Making the Link Between Sales and Operations Planning

Presented by:Kathan Bhatt (s3922291)Bhavin Chauhan (s3922349)

Sales and Operations Planning

• Sales and operations planning (S&OP) is an integrated business management process developed in the 1980s by Oliver Wight (Donald S, 2006)

• Using S&OP, the executive/leadership team continually achieves focus, alignment and synchronization among all functions of the organization. Agree?

What do you mean by Sales and Operations Planning?

• Sales and Operations planning is a process where executive level management regularly meets and reviews projections for demand, supply and resulting financial impact. (by Martin Murray)

• Is it a Long range strategy or tactical day to day planning ?• Answer: In-between

SOP may be least expensive but hardest

Source: GBM Consulting

Thought Leadership Summit

• An executive roundtable series co-founded by the Center for Digital Strategies at Tuck School of Business and Cisco Systems, Inc. for strengthening links between Sales and Operations planning

• Participants:– 3M (mining and manufacturing)– Cargill (trading, purchasing and distributing agri. products)– Cisco (Design and sales of Networking Equipments)– General Motors (Automotive)– Lowe’s (retail: home appliances)– Owens Corning (largest fiberglass manufacturer)– Staples (retail: office supply chain)– Sysco (retail: food products)– Whirlpool (home appliances)– Tuck School of Business, Dartmouth (Education)– Harvard Business School (Education)

Breakdowns in Supply Chain - Examples

• Lowe’s oversupply of loan movers pushed out to stores in order to reduce inventory at distribution centre, as spring arrived late

• At Sysco the sales people brought in huge last minute orders for next-day fulfillment

• Whirlpool was unable to match the consumption of certain products during the peak period

“once you miss the boat and you got to wait for another month…99.9 % of delivery isn’t good enough”

Does the CEO get it?

• How important is it for a CEO to understand the value of supply chain ?

– Cost saving ?– Competitive advantage?

Choosing Right Opportunities

• Segmentation and Selectivity – focusing on most profitable opportunities– Improve service levels - Customer profitability– Segmenting accounts – current and future profitability– Cover fixed costs – unprofitable customers– Stronger relationship with few players

“Identify transactional and strategic partners”

Rethinking Forecasting and Modeling

• High Variability– Reasons: demand change, fashion change, new product launches etc.

• “We have data to see variabilities…we can define rules”• “Forecast is good only for the day I give it to you”• “Lack in understanding how predictable demand is?”

• Is the computer forecasting reliable enough?• No , you have to integrate Human insights from sales and

merchandising

Forecasting to Planning: Breaking Down Silos

• Challenge: converting demand signals into forecasts• Different functions develop their own plans• Forecasting, scheduling, production planning and inventory

management can only be improved marginally within the departmental silos of sales, manufacturing and distribution

• How to get a single version of truth?• Cross-functional meetings (weekly)

– Alignment of sales and operations vision

Demand & Supply

Incentives, Metrics and Accountability

• Achieving shared goals, rather than departmental goals

• How to operationalize it?– GM’s effort to establish end-to-end process owners who live in

between silos of sales and manufacturing and have accountability for processes like order fulfillment

– Is it okay to create dynamic set of incentives for the people that are doing actual job schedules at factory floor?

“No one gets a bonus till the common goals are achieved”

External Collaboration: Key Success Factors

• Interconnection of supply chain across trading partners– Supplier Engagement process - regular open dialogue

• Look beyond borders, focusing inside and outside• Partner evaluation

• But ,– It is time taking, lengthy process– Requires multiple level collaboration– Right people talking with each other (E.g. IT with IT)– Risky and delicate

Trust and Information Sharing

• Sharing of data: EDI and inventory data• What to share and what not to share?• Trust is hard to systemize

• What we can do?– Develop an attitude of “how are we going to work through it”

• IT enables collaborative relationships– It makes unobservable things observable

Deeper Collaboration – Growing the Pie

• Can we come up with the product that we can sell better?– Sharing of Ideas and opinions

• Willingness to allow the best company to manage your that part of business

• Increase in profitability for both the partners - identify

• Issues: “sharing data is ok, taking decisions is ok, delegating work is ok but now you are getting into my business”

“if there is money to be had, its mine”

Activity Time

Integration in SC for better S&OP

Conclusion

• To integrate sales and operations in a better way, thinking out of the box (beyond ERP systems)

• Building trust on multiple levels• Planning and forecasting should be data driven

– Based on current and historical data

• Shared incentives, accountability and language can help build effective S&OP process

• Successful collaboration with external partners:– Mutual commitment– Constant re-evaluation– Constant relationship building

S&OP with SAP HANA