Debrief 2

Debrief after round 2

• Strategy in The Fresh Connection– What is your strategy?– How did you translate it into action?– Was everything clear?

• Please give us your reflection in headlines

• Review team results

Maturity scan:Alignment and collaboration

Stage of evolution

Characteristics

Stage I:React

Ad hoc decisions, no connection with business strategy, no specific sequence

Stage II:Anticipate

Functional organization with each function making separate decisions in its own silo, little or no connection with business strategy

Stage III:Collaborate

Joint decision making with a rough logical sequence, not formalized or detailed. Limited preparation on trade offs, connected to business strategy

Stage IV:Orchestrate

Formalized logical sequence of joint decision making based on business strategy. Individual preparation of decisions and trade offs beforehand

Sales&

OperationsPlanning

What is happening 6-12 months from now?

A typical board meeting:Let’s eavesdrop

President: “This shortage situation is terrible. When will we ever get our act together? Whenever business gets good, we run out of product and our customer service is lousy.”

VP Operations: “I’ll tell you when. When we get some decent forecasts from Sales and Marketing…”

VP Sales (interrupting): “Wait a minute. We forecasted this upturn.”

VP Operations: “… in time to do something about it. Yeah, we got the revised forecast – four days after the start of the month. By then it was too late.”

VP Sales: “I could have told you months ago. All you had to was ask.”

VP Finance: “ I’d like to be in on those conversations. We’ve been burned more than once by building inventories for a business upturn that doesn’t happen. Then we get stuck with tons of inventory and run out of cash.”

Source: Thomas F. Wallace, Robert A. Stahl, ‘Sales & Operations Planning’, 3rd ed., 2008

What is causing these type of discussions?

Business Strategy

Execution

We all mean well, but we get nowhere

No ownership, high forecast bias, no identification of gaps between

forecast, plan, budget etc…

No connection between business strategy and execution

Business Strategy

Execution

We all mean well, but we get nowhere

Where does S&OP fit?

No ownership, high forecast bias, no identification of gaps between

forecast, plan, budget etc…

What is S&OP?

S&OP, at heart, is a very simple idea: 1. make forecasts of what you are going to sell and

what you can make (or buy)2. take actions to balance the equation supply =

demand over the whole horizon you have decided you need to look at

3. look at the financial consequences of those actions versus your targets

4. initiate actions to address the difference between the target and the current, balanced forecast

S&OP is business planning in 5 steps…

Sales and Ops Planning

Meeting

Reconcile with financial plans

Supply

Reconcile demand and supply

Demand

From Forecasting to Demand Shaping

From Capacity Planning to Supply Network trade offs & design

“What if?” Rather than “Yes/No”

Getting the right info to make decisions into the last 60 minutes of the process

Source: Deep Parekh, Partner, Equus Group, LLC

S&OP is also about behavior and collaboration

“You have done well: you have consistently beaten your forecast.”

“You consistently under-forecast; please look into your process.”

“Your forecast is well below your target; this is unacceptable.”

“What options have you considered already and what can be done more to close the gap.”

“This is our bottom up forecast; this is our best outlook based on current plans; there is nothing I can do”.

“Our bottom up forecast fell short of target. We are working to improve our Q3/Q4 promotional program.”

16

● Functional silo approach

● Ineffective behaviour

● Fire fighting

● Lots of ad-hoc meetings

● Lots of effort, little reward

● Key decision making forum

● Manage together

● Routine things done routinely

● Issues addressed early –

efficient response &

anticipation

oneconsensusplan

Sales:we can sell 200Sales:we can sell 200

Marketing:

the promotion will sell 400

Marketing:

the promotion will sell 400

Manufacturing:they will only sell 150

Finance:

we have budget of 300

Source: Red Pepper, Modified E&Y, 1999

Who Brings What to the Table?

Marketing

ProductDevelopment

ProductDemand

Capital

MPS and Supplier

ConstraintsBusiness

Plan

WorkforceAvailability

Finance

Materials

Operations

HumanResources

Engineering

GeneralManagement

Capacity

CustomerInterface

Sales

Source: Launchbury, Keith J. Principles of Planning Omeric, 1999

How to translate this to The Fresh Connection

ServicelevelDemand patternShelflife

Supply Chain

Operations

Purchasing Sales

LeadtimesQualityReliabilityTrade Unit

CapacityImprovements

FrequenciesStocklevelFixed period

Strategy

Adapted from: Launchbury, Keith J. Principles of Planning Omeric, 1999

Strategy into actionLevels in version 2013

Theme Sales SCM Operations Purchasing

Level 1 ReliabilityService level

Order deadlineShortage rule

Safety stocks# Shifts

# Pallet locations# FTE

Delivery windowDelivery reliability

Level 2 Batches and frequencies

Shelf lifeTrade unit

Lotsizing in production and purchasing

SMEDIncrease speed Trade unit

Level 3 Speed and quality Payment terms Frozen period

Intake timePreventive

maintenanceSolve breakdowns

trainingRaw materials

inspection

Supplier selectionPayment terms

QualityTransport mode

Extensionsin version 2013

Theme Sales SCM Operations Purchasing

Extension a S&OPPromotional pressureCategory management

ForecastingProduction interval

toolResource selection Dual sourcing

Extension b External collaboration

Promotion horizonVMI

Outsourcing warehouse (MCC)

Inflate PETVMI

Supplier development

Extension c CO2 footprintSustainabilty

CO2 sla Decrease of water usage

Decrease of energy usage

Decrease of start up productivity loss

Extension d KPIs and targets KPI selection KPI selection KPI selection KPI selection

Extension e Supply chain risk management

Risk eventsRelaunch (horizon) Scenarioplanner

Tracking & tracingQuarantineRisk events

Pooling warehouse FTE

Contract durationSupplier development

Dual sourcingRisk events

Decision making

sequence

Sales OperationsSupply chain

Purchasing

• Decision making– Who is involved?– What sequence makes sense?

Decide about portfolio/ customer service

Forecasting demand (pattern)

Production resources and allocation

Production policy (interval / fixed

period)

Inventory policy finished product (safety stock)

Production capacity plan (shifts/projects)

Capacity plan outbound warehouse

Inventory policy raw mat. (batch size,

safety stock)

Capacity plan inbound warehouse

Sales Operations Supply chain Purchasing

The value proposition

Supplier selection and agreements

Set up a logical sequence of decisions and roles involved for The Fresh Connection