and eliminate root causes

of problems: small-step improvement as opposed to big-
step improvement.” APICS Dictionary, 14th edition
Continuous improvement is important because:
Ideas for process improvement come from the S&OP team
participants – hence more realistic
S&OP enables continuous monitoring, feedback, and
sharing of improvement ideas
Once S&OP teams see their ideas are heard, they will
continually seek ways to improve their own performance
Encourages employees to take ownership and reinforces
team working, thereby improving level of motivation

Creative Professional Development Associate (CPDA) AHM Shahadat Ullah

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