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S&OP planning process improvement
Transcript of S&OP planning process improvement
NITIE A STUDY OF
SALES AND OPERATIONS PLANNING
PROCESS IMPROVEMENT Current Operations Plan at Sterlite Tech Ltd AGENDA Current Sales Plan at Sterlite Tech Ltd PROJECT OVERVIEW
CURRENT SALES AND OPERATIONS PLAN
INTRODUCTION TO S&OP
S&OP IMPLEMENTATION PATH
DISTRIBUTION INTO PRODUCT FAMILIES
S&OP MONTHLY PLANNING PROCESS
S&OP BEST PRACTICES
With the recent advances in supply chain management and a marketplace of constant change, opportunities have opened up for a demand-driven supply chain philosophy that synchronises supply with demand so as to maximise its financial success and customer satisfaction.
Pressure has grown increasingly on the S&OP process as the single most important competitive weapon for ensuring that the enterprise is profitably servicing the right customers, through the right channels, with the right products.
With this thought in view , it was thought to integrate the Sales and Operations Plans at Sterlite Technologies Ltd so that a holistic view of the functioning of the organization is available.
Implementation of S&OP required the grouping of products into product families. This was done considering various criteria as Manufacturing attributes, customer-applications , no of strands, Raw Materials , etc.
A standard format for the depiction of S&OP was prepared. A spreadsheet was prepared to depict the Sales , Operations and the Inventory values.
S&OP Dashboard is prepared to depict the important data to reflect the present condition of the S&OP.
The present condition of the firm is compared to the S&OP Maturity Framework so as to set the targets of S&OP. The Best in Class S&OP Practices are presented. Project Overview Forecasted Sales is calculated at the beginning of a quarter or a year. It is denoted by the BP ( Business Plan). Example of forecasted sales for the year 2013-14.
The Forecasted Sales Plan consists of Book-and-Bill orders (which are expected to confirm) and the confirmed orders. Out of total 1,56,107 MT expected around 90 k are confirmed ones while the rest consists of Book-and-Bill orders.
The Forecasted Sales Plan consists of the total projected sales considering both the plants – Rakholi and Haridwar
The Actual Sales are calculated at the end of the month.
A spreadsheet consisting of projected sales denoting confirmed orders is shown in the Delivery Spread of Open Orders. Operation plan is backward calculation or as per backward scheduling as we are working in Make to Order scenario.
The firm currently uses a 12-week rolling plan which resembles the operations plan.
This is prepared for a particular plant – e.g Rakholi and Haridwar .
The rolling plan is updated every week considering the changes from MCP to Confirmed or UC to Confirm. Current S&OP at Sterlite Tech Ltd. Accomplish this goal by helping companies to make “right-timed” tactical planning decisions on the best combination of customers, products, and markets. A cross-functional consensus process that integrates customer-focused marketing plans for new and existing products with supply chain management.
Performed with formal cross-functional meetings (with sales, marketing, and operations, at a minimum) at least once a quarter (but preferably monthly), and reconciles supply, demand, and new product plans. Introduction to S&OP Enhanced teamwork in the executive and mid-management groups
Better decisions with less effort and time
Better financial plans
One set of numbers, in both units and dollars, with which to run the business
A tight linkage between strategic plans and day-to-day activities
A "window into the future” . Benefits of Executive S&OP Benefits of Executive S&OP Characteristics of a good S&OP S&OP Implementation Path We can’t group product into families at the very top of the pyramid because it would not provide enough granularity at the level upon which we will based the S&OP decision. Towards the bottom of the pyramid there is too much unnecessary detail for S&OP. Detailed planning of hundreds (or thousands) of items become cumbersome and impractical for running the company from the top .
The aim of grouping together products into product families is to have a set of market-oriented families/customer-oriented families.
It must make the forecasting job less difficult and also be translatable into product requirements. Grouping into Product Families Sales Value : 206.65Cr Rs.
Per Day Sale : 688,83,333.33 Rs. Data Display : S&OP Spreadsheet Assessing Industry Priority “Pain Points” Data Display : S&OP Dashboard * Another Look at measures of forecast accuracy by Rob J.Hyndman, Anne B.Koehler, International Journal of Forecasting 22 (2006) 679-688 Forecast Accuracy denotes the Mean Absolute Percentage Error (MAPE) which is calculated as follows . It is considered for reasons of simplicity*.
The trend in Forecast errors is shown in the form of a line chart.
Order Clearance Lead Time is used to denote the average of the total time taken for aUC or MCP order to get converted to Confirmed Orders.
Order Execution Backlog denotes the number of orders which were not executed in
the scheduled time i.e the number of backlogged orders.
RM or FG inventory denote the number of days of RM or FG inventory in hand in the
current scenario. The green region denotes the required no. of days of inventory.
Order Execution Lead Time denotes the total time taken for an order per unit MT to be
executed fully i.e the time taken from the day Sales Order is released to the day the
actual dispatch is done. S&OP Dashboard Metrics S&OP Monthly Planning Process Maturity of S&OP Process Focus on the areas where the greatest risk currently lies in achieving your business objectives. In 90% of the cases, this starts with, or at least includes, demand management.
Identify and focus upon your “levers of power” to shape demand and align supply.
Include your business network partners in the design of the processes and the success metrics.
Align your functional metrics to the overall profitability objectives.
Deploy a contingency planning approach based on multiple “what if” scenarios
to determine the “hot spots” of risk and opportunities.
Plan a three month roadmap to achieve specific business value objectives and keep the roadmap dynamic. S&OP Best Practices  **Companies that have identified themselves as MTO have selected the following areas of demand planning to improve in the next two years :
26% : Statistical Forecast ; 42% : Analytics based ; 29% : Sales Collaboration S&OP Best Practices  Manufacturing Planning and Control For Supply Chain Management : Vollmann , Berry ,Whybark and Jacobs
Sales and Operations Planning : The ‘How-to” Handbook : T.F.Wallace & Co.
Operations Management : Chase and Jacobs.
Maximizing your ERP system : A Practical Guide for Managers : Scott Hamilton – Tata Mc-Graw Hill - 2004 Edition
A Review on the Classification of the Make-To-Order Manufacturing Companies : Mohd Shaladdin bin Muda, Wan Abdul Aziz bin Wan Mohd Amin, Nik Wan bin Omar, The Journal of International Management Studies, Volume 4, Number 2, August, 2009.
Another Look at measures of forecast accuracy by Rob J.Hyndman, Anne B.Koehler, International Journal of Forecasting 22 (2006) 679-688
Best Practices in S&OP : A Benchmark Report , Aberdeen Group Report , 2005
The Sales and Operations Planning :Key Enabler for the Supply Chain Officer , Aberdeen Group Report , August 2011
WHY IS SALES & OPERATIONS PLANNING IMPORTANT? Article , Hawk-eye Planner References THANK