s&op - a summary

Sales & Operational Planning Process

S&OP Process - what, where, when, which, who, why

etc. …

RECOGNISE IMPROVE DELIVER

“To live through an impossible situation, you don’t need the reflexes of a Grand Prix driver, the muscles of Hercules, the mind

of Einstein. You simply need to know what to do next.”

- Anthony Greenback (author – “The Book of Survival”)


S&OP - Highlights

• S&OP – Overview

• S&OP – Leaders

• S&OP – Policies

• S&OP – Process / Inputs / Outputs / Controls & Rules

• S&OP – Cross Functional Teams

• S&OP – Measures & Metrics

• S&OP - Checklist


“There is no data on the future”

- Laurel Cutler (advertising/marketing trailblazer and member of the American Advertising Federation Hall of Fame)


S&OP – Drivers for Change

• New competition

• Price changes

• Technology

• Regulation

• Consumer demand

• New management

• Mergers / acquisition

• New product introduction


S&OP – Current Demand & Supply Challenges


Challenges

Poor co-ordination of demand and supply; lost sales; incorrect inventories; lower

profitability

Lack or no technology /

systems to do the “what-if”

modelling and gaining

agreement Lack of processes to manage new

product, innovation

and / feasibility

Internal business process does not

facilitate delivery of right product / price /

quantity / quality, at the right time, to the right

customer

Lack integration with the financial budgeting process

Lack co-ordination of multi-site / cultural teams

Lack the right metrics to drive

value or to determine same

Lack of leadership in

getting agreement on

S&OP plans

Breakdown in communication

due to the lack of quality and

availability of useful data

S&OP – Department Concerns & Questions


Department Their concerns

Marketing What products, Where, When, What quantity, What price, What quality

Sales Planning (Forecasting) What products, When, Where, In what quantities

Production / Operations What products, In what quantities, When, What quality, What price

Distribution / Logistics What products, In what quantities, Where, When

Sales What products, What quantity, Where, When, What price, What quality

Finance What products, What price, What profitability

Buying / Purchasing What products, What price, What profitability

Need for S&OP


To Manage

Excessive on-hand inventories and obsolescence

Lack of confidence in planning

systems Ineffective utilization of

resources, and / or lack or resources when needed

Poor collaboration among stakeholders – internal or external

(finger pointing)

Ineffective bottleneck and

constraints management on the supply side

Unacceptable lead times

Material / product

shortages – increased

expediting cost $$$

Absence of teamwork &

share risk management

among internal functions

Supply interruption,

leading to production delays, on-time delivery

issues lower profits and / or customer

loss

S&OP - Overview


“As a young teacher I learned never to promise anyone instant success. Instant success does come for some gifted pupils, but for the average pupils, success is a journey of testing their intention.”

- Harvey Penick (golf professional and coach)


S&OP – An APICS definition

• A process that provides management the ability to strategically direct its business to achieve competitive advantage on a continuous basis.

• The Process:• Is performed at least monthly• Brings together all functional plans• Reconciles Supply, Demand, and New Product plans.

Adapted from APICS Dictionary, 10th EditionRECOGNISE IMPROVE DELIVER

Definition

• Backlog: An accumulation of customer orders that have been promised for delivery at some future date.

• Backorder: A customer order that cannot be filled immediately but is to be filled as soon as possible.

• Stock out: An order that is lost and causes the customer to go elsewhere.


S&OP – Relationship with other plans


Sales and Operations Plan

Sales Plan Operations Plan

Constraint Management

Operations strategy

Resource Planning (services)

• Workforce schedule• Materials and facility resources

Forecasting

Business or Annual Plan

Schedules

• Employee schedules• Facility schedules• Customer schedules

Resource Planning (manufacturing)

• Master Production Schedule• Material Requirements Planning

Schedules

• Employee and Equipment schedules• Production Order schedules• Purchase Order schedules

Planning Hierarchy


Business Plan

S&OP

Master Schedule

Material & Service Planning

Planning Cycle

Annually

Monthly

Weekly

Daily

Planning Output

SalesProfitsROI

Product Groups

Product Models & OptionsComponents & Workload

S&OP – High level view


Finance(Dollars)

Executive S&OPA process to reconcile, agree upon,

and communicate the company game plan.

Product Development

(New Product Introduction)

Operations(Units / Hours / Materials)

Sales & Marketing(Units/$$ by product family)

S&OP – Mid level view


Supply Planning(Capacity / Constraints)

Master SchedulingPlant & Supplier Scheduling

Distribution Scheduling

Demand Planning / Sales Forecasting

Executive S&OP

Volume

SupplyDemand

Mix

What is S&OP

• Deals with volume in both units and $$$.• Is an executive decision making process.• Balances demand and supply | volume and mix.• Ties operational plans to financial plans – ONE set of numbers.• Is a forum for setting and executing the relevant strategy and

policy.• Monthly process reviewed by management at an aggregate

level.• Reviews assumptions, constraints, resources, risks &

opportunities.RECOGNISE IMPROVE DELIVER

Why S&OP


Reasons

Review done as part of an Integrated Business Management Process

Aligns all stake holders towards

meeting customer demand /

profitability & ensure delivery of

the company’s strategic agenda Formalizes the

generation and adoption of a

Company Demand Plan through the

Demand ReviewProvides a

transparent view of the company’s

response from Demand through

to the Supply Review

Delivers one clear plan that answers all the customers

demand questions that the

organization faces

Ensures the Supply & Demand are reconciled and evaluated against financial targets in the Management Review

Clearly identifies the product

domain in which the company

competes through Product

Management

S&OP - Objectives

• Consensus on managing gaps.

• Greater accountability of individual plans.

• Determine the resource capacity required.

• Development an economic strategy for meeting demand.

• Establish a company wide game plan for allocating resources to meet demand for product families over an intermediate time horizon.


S&OP – Critical Success Factors

• Collaborative culture• Change management• Executive sponsorship• Relevant lead times• Tool to support sales

forecasting

• Tools to facilitate scenario planning (what if analysis)

• Fact-based• Clear ownership• Formal assumptions• Rolling horizon• Trade-offs, clearly

articulated, evaluated• Staff commitment to process,

systems and procedures


S&OP - Challenges


Reasons

Identifying S&OP Champion or expert

to lead implementation

Adapting the process to the organization

Data accuracy and integrity

Organizational silos

Establishing S&OP meetings as the business

priority

Clear definition and acceptance of roles and

responsibilities, including defining

specific objectives in employee appraisals

Achieving process

compliance

IT enabling process with adequate tool

functionality

Senior leadership

support & “walk the talk”

S&OP – Department Concerns & the Answers


Department Departmental concerns & questions Questions Answered

Marketing What products, Where, When, What quantity, What price, What quality

What products, What price, What quality

Sales Planning (Forecasting)

What products, When, Where, In what quantities What products, When, Where, In what quantities

Production / Operations

What products, In what quantities, When, What quality, What price

What products, In what quantities, When, What quality, What price

Distribution / Logistics

What products, In what quantities, Where, When What products, In what quantities, Where, When (What quality)

Sales What products, What quantity, Where, When, What price, What quality

What products, What Quantity, Where, When, What price (What quality)

Finance What products, What price, What profitability What profitability

Buying / Purchasing

What products, What price, What profitability What price, What profitability

S&OP - Benefits


Benefits

Ability to perform “what-if” modeling and competing on products that the

customer requires

Integration with the financial

budget process and process automation Improved new

product launches: Internal

efficiencies and effectiveness

Improvement in order

fulfillment, customer

retention and revenue

Inventory and cost reduction

Improvement in Logistics / Distribution

Improved utilization of machines & resources

Improved forecast accuracy and

processes around it

Improved communication, coordination and

team work

S&OP Leaders


S&OP Leaders

• Profit focus (not just demand/supply balance)

• Value chain focus (customers and suppliers)

• Continuous improvement focus

• Decision-making – teams empowered

• Technology enablers – Integrated Systems

• Risk management – multiple “What-If” choicesRECOGNISE IMPROVE DELIVER

S&OP - Implementation Benefits

• Forecast error reduction ………………………………..… 20-25%

• Inventory reduction …………………………………….……… 5-10%

• Inventory turns increase ……………………………………… 5-10%

• Service level increase …………………………………………. 5-10%

• Top line revenue growth ……………………………………… 2-5%

• SKU rationalization ………………………………………………10-20%RECOGNISE IMPROVE DELIVER

S&OP – Forecast Accuracy benefits

• High forecast accuracy yields tangible benefits in the supply chain performance

• Companies that are best at demand forecasting average:• 15% less inventory• 17% higher perfect order fulfillment• 35% shorter cash-to-cash cycle times• 1/10th the stock outs of their peers

• 1% point improvement in forecast accuracy can yield a 2% improvement in perfect order fulfillment

• 3% increase in forecast accuracy increases profit margin by 2% on average• Companies with higher forecast accuracy also achieve better delivery

performanceSource: AMR Research


S&OP - Policies


S&OP - Policies


Policies

Forecasting, Demand

Management, RCCP (Rough Cut Capacity

Plan), Inventory techniques

Rolling forecasts / sales plans, shipment

forecast / plan to be maintained for

the horizon Guideline for developing and

approving various changes

to then plans

Inventory, backorder, backlog plan, planning fences, service levels,

new product introduction,

promotion, special offers etc..

Planning horizon, Time zones, Metrics, UOM (units of

measure)

Product families and variance analysis &

how the plans will be used to establish financial plans,

budgets, detailed MPS and line item forecasts

Team charter & responsibilities

Planning process & how demonstrated capacities by

product family will be

maintained& utilized

Schedule of future meetings,

attendees & an agenda for a

monthly review meeting

S&OP - Principles


S&OP - Principles

• Sales and Operations must work together

• S&OP performance must be measured against the plan

• Differences should be highlighted for corrective action

• S&OP communication should be formalized by a monthly meeting

• Product groups and performance measures must be establishedRECOGNISE IMPROVE DELIVER

S&OP – Principles (continued)

• Resource capacity must be planned

• S&OP must include all inputs from all groups

• Resource issues must be resolved before the S&OP is communicated

• S&OP establishes the boundaries for the Master Scheduler

• The S&OP provides the basic information for financial planningRECOGNISE IMPROVE DELIVER


• S&OP is the vital link between long range and short range planning

• S&OP are established at the product group level

• S&OP includes management targets

• S&OP is monitored and revised monthly



• S&OP is the company’s game plan

• Resources are checked at the macro level

• S&OP is based on a rolling 18~24 month horizon

• S&OP must be communicated to all impacted stakeholders

• S&OP establishes the boundaries for master scheduling & financial planning


S&OP – Process / Inputs / Outputs / Controls & Rules


“Perfection is not attainable. But if we chase perfection, we can catch excellence.”

- Vince Lombardi


S&OP – Input & Output Process


Sales by Product by Month

Company Policies

Strategic Objectives

Financial Constraints

Demand Forecasts

Capacity Constraints

Sales Plan Operations Plan

Demand Management (including new product introduction,

promotions, special offers etc.)

Sales by Product by Month

Production per month by product family (including regular &

overtime, sub-contract work)

Workforce & inventory levels

Backlogs, backorders & lost sales

Sales & Operational Planning

S&OP – Sales and Operations Plans


Sales• Market Plan• Product Plan• Sales Plan• Distribution Plan

Operations• Resource Plan• Inventory Plan• Shipment Plan• Operations Plan

S&OP – Inputs by Function


Manufacturing / Engineering

FinanceBusiness Unit

Sales

• Unconstrained Forecast

• Execution to Plan

• Market Trends• Share

expectations• Customer

expectations• Roadmaps and

Transitions

• Preliminary revenue plan

• Revenue Objectives

• Profitability scenarios

• Preliminary budgets / targets

• Return on Invested

• Buffer targets• Time to Volume• Materials Plan• New Products• Capacity

S&OP - Inputs

Input

• Demand Forecast• Market Intelligence• Actual Sales• Capacity Information• Management targets• Financial requirements• New product information• New process information• Workforce availability

Responsibility

• Planning• Marketing• Sales• Manufacturing• Management• Finance• R&D• Process engineering• Human resources


S&OP - Outputs

Output

• Sales plan• Production plan• Inventory plan (MTS)• Backlog plan (MTO)• Purchasing plan• Financial plan• Engineering plan• Workforce plan• Contingency plan

Responsibility

• Marketing & Sales• Manufacturing• Management• Management• Purchasing• Finance• Engineering• Human Resources• Management


S&OP - Controls

Challenge

• Respond quicker• Reduce costs• Improve quality• Manage change• Improve workforce• Improve systems• Reduce Inventory

Solution

• Cut lead times• Reduce batch & cycle time• Eliminate waste• Empower people• Commit to lifelong

learning• Upgrade networks• Improve forecast accuracy


S&OP - Rules

• Product groups (defined in terms of the manufacturing process), agreed upon

• Planning units of measure, agreed upon

• Planning horizon includes new product development time

• Performance review periods for plan vs. actual comparison, agreed upon


S&OP – Planning Fences


ForecastChanges to plan accepted – 20%

Changes to plan accepted – 10%

Changes to plan accepted – 5%

No Changes to plan accepted – “Frozen”

Emergencies only accepted

Monthly S&OP

Weekly Schedule Issued

Daily Production Schedule

Customer Order

Finished Good

Ship

S&OP – Concurrent Planning (Iterative)

1. Develop production plan

2. Check implications for inventory/backlog plan

3. If necessary, adjust production plan

4. Check against resource plan and availability

5. If necessary, adjust production plan

6. Recheck against inventory/backlog plan and resources

• Continue (to step 5) until you meet all constraints


S&OP – Cross Functional Teams


“Real communication is an attitude, an environment. It’s the most interactive of all processes. It requires countless hours of eyeball-to-eyeball back and forth. It involves more listening than talking. It is a constant, interactive process aimed at [creating] consensus.”

- Jack Welch (former CEO General Electric 1981-2001)


S&OP – Meeting Agenda


Key Questions

What has changed since last month? Are we on plan financially? How are we performing to performance

metrics? What new risks do we need to consider? What decisions need to be made now? What decisions need to be made in the near

future? How are product families performing? Are we on track with product development? Do we have any critical constraints? Is there any need to revise long term plans?

Review:

• Revenue / Profit Performance

• New Product Development

• Manufacturing Performance

• Inventory Levels

• External Factors

• Future Plans

Review:• Orders Booked

• Sales & Shipments• Backlogs

• Finished Goods Inventory

• Production

• Performance Measures by Product Group

S&OP – Meeting Outcome (Min/Max)

• Maximize Profits

• Maximize Customer Service

• Maximize utilization of Plant & Equipment

• Minimize Costs

• Minimize Inventory Investment

• Minimize Changes in Production Rates

• Minimize Changes in Workforce Levels


S&OP – Functional Manager’s Inputs


Operations:• Current machine

capacities• Plans for future

capacities• Workforce capacities• Current staffing level

Accounting & Finance:• Cost Data• Financial condition of

firm

Distribution & Marketing:

• Customer needs• Demand forecasts• Competition behavior

Engineering:• New products• Product design changes• Regulatory requirements

Human Resources:• Labor market

conditions• Training Capacity

Sales & Operation

al Plan

Materials:• Supplier Capabilities• Storage capacity• Materials availability

S&OP – Month End Review


Data / Month End Reports

Demand Review (include “what-if”)

Product Management

Review (include “what-if”)

Supply Review (include “what-if”)

Pre-S&OP Review

(include “what-if”)

Review – Alternates / Trade-offs /

What-If / Constraints

Executive Management Plan Review

(communicate)

Actual Demand & Supply Forecasts Revenue / Sales Forecast Product Portfolio Review Resource / Capacity

Constraints

All constraints & risks Conflicts resolved Agenda & Recommendation

Game Plan Next Month

• Agreed revenue/profit plan

• Master build schedule• Contingency plans• Documented

agreements & planned outcomes

Communication – Cross Functional Teams


Demand Review

Product Management Review

Supply Review

Pre-S&OP

(Integration reconciliation)

Executive S&OP /

Management Review

S&OP Meetin

gs

S&OP – Demand Review Checklist

• Has the market and sales events been considered?• Has the demand baseline forecast (based upon history) done,

been based on market, product, sales, distribution plan inputs (using time series modelling)?

• Has the quantitative future demand for each of the product family / category, been done?

• Has the demand drivers by customer, region, channel ….. etc., been done undertaken?

• What assumptions, constraints and risk & opportunities have been identified?


S&OP – Demand Review Checklist (continued)

• Has the market intelligence (deals, promotions, competitor activity) that could effect the product launches on the projected statistical sales forecast, been completed?

• What demand metrics (service levels, perfect order/fill rate), forecast (accuracy, error, bias), processes, price, market share and volume analysis etc. are being utilized?

• Has the projected / planned sales in units and $ been completed?

• To determine demand - has shipment, order, customer pulls, customer consumption, promotional activities, consumer point of sale etc., been considered?


S&OP – Product Management Review Checklist

• Has current and future customer trends been identified?• Has the frequency for product review meetings been

identified?• What products are offered to customers at present?• Has the perception in the market place (customer /

competition) been identified and considered?• What changes should be made to the existing product range,

going forward?• What products should be launched ? discontinued and when?


S&OP – Product Mgmt. Review Checklist (continued)

• What additional products / services should be offered in line with the strategic goals?

• With the launch of new product, what is the timing and its impacts on market, channel and demand for current product mix?

• Has the integration of product lifecycle phasing and decisions being made especially with regard to cross functional process of product lifecycle “new” and “decline”?

• Has the impacts including risks (sales/ quantity impacts), supply commitments, and / or the axing of product on the product portfolio profitability etc., been considered?

• Has the product data management been synchronized?• Is there an inventory rationalization process for phase out of phase over

product transitions?


S&OP – Supply Review Checklist

• What process, systems, improvement plans, resources, supply response capabilities will be required to meet the forecasted demand with the right quantity, quality, price, time, place etc.?

• Has the details (MPS, MRP, DRP, CRP etc.) to meet the demand been reviewed?

• What constraints (manufacturing capacities, supplier lead times, distribution capacities and transportation capacities) have been fed into the capacity improvement / capital expenditure planes (CAPEX)?

• What metrics and measures including definition of them will be used to track progress?

• What is the manufacturing response to the known demand for the next 4 ~ 8 weeks?


S&OP – Supply Review Checklist (continued)

• What cost elements are considered for supplier commitment, asset utilization and product cost?

• What inventory levels and deployment approaches are required to support service and profitability objectives?

• Has the planning horizon been determined to cater for all elements of S&OP decision making?

• What simulation will be undertaken on physical supply capabilities to support potential changing product mix concurrently with unchanged products?


S&OP – Pre S&OP (Integration) Review Checklist

• Has the product family (<10), sub family (<25) been rationalized?

• Has the outcome of the Supply Review been validated by the finance team?

• What strategic initiatives have been prioritized and included as the best option?

• What trade-offs and recommendation has been put forward to senior management for decision making including finance and non-finance implications?

• Has the pre-S&OP been communicated ahead of time to the senior managers to facilitate final discussion?


S&OP – Executive S&OP Review Checklist

• What key external (PEST) factors will affect the S&OP and what are the priorities?

• Have the following questions been addressed?• What products will be sold, in each of the markets at any given future time?• What products will be procured / produced and hence ultimately sell?• Who will be responsible in closing the gap if there is a difference between the

S&OP and Strategic Plans?• When and what to we expect to sell including $$$ and volume?

• What are the risks and contingencies that have been considered along with clear accountabilities for delivering the plan?

• What are the financial implications of meeting this demand, as planned?• Has the finalized S&OP been signed off?


S&OP – Information Flows Checklist

• Has the information flow – bottom up (sales, customer, VMI, POS data, Supply Chain capacities), been identified?

• Has the information flow – top down (budget, business plan, category plans, market share objectives) been identified?

• Has the reconciliation of information flows been done, to provide actionable planning?

• Does the planning component and iterative feedback loops use a common business language?


S&OP – Sales Planning Worksheet


Last Updated Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 YTD Remain. Year Full Year16-09-14 8:57 -7.9% -12.0% -0.7% -1.3% 1.8% 1.5% 0.6% 1.6% 1.2% 2.5% 2.4% 2.2% -10.3% 0.9% -0.2%

SALES ($'000) - FINAL FORECAST 3,485 4,604 9,676 8,432 9,233 17,875 8,437 4,938 5,291 4,217 3,380 4,428 75,907 83,353 - ACTUAL RESULT 3,209 4,237 7,446 - Start of Month Forecast (PSFC) 3,479 4,785 9,421 8,403 8,897 17,411 8,286 4,882 5,224 4,132 3,311 4,336 8,263 74,303 82,566 - Variance ($$); Fcst/Actual to PSFC -270 -548 255 29 336 464 151 56 67 85 69 92 -817 1,604 787 - Variance (%); Fcst/Actual to PSFC -7.8% -11.4% 2.7% 0.3% 3.8% 2.7% 1.8% 1.1% 1.3% 2.1% 2.1% 2.1% -9.9% 2.2% 1.0% - BUDGET 3,484 4,813 9,749 8,546 9,073 17,618 8,383 4,858 5,228 4,114 3,300 4,332 8,297 75,201 83,498 - Variance ($$); Fcst/Actual to Budget -275 -576 -73 -114 160 257 54 80 63 103 80 96 -851 706 -145 - Variance (%); Fcst/Actual to Budget -7.9% -12.0% -0.7% -1.3% 1.8% 1.5% 0.6% 1.6% 1.2% 2.5% 2.4% 2.2% -10.3% 0.9% -0.2% - Last Year Actual 3,387 4,308 9,177 7,772 8,594 17,480 7,968 4,883 4,869 3,919 3,315 4,403 7,695 72,380 80,075 - Variance ($$); TY Fcst/Actual to LY Actual -178 -71 499 660 639 395 469 55 422 298 65 25 -249 3,527 3,278 - Variance (%); TY Fcst/Actual to LY Actual -5.3% -1.6% 5.4% 8.5% 7.4% 2.3% 5.9% 1.1% 8.7% 7.6% 2.0% 0.6% -3.2% 4.9% 4.1%

MARGIN ($'000) - FINAL FORECAST 1,734 2,243 4,930 4,249 4,615 9,330 4,380 2,603 2,729 2,172 1,723 2,212 38,943 42,781 - ACTUAL RESULT 1,643 2,195 3,838 - Start of M onth Forecast (PSFC) 1,728 2,349 4,824 4,243 4,551 9,232 4,349 2,591 2,715 2,147 1,703 2,187 4,076 38,542 42,618 - Variance ($$); Fcst/Actual to PSFC -85 -154 106 6 64 98 31 12 14 25 20 25 -238 401 163 - Variance (%); Fcst/Actual to PSFC -4.9% -6.5% 2.2% 0.1% 1.4% 1.1% 0.7% 0.5% 0.5% 1.2% 1.2% 1.1% -5.8% 1.0% 0.4% - BUDGET 1,730 2,353 5,006 4,350 4,709 9,481 4,448 2,583 2,729 2,157 1,688 2,188 4,083 39,339 43,422 - Variance ($$); Fcst/Actual to Budget -87 -158 -76 -101 -94 -151 -68 20 0 15 35 24 -245 -396 -641 - Variance (%); Fcst/Actual to Budget -5.0% -6.7% -1.5% -2.3% -2.0% -1.6% -1.5% 0.8% 0.0% 0.7% 2.1% 1.1% -6.0% -1.0% -1.5% - Last Year Actual 1,742 2,248 4,782 4,044 4,521 8,928 4,077 2,527 2,580 2,073 1,768 2,357 3,990 37,657 41,647 - Variance ($$); TY Fcst/Actual to LY Actual -99 -53 148 205 94 402 303 76 149 99 -45 -145 -152 1,286 1,134 - Variance (%); TY Fcst/Actual to LY Actual -5.7% -2.4% 3.1% 5.1% 2.1% 4.5% 7.4% 3.0% 5.8% 4.8% -2.5% -6.2% -3.8% 3.4% 2.7%

SALES AT COST ($'000) - FINAL FORECAST 1,751 2,361 4,746 4,183 4,618 8,545 4,057 2,335 2,562 2,045 1,657 2,216 36,964 40,572 - ACTUAL RESULT 1,566 2,042 3,608 - Start of M onth Forecast (PSFC) 1,751 2,436 4,597 4,160 4,346 8,179 3,937 2,291 2,509 1,985 1,608 2,149 4,187 35,761 39,948 - Variance ($$); Fcst/Actual to PSFC -185 -394 149 23 272 366 120 44 53 60 49 67 -579 1,203 624 - Variance (%); Fcst/Actual to PSFC -10.6% -16.2% 3.2% 0.6% 6.3% 4.5% 3.0% 1.9% 2.1% 3.0% 3.0% 3.1% -13.8% 3.4% 1.6% - BUDGET 1,754 2,460 4,743 4,196 4,364 8,137 3,935 2,275 2,499 1,957 1,612 2,144 4,214 35,862 40,076 - Variance ($$); Fcst/Actual to Budget -188 -418 3 -13 254 408 122 60 63 88 45 72 -606 1,102 496 - Variance (%); Fcst/Actual to Budget -10.7% -17.0% 0.1% -0.3% 5.8% 5.0% 3.1% 2.6% 2.5% 4.5% 2.8% 3.4% -14.4% 3.1% 1.2% - Last Year Actual 1,645 2,060 4,395 3,728 4,073 8,552 3,891 2,356 2,289 1,846 1,547 2,046 3,705 34,723 38,428 - Variance ($$); TY Fcst/Actual to LY Actual -79 -18 351 455 545 -7 166 -21 273 199 110 170 -97 2,241 2,144 - Variance (%); TY Fcst/Actual to LY Actual -4.8% -0.9% 8.0% 12.2% 13.4% -0.1% 4.3% -0.9% 11.9% 10.8% 7.1% 8.3% -2.6% 6.5% 5.6%

MARGIN % - FINAL FORECAST 49.8% 48.7% 51.0% 50.4% 50.0% 52.2% 51.9% 52.7% 51.6% 51.5% 51.0% 50.0% 51.3% 51.3% - ACTUAL RESULT 51.2% 51.8% 51.5% - Start of M onth Forecast (PSFC) 49.7% 49.1% 51.2% 50.5% 51.2% 53.0% 52.5% 53.1% 52.0% 52.0% 51.4% 50.4% 49.3% 51.9% 51.6% - Variance; Fcst/Actual to PSFC 1.5 2.7 -0.3 -0.1 -1.2 -0.8 -0.6 -0.4 -0.4 -0.5 -0.5 -0.5 2.2 -0.6 -0.3 - BUDGET 49.7% 48.9% 51.3% 50.9% 51.9% 53.8% 53.1% 53.2% 52.2% 52.4% 51.2% 50.5% 49.2% 52.3% 52.0% - Variance; Fcst/Actual to Budget 1.5 2.9 -0.4 -0.5 -1.9 -1.6 -1.1 -0.5 -0.6 -0.9 -0.2 -0.6 2.3 -1.0 -0.7 - Last Year Actual 51.4% 52.2% 52.1% 52.0% 52.6% 51.1% 51.2% 51.8% 53.0% 52.9% 53.3% 53.5% 51.9% 52.0% 52.0%

SPARES (Included in topline) ($'000) - Sales ($$); Fcst/Actual 21 24 33 38 39 42 51 38 34 34 31 31 45 371 416 - % of topline 0.7% 0.6% 0.3% 0.5% 0.4% 0.2% 0.6% 0.8% 0.6% 0.8% 0.9% 0.7% 0.6% 0.5% 0.5% - Margin ($$); Fcst/Actual 15 17 23 26 27 29 36 27 24 24 21 21 32 258 290 - Margin (%); Fcst/Actual 71.4% 70.8% 69.7% 68.4% 69.2% 69.0% 70.6% 71.1% 70.6% 70.6% 67.7% 67.7% 71.1% 69.5% 69.7% - Sales at Cost ($$); Fcst/Actual 6 7 10 12 12 13 15 11 10 10 10 10 13 113 126LEVEL 2 FORECAST (Included in topline) ($'000) - Sales ($$); Fcst/Actual 381 413 709 764 656 1024 366 191 220 167 133 173 794 4403 5197 - % of topline 11.9% 9.7% 7.3% 9.1% 7.1% 5.7% 4.3% 3.9% 4.2% 4.0% 3.9% 3.9% 10.7% 5.8% 6.2% - Margin ($$); Fcst/Actual 115 122 188 194 152 265 99 52 59 47 35 44 237 1135 1372 - Margin (%); Fcst/Actual 30.2% 29.5% 26.5% 25.4% 23.2% 25.9% 27.0% 27.2% 26.8% 28.1% 26.3% 25.4% 29.8% 25.8% 26.4% - Sales at Cost ($$); Fcst/Actual 266 291 521 570 504 759 267 139 161 120 98 129 557 3268 3825

BBQActual Discount Rate 4.94% 5.04% 7.28% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

Forecasted Discount Rate 8.50% 11.00% 7.00% 7.50% 10.00% 5.70% 6.50% 6.90% 7.50% 7.50% 9.00% 10.50%Budgeted Discount Rate 8.50% 11.00% 7.00% 7.50% 10.00% 5.70% 6.50% 6.90% 7.50% 7.50% 9.00% 10.50%Last Year Discount Rate 6.95% 4.58% 3.41% 3.63% 3.14% 3.04% 4.12% 3.79% 4.07% 3.37% 4.12% 4.34%

RETAIL BBQ

S&OP – Information Flow


S&OP Spreadshee

tDemand Information

Supply Information

Forecasts

Actuals

KPI

• Orders• New Products• New Customers



• Capabilities• Outages• Constraints

• Production • Distribution• Inventory

• Utilization %• Overtime• Shipping

effectiveness

Production Plan

Actuals

KPI

S&OP – Basic “What-If” Model


As-Is Impacts To-BeAs-Is Lost Orders To-Be

Data Entry 87.0% On Time Shipments 91.3% 75.5 Lost Order Count 56.0Monthly M lbs. OrdersGrade Production - Plan 86000 1623 Reduction in Lost Orders 19.5Grade Production - Actual 78000 1472 Recovered Margin - Monthly $154,950Grade Production - To-Be 81700 1542Adh. To Plan - % Calc 90.7% M lbs. As-Is Current OT Cost To-BeAdh. To Plan - % Actual 87.0% 74820 $55,000 Lost Order CountAdh. To Plan - To-Be % 95.0% 81700 $249 Std. OT/Order Base (% of Orders) 220.8Lbs As-Is due to SKU miss 3180 0.957498 New OT Orders (10% of Orders) 147.2% due to SKU miss 3.7% Savings in OT (Monthly) $18,333Summary - Actual Savings

Actual Savings As-Is Inventory To-BeInventory Carrying Costs $107,774 71 Current Level - million Lbs

OT Costs $220,000 Production (diff - act v to-be) 4.74%New Inventory (reduced by difference) 67.6

Total Actual Costs Savigs $327,774 Annual Carrying Cost Savings (10%) $107,774

Recovered Margin (.15) As-Is SKU Mismatch To-BeRecovery of Lost Orders $1,859,400 60 Lost Orders Count 60

$477,000 Lost Orders Cost $477,000Total Annual $ $2,187,174 Inventory % 4.08%Less SKU Miss $1,706,988 New Inventory Lbs. 70.5Not Included Note: Added cost above To-Be $15,147Rush transportation cost Entered Numbers 1623 OT assumes no reduction -$18,333Decrease in days la te Calculated Numbers 1472 Total Added Cost To-Be $480,187

S&OP – Measures & Metrics


S&OP – KPI’s

• Forecast Accuracy (%)• Forecast Bias ($)• Absolute Forecast Error (ABS $)• Forecast over/under

• Production Plan Adherence (%)• Inventory – Days of Supply (DOS), or Weeks Cover or Months

Cover• Inventory – Turns, GMROI• Financial Forecast Accuracy


S&OP – Performance Measurement

• Sales versus Forecast

• Cost versus Plan

• Profit versus Plan

• Customer Service Level against target

• Inventory versus Plan

• Backlog versus Plan

• Production versus Plan


S&OP - Checklist


S&OP - Checklist

• Is the data accurate and timely?

• Are accountabilities clearly defined?

• Does it cover a 18 ~ 24 month time horizon?

• Is volume expressed in unites as well as $$$?

• Does your S&OP actively involve senior members of the management team?


S&OP – Checklist (continued)

• Does it include a capacity review?

• Are decisions being made proactively?

• Does it include actual vs. forecasted sales?

• Does the S&OP meeting occur on a monthly cycle?

• Is the financial difference between the S&OP plan and the financial plan evaluated monthly?


“One half of knowing what you want is knowing what you must give up before you get it.”

- Sidney Howard (playwright – “Gone With the Wind”)


s&op - a summary

Documents