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Operations Planning
Planning is a
strategy for
survival.
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What’s The Alternative?
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What needs to be
planned?
Resources
Information Systems
Finances
Services
Products
Materials
Labor
Equipment
Facilities
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SALES AND OPERATIONS
PLANNING
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Sales and Operations Planning
All functions are aligned on one business plan
CUSTOMER
Strategic Plan
Business Plan
Sales and Operations Planning
(Integrated set of Numbers)
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DM Program Resources and Education Associates
US-Dylan - Doc #379 --S&OP Executive Overview.ppt 7
S&OP 101
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S&OP 101
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S&OP 101
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S&OP 101
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S&OP 101
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S & OP in the Planning Cycle
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S&OP continued
(2 - 18 months out)
Outside of time frame strategic planning
Inside of time frame tactical planning
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Why Do Companies
Use S&OP?
Many companies have difficulty in
establishing a valid game plan for sales,
production, procurement, and inventory
levels -- and then tying them to day-to-day
scheduling and execution. As a result,
performance suffers: customer service is
poor, production and procurement
are inefficient, inventories are too high or
too low, or all of the above.
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Why Do Companies
Use S&OP?
Sales & Operations Planning has emerged
as an essential management tool in this
age of rapid changes, increasingly
demanding customers, and supply chains
that extend half a world away. It's rightfully
been called "top management's handle
on the business."
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What is Executive S&OP?
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What is Executive S&OP?
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What are the Benefits of
Using S&OP?
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What are the Benefits of
Using S&OP?
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Who's Using S&OP
Successfully?
Microsoft, among many others, also
uses Executive S&OP and all of their
manufacturing is outsourced.
Companies in this category may need
Executive S&OP even more, because
they have less control over their sources
of supply.
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Who's Using S&OP
Successfully?
In addition, S&OP is starting to take
hold in retailing and banking, and in
companies that produce products of a
non-physical nature: product design
firms, process engineering
organizations, and so forth.
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What Does it Cost?
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Sales and Operations Planning
All functions are aligned on one business plan
CUSTOMER
Strategic Plan
Business Plan
Sales and Operations Planning
(Integrated set of Numbers)
PCI on
DM Program Resources and Education Associates
US-Dylan - Doc #379 --S&OP Executive Overview.ppt 28
SALES AND OPERATIONS
PLANNING
THE MONTHLY PROCESS
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Inputs into S & OP
Input Responsibility
Projected demand Marketing
Market intelligence Marketing
Actual sales Sales
Capacity information Manufacturing
Management targets Management
Financial requirements Finance
New product information R&D
New process information Process engineering
Workforce availability Human resources
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Forecast Laws
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The Monthly S&OP Process
Step #2
Demand • Management Forecast
Planning • 1st-pass spreadsheets
(with new forecast)
Step #1
Run Month
End Reports •Statistical Forecasts
•Field Sales Worksheets
End of Month
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Thoughts
on Forecasting:
Forecasting is a Process
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The Forecasting Process
Inputs Outputs
Current Customers
Forecasts that are:
New Customers
Competition
1. Reasoned
Economic Outlook
New Products/Services
2. Reasonable
3. Reviewed
Promotions Process
Pricing Strategy
Frequently
Bid Activity 4. Represent the
Management Directives
Total Demand
Intra-Company Demand
History (Data)
Other
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Thoughts
on Forecasting:
Forecasting is a Process
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Accuracy????
Product A Product B
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10 10
5 5
Forecast Forecast
Actual Actual
Forecasting is a Process
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The Monthly S&OP Process
Step #3
Supply
Planning • Capacity constraints
• 2nd-pass spreadsheets
(with new production /service plan)
Step #2
Demand • Management Forecast
Planning • 1st-pass spreadsheets
(with new forecast)
Step #1
Run Month
End Reports •Statistical Forecasts
•Field Sales Worksheets
End of Month
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The Supply Planning Process
Step #4
Pre-SOP • Recommendations &
Meeting Agenda for Exec Meeting
• 3rd-pass spreadsheets
Step #3 (consensus, alternatives, what-ifs)
Supply
Planning • Capacity constraints
• 2nd-pass spreadsheets
(with new production plan)
Step #2
Demand • Management Forecast
Planning • 1st-pass spreadsheets
(with new forecast)
Step #1
Run Month
End Reports •Statistical Forecasts
•Field Sales Worksheets
End of Month
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S&OP Example
Present
Past Future
Product Family B D J F M A M J J A S O N D J
Sales Plan 2 4 6 8 12 19 21 14 8 4 9 10 3 5
Actual Sales 3 5 7
Difference 1 1 1
Cumulative Diff. +1 +2 +3
Production Plan 8 8 10 8 12 19 21 14 8 4 9 10 3 5
Actual Production 7 8 9
Difference -1 0 -1
Cumulative Diff. -1 -1 -2
Backlog Plan 20 14 10 6 11 11 11 11 11 11 11 11 11 11 11
Actual Backlog 20 16 13 11
Difference +2 +3 +5
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The Monthly S&OP Process
Step #5 •Decisions
Executive •Company
S&OPMeeting Game Plan
Step #4
Pre-SOP • Recommendations &
Meeting Agenda for Exec Meeting
• 3rd-pass spreadsheets
Step #3 (consensus, alternatives, what-ifs)
Supply
Planning • Capacity constraints
• 2nd-pass spreadsheets
(with new production plan)
Step #2
Demand • Management Forecast
Planning • 1st-pass spreadsheets
(with new forecast)
Step #1
Run Month
End Reports •Statistical Forecasts
•Field Sales Worksheets
End of Month
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Executive Sales and Operations
Planning Meeting
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Executive S&OP Meeting
Objectives:
Make decisions on each product family, accept Pre-
adjustments
Make decisions where no agreement on Pre-S&OP
team
Review business key performance indicators where
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The Monthly S & OP Process:
Summary
1. Run month end sales forecast reports
statistical forecasts and field sales worksheets
2. Demand planning
management forecast and first pass spreadsheets
3. Supply planning
capacity constraints and second pass spreadsheets
4. Pre-S & OP meeting
Recommendations and agenda for Executive S & OP
meeting
5. Executive S & OP meeting
Approved single companywide game plan
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Advantages of S&OP
Negotiated process
“Agreed” demand
Functional coordination
Budgets and cash flow analyses
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Implementing S&OP
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The ABC’s of
Implementation
C - Computer
B - Data
A - People
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The Real
Implementation Challenge . . .
. . . is not in understanding S&OP. It’s simple
Behavior Change . . .
. . . changing the way we do our jobs:
Discipline
Accountability
Conflict
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Principles of S & O P
The Sales and Operations Planning is
the Company Game Plan
The Sales and Operations Plan is the
vital link between long range and short
range planning
Sales and Operations Plans are
established at the Product/Service
Group level
The Sales and Operations Plan includes
all management targets
The Sales and Operations plan is
monitored and revised
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monthly
S&OP: Key Points
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What Can Sales & Operations
Planning Deliver?
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References
Orchestrating Success: Improve Control of the Business
with Sales & Operations Planning --- Richard Ling and
Walter E. Goddard )
Sales & Operations Planning: The How-To Handbook 3rd
edition --- Wallace and Stahl
Introduction to Operations and Supply Chain
Management, 2/e --- Bozarth and Handfield
Executive S&OP – How to implement it Successfully
Presentation by Bob Stahl at the The Best of the Best S&OP
Conference sponsored by APICS and IBF on December 12, 2008,in
Dallas, TX.
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