S&OP: Getting The Most From Your Planning

Business Forecasting and Analytics Forum Boston, June 6, 2017

Anthony Reese
Typical S&OP Process

Executive
Demand Financial
Product Supply Business S&OP
Review Review
Review Review Review Meeting

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S&OP Critical Areas of Success
Focus
• Bring the right discussions to the
forefront

Collaboration
• Bring the right people and process
together

Commitment
• Establish the right pace and cadence

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1
Creating
Focus

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Create Focus Systematically
• Reduce the conversations that need to happen
down to the critical items.
• Manage the conversations with a structured system
of discussion and action.
• Develop separate processes for the critical items
(and non-critical items)

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Demand Segmentation is an
Analytical Tool to Build Focus
High
Q1 – A Items Q3 – A Items
(Low Variability / High Gross (High Variability / High Gross
Sales) Sales)

“Good for Statistical Tools!” “Collaborate!”

Business
Importance
Q2 – B & C Items Q4 – B & C Items
(Low Variability / Low Gross (High Variability / Low Gross
Sales) Sales)

“Good for Statistical Tools!” “New Strategies!”

Low High
Demand Variability
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 Demand Segmentation Approach
• Review all active finished good items
for:
• Historical monthly demand for the
High Q1 – A Items Q3 – A Items last three years
(Low Variability / High
Gross Sales)
(High Variability / High • Gross sales by month for the same
Gross Sales)
period
“Good for Statistical
Business Tools!”
“Collaborate!”
• Establish Business Importance –
Importance Q2 – B & C Items Q4 – B & C Items ABC Classification based on gross
(Low Variability / Low
Gross Sales)
(High Variability / Low sales over last 12 months
Gross Sales)
• Top 80% = “A item”
“Good for Statistical
Tools!”
“New Strategies!” • Next 15% = “B” item
Low Demand Variability High • Bottom 5% = “C” item

Assign each item to a quadrant based on business importance

and demand variability

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Develop Quadrant Specific
Action Plans Example
High Q1 – Statistical Forecasting
(Low Variability / High Gross Sales)
1. Validate forecastability against new
statistical model parameters
2. Determine if any Q1 should move
to Q3.
• E.g., new demand patterns,
seasonality or trends
Business
Importance Q2 – Statistical Forecasting
(Low Variability / Low Gross Sales)
1. Validate forecastability against new
statistical model parameters
2. Determine if any Q2 should move
to Q4.
• E.g., SMU, OEM
Low
Demand Variability
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Q3 – Market Intelligence
(High Variability / High Gross Sales)
1. Validate if any Q3 can move to Q1 or
Q4
• E.g., seasonal items that sell year
round with consistent demand
pattern may produce reasonable
statistical models
• E.g., Items that should be MTO
Q4 – Alternative Strategies
(High Variability / Low Gross Sales)
1. Validate item type (e.g. SMU, OEM,
seasonal)
2. Determine whether statistical
forecasts or market intelligence will
be value added per item
3. Partner with Supply Chain on
Supply Strategy to recommend for
organization (e.g. MTO, ROP)
High
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1
Collaboration

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A Working Definition
Two or more functions (stakeholders)
working together and leveraging their
critical expertise to find
the best solution to a
shared goal.
Attributes of Collaboration:
• Clear Goals
• Close Cooperation
• A Structured System

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Alignment Is Required Across The
Top of the Organization

Sales Alignment Operations

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Collaboration Happens Deeper in
the Organization…

Alignment

Sales Operations
Collaboration
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…and depends on having the
right people engaged

Alignment

Sales Operations
Collaboration
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Is Collaboration What you Need?
• Collaboration is hard work
• If not done right can damage cross functional
relationships
• Collaboration needs to be supported by alignment
and happen deep in the organization

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How Important is it For Teams to
be Aligned within Your Company?

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How Important is it For Teams to
be Aligned within Your Company?
• Teams identified as important to be aligned,
are often not aligned.

• The real or perceived gaps can be significant.

• Building cross functional alignment is an

improvement area for many organizations.

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Poor Collaboration Reduces the
Effectiveness of Strategy
Functional Collaboration
Share of managers who say they can
rely all or most of the time on:
Their boss
84%
Their direct reports
84%

Cross Functional Collaboration

Share who say they can rely all or
most of the time on:
Colleagues in other departments
59%
External partners
56%

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Creating a Breakthrough

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To Make Collaboration Work
• Clear shared goals (Alignment)
• Close cooperation of the right people at lower
levels of the organization
• A structured system of discussion, agreement and
actions to achieve results.
• Established ways to resolve conflict and achieve
results.

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To Make Collaboration Work
• Clear shared goals (Alignment)
• Close cooperation of the right people at lower
levels of the organization
• A structured system of discussion, agreement and
actions to achieve results.
• Established ways to resolve conflict and achieve
results.

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There are Various Approaches to
Collaborating on a Forecast
Without Feedback A forecast is produced with no feedback

With Feedback Systematic collection of feedback is incorporated into a forecast

Several functions independently create forecasts and compare

Comparison them together and agree on the final forecast

A forecast is created and passed to other stakeholders that adjust

Hand Off the forecast and the final stakeholder produces the final forecast

A forecast is produced as a base and stakeholders add or subtract

Waterfall to/from the base

The forecast is assembled through a combination of the above

Hybrid approaches

Don’t Forecast It is agreed that no forecast is needed

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3
Building
Commitment

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Three Key Areas to Understand

Business Flow Calendar Context

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Understand the Business Flow

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Develop a Calendar Example
January April July October
S M T W T F S S M T W T F S S M T W T F S S M T W T F S
1 2 3 4 5 6 7 1 1 1 2 3 4 5 6 7
8 9 10 11 12 13 14 2 3 4 5 6 7 8 2 3 4 5 6 7 8 8 9 10 11 12 13 14
15 16 17 18 19 20 21 9 10 11 12 13 14 15 9 10 11 12 13 14 15 15 16 17 18 19 20 21
22 23 24 25 26 27 28 16 17 18 19 20 21 22 16 17 18 19 20 21 22 22 23 24 25 26 27 28
29 30 31 23 24 25 26 27 28 29 23 24 25 26 27 28 29 29 30 31
30 30 31

February May August November

S M T W T F S S M T W T F S S M T W T F S S M T W T F S
1 2 3 4 1 2 3 4 5 6 1 2 3 4 5 1 2 3 4
5 6 7 8 9 10 11 7 8 9 10 11 12 13 6 7 8 9 10 11 12 5 6 7 8 9 10 11
12 13 14 15 16 17 18 14 15 16 17 18 19 20 13 14 15 16 17 18 19 12 13 14 15 16 17 18
19 20 21 22 23 24 25 21 22 23 24 25 26 27 20 21 22 23 24 25 26 19 20 21 22 23 24 25
26 27 28 28 29 30 31 27 28 29 30 31 26 27 28 29 30

March June September December

S M T W T F S S M T W T F S S M T W T F S S M T W T F S
1 2 3 4 1 2 3 1 2 1 2
5 6 7 8 9 10 11 4 5 6 7 8 9 10 3 4 5 6 7 8 9 3 4 5 6 7 8 9
12 13 14 15 16 17 18 11 12 13 14 15 16 17 10 11 12 13 14 15 16 10 11 12 13 14 15 16
19 20 21 22 23 24 25 18 19 20 21 22 23 24 17 18 19 20 21 22 23 17 18 19 20 21 22 23
26 27 28 29 30 31 25 26 27 28 29 30 24 25 26 27 28 29 30 24 25 26 27 28 29 30
31

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June Example

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Establish the Context
• Live or Email
• In Person or Remote
• One to One or Large Group
• Regularly or As needed

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4
Bringing it
Together

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 From This

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Example Seasonal Planning Map
Planning Planning Planning
Season #1 Season #2 Season #3

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2(A,B) Planned Using

3(A,B)
1(A, B) Stat Forecast +
Collaboration

2(C) Planned Using

3(C)
1(C) Stat Forecast

No Value to Plan,
1(D) 2(D) 3(D) Develop
Alternative
Strategies
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What Questions Do You Have?

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 Thank You

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