Module 2 - Section A: S&OP Purpose and Process Flashcards
Sales and Operations Planning
-process to develop tactical plans that provide management the ability to strategically direct its bsuinesses to achieve competitive advantage on a continuous basis by integrating customer-focused marketing plans for new and existing products wit management of supply chain
-process brings together all the plans for the business (sales, marketing, development, manufacturing, sourcing and financial) into one integated set of plans
-S&OP performed at least once a konth
-reviewed by management at an aggregate (product family) level (org may have multiple S&OP plans for various product families
-focuses on future projections (12 to 24 months out)
-role is to balance demand and supply at the product family volume level
Volume
-big picture decision that determines how muchto mark
-For MTS volume concerns aggregate inventory levels and the money needed to make that inventory
-for MTO it concerns the size of the backlog (all the customer orders received, but not yet shipped; sometimes referred to as open orders or order board)
Mix
-focuses on what to make in which order based upon actual customer orders and sales forecasts
-challenge with mix decisions is that many orgs. get caught up in managing the mix in a reactive mode due to customer requests and they never take a step back and focus on big picture
S&OP Process
Step 1: Reviewing Performance (Product Review)
Input = monthly information
Participants = information systems analyst, forecaste analyst
Output = sales analysis reports generated and demand forecasts updated
S&OP Process
Step 2: Evaluating Demand Levels (Demand Planning)
Input = updated sales analysis and demand forecasts
Participants =
Output = draft sales plan that includes new month’s cycle
S&OP Process
Step 3: Evaluating Supply Capability (Supply Planning)
Input = updates sales plan
Outputs
1. draft plan that includes updates to production plan, sales plan, and resource plan;
2. list of issues needing resolution to be presented by S&OP process owner at pre-S&OP planning meeting
S&OP Process
Step 4a: Financial Review Meeting
Inputs
1. any capacity constraints or out-of-tolerance conditions
2. list of issues that require resolution
3. supply-side analysis of sales ops. plans
Participants = all functional department managers/heads
Outputs = financially validated plan or recommendation for plan changes to enable meeting financial constraints
S&OP Process
Steph 4b: Pre-Meeting
Input = each prodct family’s plans and recommendations from prior steps
Participants = functinal department managers
Outputs = agenda for executive meeting
S&OP Process
Step 4c: Executive Meeting
-makes decisions on sales/ops. pans for each product family
-authorizes spending based on rate changes in production and procurement
Input = executive meeting agena developed in pre-meeting
Participants = group should be smaller
Outputs = single companywide plan that has been agreed upon by executive team and clearly understood by all internal stakeholders
Demand Planning
-process of combining statistical forecasting techniques and judgment to construct demand estimates for products/services across supply chain from suppliers’ raw materials to consumer’s needs
-items can be aggregated by product family, geographical location, product life cycle, etc, to determine estimate of consume demand for finishes products/service parts/services
-actual sales are compared to forecasts provided by various models/judgment to determine best integration of techniques and judgment to minimize forecast error
-once a new forecast is generated, it will be used along with actual sales, production, and inventory data to create the new sales plan
Sales Plan
-time-phased statement of expected customer orders anticipated to be received (incoming sales, not outgoing shipments) for each major product family or item
-represets sales and marketing management’s commitment to take all reasonable steps necessary to achieve this level of actual customer order
-necessary input to the production planning process/S&OP process
-also an output in that it’s the finalized plan that the consensus-building process of S&OP ensures is in agreement with the production plan
-expressed in units identical to those used for the production plan
-updating sales forecasting reports involves updating files with data from period that most recently ended (updated info is then used to develop sales analysis reports and change sales forecasts)
Production Plain
Input = sales plan, which shows what organization intense to sell and this plus inventory plan/backlog plan help determine what needs to be produced to enable those sales
-S&OP process forces mgmt to consider whether their current production plan choices are still efficient and effective
-S&OP process should synchronize sales and production plans
Planning Factors - Units of Measure
-unit in which quantity of an iten is managed (e.g. pounds, each, box of 12, etc.)
-measurements that orgs use that need to be in aligment include:
1. total units for each product line or product family
2. dollar value of total monthly output
3. total output by factory
4. direct labor hours
-best practice is to use unit of measure that is consistent with the way the org goes to market, such as units, gallons/liters, etc.
Planning Factors - Product Families and Product Lines
product family
1. group of products/services that pass through similar processing steps, have similar characteristics, and share common equipment prior to shipment or delivery to the customer
2. can be diff. overlapping product lines that are produced in 1 factory and often used in production planning/S&OP planning
3. defined from a production synergies perspective
4. should be meaningful in terms of volume of sales generated
5. should be meaningful in terms of production and capacity planning (help establish which units can be producted together or use sames types of capacity)
6. help org select appripriate unit of measure per group
7. six to 12 product families is optimum e.g. business unit (less detailed) and SKY by customer by location (most detailed)
product line
1. group of products associated by function, consumer group, distribution channel, manufacturing characteristics, or price range
2. typically reflects the marketing and sales aspects of a product/service and used in aggregate planning marketing, costing, sales planning
3. defined from a customer-centric perspective
product/service hierarchy
1. in S&OP planning, general approach to dividing products or services into families, brands, and subfamilies for various planning levels; this ensures a correct top-down or bottom-up approach is taken to grouping (or aggregating) demand at each subsequent level;
2. forecasts are more accurate the higher up the product hierarchy they are developed;
3. forecasts should usually be driven from from the top
Planning Factors - Planning Horizon
-amount of time a plan extends into the future
-for a master schedule, this is normally set to cover a minimum of cumulative lead time plus time for lot sizing low-level components and top for capacity changes of primary work center or of key suppliers
-for longer-term plans, the planning horizon must be long enough to permit any needed additions to capacity
**finishing lead time **=
1. time that is necessary to finish manufacturing a good after receipt of a customer order
2. the time allowed for completing the good based on the final assembly schedule
-S&OP horizon need to be at least as long in periods, usually months, as the annual business plan
-ideal is 6 to 18 months
