Sales & Operations Planning

1. Sales & Operations Planning

2. What is happening 6-12 months from now?

3. Maturity Scan How do youcharacterize the S&OP process in your team? Stage of Evolution Characteristics Stage I React Ad hoc decisions, fire fighting problems, no specific sequence Stage II Anticipate Functional organization with each function making separate decisions in its own silo, not sharing it with the others Stage III Collaborate Joint decision making with a rough logical sequence, not formalized or detailed. Limited preparation on trade offs Stage IV Orchestrate Formalized logical sequence of joint decision making. Individual preparation of decisions and trade offs beforehand

4. A definition S&OP is a process discipline that brings together the sales & marketing ambitions, supply capabilities, customer needs and financial constraints and objectives to balance them and create a single, achievable plan for the tactical horizon

5. S&OP can be an effective bridgebetween Strategic Business Planning and Execution Predict and prepare Strategic Management / Business Planning • S&OP • Align functional plans • Create the right context • 2-18 months horizon • Prepare for different scenarios • Recognise and address gaps Tactical Planning & Decision Making (Tactical) Execution Sense and respond

6. Demand Reconcile demand and supply Reconcile with financial plans Supply S&OP is business planning in 5 steps… From Forecasting to Demand Shaping Getting the right info to make decisions into the last 60 minutes of the process Sales and Ops Planning Meeting “What if?” Rather than “Yes/No” From Capacity Planning to Supply Network trade offs & design

7. The process seems simplebut some principles are a challenge…. • Discussions should be fact-based • There must be clear ownership of each element of the process and of the decisions made • The operating plan must be formally linked by assumptions to a financial plan • There needs to be a formal balancing of demand and supply across a rollinghorizon • Gaps (vs set targets…) must be recognised and action plans formulated to close them taking into consideration the relevant leadtimes • Trade-offs must be clearlyarticulated and commercially evaluated

8. Common pitfall: believing that S&OP is a monthly meeting If S&OP is only a monthly meeting, it will not deliver the targeted results: a good process consists of well-prepared and fact-based discussions on key topics only, resulting in optimal decisions for the company as a whole 15.00–18.00 S&OP

9. What do you think about this discussion? : • Sales: “We have received a tough target of 5% additional sales next year and we have accepted the challenge” • Marketing: “We are designing a new campaign and will invest €10m, so we think that volumes should increase by 6%” • Supply Chain: “The statistical forecast indicates 2% growth” Compromise reached after long fight in S&OP meeting: 4% growth

10. Aligning with finance does not mean that the forecast has to become the target! Target A goal or objective (a desired future outcome) ≠ Plan A set of actions designed to achieve a defined outcome ≠ Forecast The best estimate of anticipated events (a likely future outcome)

11. Realising that there are gaps is good! This helps to timely drive the right actions GAP Target GAP Demand plan Forecast Recognising that gaps exist between forecast and target is very useful: in the S&OP process you can decide to do something about it! Time Horizon History Short term Next 3 Months Medium Term3-18 months Long Term>18 months

12. It is all about the gaps Comparing the bottom-up forecast with financial targets will give better understanding of the expected outcomes Volume plan Business targets Bottom-up financial forecast Gaps? Planned net average sales prices

13. Marketing: the promotion will sell 400 Sales:we can sell 200 one consensus plan Finance: we have budget of 300 Manufacturing:they will only sell 150 Source figure: Red Pepper. Modified E&Y 1999 • Key decision making forum • Manage together • Routine things done routinely • Issues addressed early – efficient response & anticipation • Functional silo approach • Ineffective behaviour • Fire fighting • Lots of ad-hoc meetings • Lots of effort, little reward

14. Who Brings What to the Table? Engineering Sales Product Development Customer Interface Human Resources Marketing Workforce Availability Product Demand Capital Operations Capacity Finance MPS and Supplier Constraints Business Plan General Management Materials Adapted from: Launchbury, Keith J. Principles of Planning Omeric, 1999.

15. How to translate this to The Fresh Connection Purchasing Sales Servicelevel Demand pattern Shelflife Leadtimes Quality Reliability Trade Unit Strategy Capacity Improvements Operations Frequencies Stocklevel Fixed period Supply Chain Adapted from: Launchbury, Keith J. Principles of Planning Omeric, 1999.

16. Decision making Sales Operations Supply chain Purchasing • Decision making • Who is involved? • What sequence makes sense? sequence

17. Set up a logical sequence of decisions and roles involved for The Fresh Connection Sales Operations Supply chain Purchasing Inventorypolicyraw mat. (batch size, safety stock) Productioncapacity plan (shifts/projects) Forecastingdemand (pattern) Inventorypolicyfinished product (safety stock) Supplierselection and agreements Productionpolicy (interval / fixedperiod) Production resources and allocation Decideaboutportfolio/ customerservice The valueproposition Capacity plan inboundwarehouse Capacity plan outboundwarehouse

18. 10 steps to success Sales Operations Supply chain Purchasing The valueproposition Cus-tomer Portfolio / customer service Product group Forecastingdemand Production resources and allocation Finished product Productioncapacity plan (shifts/projects) Productionpolicy (interval / fixedperiod) Finished product Capacity plan outboundwarehouse Inventory policy finished product (safety stock) Compo-nents Capacity plan inboundwarehouse Inventorypolicyraw mat. (batch size, safety stock) Supplierselection and agreements Iterate