1、S&OP Referential for Finished Products,How to use the referential?,The referential is divided into topical sections. You dont have to read from front to back to get the results. It outlines the general sequence to follow. These are not meant to be “must follow” approaches but general recommendations
2、 to get you started and save your time. You can pick the section that fits your needs.,I just want to have a general understanding of the global S&OP process - Go to Section 1,Our LP/ UOT wants to improve the existing S&OP process, and understand what is insufficient in the process Best Practices -
3、Go to Section 2 Monthly Process - Go to Section 4,Our LP/ UOT needs to improve the supply resources planning, understand deeply the linkage between S&OP and production planning - Go to Section 3,I want to get people to continue improving the business results and process - Go to Section 5,Our S&OP pr
4、ocess is working quite well already, we want to know briefly the next generation of the S&OP - Go to Section 6,Table of Contents,Table of Contents,This referential applies to all finished goods in the LP/ UOT,Return to Table of Contents,Section 1 Overview,Manufacturing,Finance,Supply Chain,What is t
5、he problem?,People,People,People,People,People,Low sales due to supply shortage. Already told supply chain forecast will change!,Change is too costly and inefficient. Dont change! This is my instruction. We measure based on cost effectiveness, not sales!,Inventory is too high, soon run out of cash!
6、This is already the 3rd time we mention this problem, but no one cares!,Forecast never accurate. M&S always come up with last minute commercial actions! We had enough of them!,Not enough resources to respect the launch timing. M&S postpone the launch, they have no choice!,How the situation used to b
7、e before S&OP implementation,Demand/supply imbalanceInsufficient forward planningFunctional management, non-aligned objectives and measures Defensive functional behaviors, little constructive collaboration,New Product Development,Marketing & Sales,What is the problem? (contd),Without adequate planni
8、ng and control, good cross-functional collaboration, usual common problems found:High backorders Late shipments Dissatisfied customers Demand supply out of balance High inventories Missing the annual plan / $ Finger pointing Little or no collaboration,A business process called Sales and Operations P
9、lanning S&OP aims to help avoid such problems.,Where does S&OP fit?,S&OP is a process link between strategy and execution,What is S&OP?,Strategic Planning (J1),Annual Planning (J3),DISCONNECT,Detailed Planning, Operational Execution,Before:,Tactical Process Demand Planning Sales & Operation Planning
10、,Strategic Planning (J1),Annual Planning (J3),Current:,Detailed Planning, Operational Execution,Not well connected,What is S&OP? (contd),Annual Plan uses a snapshot extraction from the Tactical S&OP Plan,Tactical Process Demand Planning Sales & Operation Planning,Strategic Planning (J1),Annual Plann
11、ing (J3),Future Target:,Detailed Planning, Operational Execution,What is S&OP? (contd),Operational Planning,Strategic Planning,Tactical Planning,Horizon,Year 1,Year 2,Year 3,Year 4,Year 5,5 10 years,Jan,Feb,Mar,Apr,May,18 months,Wk1,Wk2,Wk3,Wk4,Wk5,D1,D2,D3,D4,1 8 weeks,Type of Decision,Increase fac
12、tory capacity,Buy a new tooling,Add an additional shift,Decision Maker,Partners/ CEG,Head of LP/ UOT,Function Managers,The different levels of planning allow management to anticipate sufficient lead time required for decision making & implementationS&OP is a tactical planning process focus on mid-te
13、rm horizon,What is S&OP? (contd),Description/ Objective: S&OP is a monthly management re-planning process that brings separate operational plans into one integrated plan. The process consists of series of reviews and ensures that all plans are synchronized particularly demand, supply, inventory, new
14、 product and finance. The process provides a formal method for senior management to respond to change, both positive and negative, such as market opportunities or risks over a 18 months planning horizon. A mature process enables management visibility of the status of company strategic goals (e.g. st
15、ock level, management results, etc) and identification of gaps between current plans and business objectives. This gap identification leads to action plans in order to minimize or close the gap.,What is S&OP? (contd),Sales & Marketing (/units, segments, markets, margin, TSD, etc),Finance (, profitab
16、ility, BFR, etc),Manufacturing (units/tonnage, critical resources, quality, TSD, etc),Technical (capacity & timing new product, etc),Mechanism to reconcile, agree upon and communicate ONE integrated plan,Supply Chain (supply, inventory, demand to cash, TSD, flows, etc),Company Strategic Goals Execut
17、ive Management Decision,S&OP is a tactical planning process which balances business sales & marketing ambitions, supply capabilities, and financial goals, to create ONE integrated achievable plan taking into account the LP/ UOT strategic goals,Quality (customer representation),What are the objective
18、s of S&OP?,The objectives of the S&OP are: Cross-functional reconciliation and agree on ONE integrated plan. Following objectives are considered during development of the plan respecting the main priorities and strategic goals such as:Maximize the Customer Service Level Minimize the Inventory Invest
19、ment Minimize the Change in Production Rates Minimize the Change in Workforce Level Maximize Factory Capacity Utilization Minimize the Costs Maximize the ProfitsThis integrated plan is the unique choice of the LP/UOT, and it is fully accountable by the LP/ UOT managers,What are the objectives of S&O
20、P? (contd),Finalized plan must be realistic, feasible to be executed in the operational level. This includes:Demand plan can be fulfilled for the customers Production plan can be executed by the major critical resources Inventory plan is coherent with the desired objective Financial plan based on S&
21、OP numbers can deliver the financial results of annual plan New Product plan can respect the new product launch schedule Logistics distribution plan, upstream resources (the output of S&OP gives input to the other entities Logistics/ Upstream SC for further feasibility analysis),What are the benefit
22、s?,How S&OP can Help,Supply Chain Impact,Increase Revenue,Reduce Cost,Improve Working Capital,Improve Fixed Capital,Improve Profitability,Improve Invested Capital,Improve Financial Results,Business Impact,S&OP improves Supply Chain performance which in turn leads to better financial results of the c
23、ompany,Better planning & review process Identify potential issues earlier More responsive to market,Improve demand & supply balancing (e.g. sourcing, loading, etc), more stable production rates, resulting in higher productivity Better anticipation of future logistics flow,Better inventory management
24、, set desired level of inventory and manage the business proactively to achieve the goal,Better anticipation of capacity utilization,Increase Fill Rate Improve TSD,Lower cost of good sold Transportation, warehousing, distribution cost, etc,Reduce finished goods inventory level,Reduce or identify unu
25、sable available capacity,What are the benefits? (contd),Apart from business benefits, other benefits also include:Enhanced team work and collaboration From the executive team to the operational levels, reduce the loss of time caused by the lack of information Better communication Able to synchronize
26、 and coordinate activities across the business, both vertically and horizontallyGreater accountability More serious monitoring of actual results compared to plan Greater risk control Able to see potential problem soon enough to avoid the obstacles, pitfalls, etc,Organization of S&OP in Michelin,* Fo
27、r Finished Goods only,LPTC & LPPL: Individual S&OP at UOT level first, and then Global S&OP consolidation at LP levelDLPS (GC, 2R, AG, AV): Global S&OP at LP level only,Condition for S&OP: The business units take decisions on their sales, production, inventory and financial results. Therefore, there
28、 is no zone S&OP for DLPS,Section 2 S&OP Key Principles,Return to Table of Contents,S&OP Key Principles,S&OP is a critical business process, championed by a cross-functional team of executives (including Head of LP/ UOT and his/ her staff) because: Head of LP/ UOT owns the financial results of the a
29、nnual plan, and all decisions made in the S&OP will affect the financial results. He/ she is the owner of the S&OP process LP/ UOT can assure meeting its objectives only when Head of LP/UOT has taken the ownership and responsibility for the needed decisions. Only he/ she can arbitrate between local
30、functional objectives for the general interests of LP/ UOTLeadership is strengthened when S&OP is the process being used to manage important activities (e.g. balancing demand and supply, enhancing customer service, etc). Encourage people throughout the organization to do their own part.,Executives h
31、ands-on participation,Return to Main Page,S&OP process involves, at a minimum, the participation of the following functions:Head of LP/ UOT Marketing & Sales Supply Chain Manufacturing Finance Quality Technical All departments across end-to-end supply chain are represented in the decision-making pro
32、cess (Logistics, Demand to Cash, Upstream SC are represented by Supply Chain)The cross-functional team provides knowledge and expertise to reach decisions with the organization interest in mind,Cross-functional & collaborative,Return to Main Page,The organization responsible for developing the plans
33、 should be accountable for their executionEach of the plans should have a process owner within the UOT/LP Sales plan Head of Marketing & Sales Manufacturing plan Head of Manufacturing Inventory plan Head of Supply Chain Financial plan Head of Finance New product plan Head of Marketing Process owners
34、 come into the meeting with preparation, accountable for the actual past performance, root cause gap analysis and commitment to the future plan,Functional Accountability,Return to Main Page,Rolling 18 months horizon,Strategic Planning (J1),Tactical Planning,Operational Planning,1 to 5 or 10 years,18
35、 months,2 to 4 months,Yearly Planning,Monthly Planning,Weekly/ Daily Planning,S&OP,Year,2,1,3,4,5,6 etc,S&OP is a tactical process focusing on 18 months ahead,Return to Main Page,Rolling 18 months horizon,Return to Main Page,Jul,Dec,Dec,Apr,Jan,Rolling: Rolling plan gives early visibility Iterations
36、 provide familiarity to the business and figures Tactical vision should be always coherent with the long-term J1 orientation, but not necessarily keeping the same figures as J1 “Annual Plan” figures should be a “snapshot” from either Oct or Nov S&OP,Horizon: Must extend far enough into future to ens
37、ure the availability of all resources Whichever resource (material, equipment, people) takes the longest, determines the minimum length of the planning horizon. Usually, it takes at least 12 months to react on the critical resources and the investment plan Target length of horizon should be 18 month
38、s in order to allow SGF to provide its mid-term financial re-forecasting,J1 orientation of last year,J1 orientation of current year,PA plan of next year,Oct/ Nov,Rolling 18 months horizon,History,Zone B,Zone A,At least 3 Months,Reactive,Proactive,The horizon is divided into three zones: History: at
39、least the past 3 months plans are compared to the actualZone B: this is usually month 1 & 2, varies depending on the business context. It could be as short as 2, 4 or 6 weeks or as long as 4 months. This is usually the detailed production planning zone. Changes in this zone could mean substantial co
40、mmitment of resources and could be very costly. This zone is referred to as reactive zoneZone A: this is usually where the S&OP decisions takes place. Demand and supply changes can take place in this zone. Industrial resources can be adjusted in a more efficient and economical way, e.g. hiring peopl
41、e, training, etc This zone is referred to as proactive zone S&OP process focus should be in Zone A 85 90% of the time, and only 10 15% (max 25%) should be spent in Zone B,Planning Time Fence,Return to Main Page,Aggregate Driven,Items,Sub-Aggregates,Aggregates,Product Segments (LP/UOT),Diagnostics J1
42、,Annual Plan J3,Executive S&OP,Pre-S&OP Supply Review Demand Review,Production Planning Deployment Planning,Process,Level of Details,Strategic,Tactical,Operational & Execution,S&OP is a tactical process focusing at the aggregate level, which means product groupings rather than individual product or
43、item. It aims to get effective input and control from the management in order to achieve the company “Go-To-Market” strategic goals,Return to Main Page,Aggregate Driven Definition Structures,Product type Product characteristics (high performance, deluxe, mass market) Product size (large, medium, sma
44、ll) Brand (tier 1, tier 2, tier 3) Market segment (industrial, consumer) Distribution channel (mass merchandisers, original equipment, aftermarket) Customers etc,Defining Aggregate is a key step, normally prior to the implementation of the S&OP process. Below are the various possible options to stru
45、cture the aggregates in order to achieve the strategic goals:,Return to Main Page,Aggregate Driven Definition Structures,S&OP Process,Executive S&OP,Pre - S&OPSupply ReviewDemand Review,The total number of Aggregates should be between 5 and 12. More than that will be difficult to manage within a 2 h
46、our Executive S&OP meeting.,Return to Main Page,Aggregate Driven Definition Structures,=/=,Marketing & Sales,Manufacturing,Executive S&OP - Aggregates Definition A grouping of end items whose similarity allow the markets to be best anticipated. It reflects company Go-To-Market strategiesPre-S&OP/ Su
47、pply Review, etc - Sub-Aggregates Definition A grouping of end items represents a subset of aggregates grouped by various attributes which aims to provide more detailed information for analysis purposes,Product Segment Channel Customer,Process Material Machine Supplier,Return to Main Page,Aggregate
48、Driven Operating Targets,Examples of Operating Targets (also named as Demand/ Supply Strategies)Aggregate: ABC Make-to-Stock Target Customer Service Level 90% Target Finished Products Inventory 40 daysAggregate: XYZ Make-to-Stock Target Customer Service Level 80% Target Finished Products Inventory 2
49、5 daysAggregate: LMN Make-to-Order Target Customer Service Level 95% Target Customer Lead Time 4 weeks,Customer service level & inventory targets must be established for each Aggregate. These targets have to be reviewed periodically (at least once per quarter) in order to drive continuous progress to the business. The customer service target must be coherent with the target inventory level,
