APICS Introduction to Sales

and Operations Planning

(S&OP)

© APICS
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 Introductions – Presenter

Name

Company/Organization

Position
Introduce
Background
yourself!
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APICS Certifications

APICS Training

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 Presentation Agenda
• S&OP Definition

• S&OP process overview

• Attributes and objectives of S&OP

• S&OP implementation challenges

• Foundation components for successful S&OP

• Benefits of S&OP

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 Sales and Operations Planning (S&OP)
Definition
A process to develop tactical plans that provide
management the ability to strategically direct its
businesses to achieve competitive advantage on a
What is Sales and Operations Planning
continuous basis by integrating customer-focused
marketing plans for(S&OP)?
new and existing products with
the management of the supply chain. The process
brings together all the plans for the business (sales,
marketing, development, manufacturing, sourcing,
and financial) into one integrated set of plans.
APICS Dictionary, 14th edition

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 S&OP – A Balancing Act

Demand Actual Supply Resources/

Forecasts Orders Inventory Orders Capacity

Demand Supply

S&OP
S&OP
Process
Process

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 Demand and Supply and Volume and Mix
F Business Plan
O
R
E R
C VOLUME E
A S&OP S
D S Sales & O
S
Operations
E T Marketing Plan U U
Plan
M I R P
N C
A G E
P
PRODUCT MIX
N L
& Master P
D Scheduling
Y
L
D A
E N
M MRP N
A I
N Plant and Supplier N
D G
Scheduling
M & Operations Planning, 3rd ed., p. 207
Adapted from Wallace, Sales
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 S&OP Processes
Demand Forecast
Product/ S&OP
Brand Plan
Marketing Plan Demand Demand Supply
Management Planning Planning
Sales Plan

Production Resources Inventory Distribution

Production Facilities Investment

Transportation
Plan Planning Targets
Master Labor Channel Warehousing
Scheduling Planning Distribution
Detailed Labor and
Planning and Machine Shipment Equipment
Scheduling Planning Plan
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 Major Attributes of S&OP

Connects business planning to tactical planning

Balances supply and demand at the product family

level
Plans at the volume level using aggregate time
buckets, not the individual end-product mix level
Enables in a better understanding of the customer
and market opportunities and company capabilities
Involves sales, marketing, manufacturing, logistics,
finance, and other departments

Is a demand- and strategy-driven process

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 Objectives of S&OP

1. Supports and measures the business plan

Ensures that the strategic plans are realistic before being

2. passed to tactical planning
Enables the organization to effectively manage changes
3. to plans
Provides for the effective management of finished goods
4. inventories and order backlog to support customer
service
Enables performance measurement to identify when
5. actual performance has deviated from the plan
Enables the organization to be focused, aligned, and
6. engaged.

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 S&OP Maturity Level
We have overcome
challenges and are seeing 46%
significant results

We have stalled or are

proceeding very slowly 36%

We had a smooth
implementation of S&OP and 8%
follow best practices
We plan to start again,
learning from challenges 8%
from our past efforts

We have no plans to
2%
implement S&OP at this time

Source: APICS, “2011 Sales and Operations Planning Practices and Challenges”

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 Common S&OP Implementation Challenges
Lack of strategic coordination 58%
among departments
Insufficient interaction and
58%
involvement among groups
Lack of common vision or
51%
purpose
Lack of commitment from top
49%
management
Lack of technology and belief
42%
in existing business systems
Inadequate communication
37%
and soft skills
Insufficient training or skill in 33%
data analysis

Source: APICS, “2011 Sales and Operations Planning Practices and Challenges”

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 Foundations of Successful S&OP

S&OP

Leader-
Tiered Integrated Perfor- Grids
ship Deep
Planning Sub- mance and
Account- Analytics
Horizon Process Metrics Graphs
ability

Change
Change Management
Management
Continuous
ContinuousImprovement
Improvement
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 #1 – Tiered Planning Horizon
Strategic
Strategic Long-range plans, aggregate financial data

Tactical Medium-range plans, product family volume

Tactical
data
Operational Short-range plans, detail product mix data for
Operational
day-to-day planning
Key benefits:
• Linkage of strategic corporate goals to S&OP processes
• Build coordination and alignment of demand and supply
management functions and corporate business objectives
• Provide ease of consensus building between corporate
goals, demand objectives, and supply objectives
• Ability to step away from day-to-day management and see
the big
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 #2 – Integrated Sub-Processes
Corporate
CorporatePlan
Plan
Demand
Demand Supply
Supply
Plan
Plan Sub-processes
Plan
Plan

Inventory/
Inventory/ Marketing
Marketing Production
Production Resource
Resource Logistics
Logistics
Sales
SalesPlan
Plan
Brand
BrandPlan
Plan Plan
Plan Plan
Plan Plan
Plan Plan
Plan

New
Newproducts/services,
products/services,new newmarket
market Production
Productionstrategy,
strategy,capacity
capacityplanning,
planning,
segments, price/promotions, demand
segments, price/promotions, demand inventory targets, distribution channel
inventory targets, distribution channel
forecast,
forecast,Internet
Internetsales,
sales,brands
brands design,
design,logistics
logisticsplan
plan

S&OP
S&OPProcess
Process
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 #3 – Leadership Accountability
Makes decisions on critical issues, authorizes spending
Executive
for production, reviews financial plan to business
S&OP team performance
Executive Sets top management expectations, authorizes
necessary
Leadership
sponsor resources, and clears
accountability obstacles the
answers
S&OPquestion “Who
process Leads theare theS&OP
monthly owners ofprocess,
planning the S&OPmanages
owner process.”
conflict, Without effective
and guides the process
S&OP teams toward consensus

governance S&OP process planning, control,

Demand
Determines the sales forecast, pricing and promotions.
Researches the marketplace, manages sales, products,
planning team execution,
and customer and
serviceimprovement.
Supply Sets production plan to meet demand, details production
planning team rates and capacities, validates resource availability
Makes decisions on demand and supply balance,
Pre-S&OP
resolves problems, identifies issues, develops
team
alternatives, sends findings to executive S&OP
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 #4 – Deep Analytics
The data and the application of analytics is at the heart of S&OP

Analytics-based reporting tells the S&OP planning

teams:
Where they are

What actions need to be taken and driven down into

tactical and operations S&OP processes
What results and trends are emerging from their
decisions
What corrective steps do the S&OP planning teams
which to take
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 #5 – Performance Metrics
Performance metrics drive accountability and ownership for
S&OP objectives

Performance metrics make the S&OP process rigorous,

disciplined, and factual so executives gain confidence in the
integrity of the S&OP process

Tiered approach: supply chain performance example

Tier 1: SC cost (%COGS) Forecast variance

Logistics costs Inventory carrying costs

Tier 2:
Resource utilization Production plan execution (%)

Fill rates Days of inventory on hand

Tier 3:
Obsolescence cost Material, labor, & overhead costs

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 #6 – Grids and Graphs

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 #6 – Grids and Graphs (cont.)

Promotional Sales

Machine
Down

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 #7 – Change Management
“An S&OP project is 60 percent change management, 30
percent process development, and 10 percent technology”*

Effective drivers of change management:

Effecting acceptance towards ownership and
restructuring of roles and responsibilities
Developing necessary adjustments to company
culture and capabilities
Training employee’s around the appropriate changes
Winning support of employees with persuasiveness
about the appropriateness of the adjustments
Iyengar and Gupta, “Building Blocks for Successful S&OP, ” Supply Chain Management
Review, Vol. 6, No. 17, 2013, 17
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 #8 – Continuous Improvement
“A never-ending effort to expose and eliminate root causes
of problems: small-step improvement as opposed to big-
step improvement.” APICS Dictionary, 14th edition

Continuous improvement is important because:

Ideas for process improvement come from the S&OP team
participants – hence more realistic
S&OP enables continuous monitoring, feedback, and
sharing of improvement ideas

Once S&OP teams see their ideas are heard, they will
continually seek ways to improve their own performance
Encourages employees to take ownership and reinforces
team working, thereby improving level of motivation
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 Benefits of Sales and Operations Planning

• Establishes operational plans consistent with the

business plan
• Continually updates the production, financial, and
sales plan
• Provides for cross-functional planning
• Establishes regular meetings with senior executives
to resolve demand versus supply trade-offs
• Checks availability of resources to validate the
production plan
• Increases teamwork and collaborative skills

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 APICS Introduction to
Sales and Operations
Planning (S&OP)

Additional Resources

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 Resources to Learn More

• APICS S&OP Folios

www.apics.org/sopfolio
• APICS Principles of S&OP Seminar
www.apics.org/seminars
• Best of the Best S&OP Conference
www.apics.org/best
• APICS 2014
www.apicsconference.org

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 Congratulations!

• Participation in today’s session

qualifies for one content hour
(SOPE1) toward the APICS
S&OP certificate.
• Download the transcript to
track your progress and learn
how you can qualify for the
remaining hours at
www.apics.org/sop.

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 APICS Introduction to Sales
and Operations Planning
(S&OP)

Thank You For

Attending!

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