Sales and Operations Planning

1. Sales and Operations Planning Flexible Dynamic Lean Business Planning

2. Conflicting objectives Customer Service Manufacturing Costs Manufacturing Flexibility Inventory

3. Vertical Functional Organisation MD Directors Sales Marketing Technical Operations Finance HR Managers Supervisors/Team Leaders S A L E S A C C T S M K T G O P S R & D H R

4. Disintegrated Business Planning Long term plan Medium Term Plan Short term Plan

5. Quality Data People Measures Improvement Vision Strategy Prioritisation Demand Supply Innovation Support The Delos ModelFor Business Integration

6. Objectives of Integrated Enterprise Leadership • Vision and Strategy supported by : • One set of numbers at all times • Integrated Plans • Realistic Plans • Visibility and transparency [3-5 years] • Teamwork • Decisions made in timely fashion • More planning, less fire-fighting • Consistent performance measures • Delivery of the strategy • Top Down and bottom up

7. Integration of Processes and Tools Detail

8. Vision Integration Mission, values, and envisioned future Operational Requirements Business of The Future Strategy, SWOT, Critical success factors, Measures, responsibilities Learning And Development Performance Management Winning business Integrated Operational Plan for all of the functions in the business Programme Management Operations Management Tactics, Detailed plans, Measures, Development Plans Contract delivery Delivery of requirements for customers and shareholders

9. Integrated Enterprise Leadership • A vision and strategy – communicated to everyone and supported by facts not hopes • Clear focus on strategic competency • All-embracing performance measures • Process not functional “orientation” • Integration of all of the business processes • Teamwork in pursuit of common objectives • Focus on delivery of customer and shareholder value • A process for managing change • Getting people to follow the changed direction without appearing to launch too many “initiatives”.

10. Integrated Enterprise Leadership • To operate effectively an Integrated Enterprise Leadership process needs: • Timely acquisition of data on sales, inventory etc. • Formal process for preparation of data and information • Time for analysis of information • Discussions to get to conclusions • Time to prepare agendas and recommendations • A regular well communicated and adhered to process

11. Week 1 Week 2 Week 3 Week 4 Integrated Enterprise Leadership Stage 1 Stage 7 Innovation Review A C T I O N Stage 2 Customer Demand Review Stage 5 Stage 6 Priority Review Senior Team Review Stage 3 Supply Plan Review Stage 4 Support Review

12. Planned Calendar ……. • Dates set in advance (annually) • Everyone knows when it is • Agenda pre-set • Preparation happens • If nothing to discuss, then no meeting • Almost non-voluntary

13. Characteristics of IEL process • Formal set of meetings • Agendas “pre-set” • Linked series of meetings • Focus on right decisions being made at right level • Preparation not “thank goodness for the last minute” • Facts not opinions • Focus on Long-term and not short-term.

14. Integration of Innovation Integrated Business Plan Innovation Demand Plan Supply Chain Support Activities

15. Management of Innovation needs a process Stage/Gate Process Stage 0 Stage 1 Stage 2 Stage 3 Stage 4 Stage 5 Gate 2 Gate 1 Gate 3 Gate 4 Gate 5 Review Research And Develop Full business Case Develop Product in line With customer Requirements. Full production marketing and Sales of product Ideation Initial Investigation Test market products and service . Develop market Meets customer, supply and financial criteria. Meets customers’ and operations needs.. Business Case and prioritisation. Is it a good idea? Does it fit our criteria ?

16. Management of Innovation Integrated Project Management – Programme Management

17. Integration with Supply Chain Distribute Finish Sub-assemble Insert New Products Here Intermediate Manufacture Purchase Design Cumulative Lead Time

18. New Product Development Performance • Definition • Purpose • Horizon • Source of information • Number of new products developed on time • Improve NPD process • New product development time • Activity schedule in planning system or project plans

19. NPD Performance Report NPD Performance = 3/6 = 50 %

20. Week 1 Week 2 Week 3 Week 4 IEL Process Steps Stage 1 Stage 7 Innovation Review A C T I O N Stage 2 Customer Demand Review Stage 5 Stage 6 Priority Review Senior Team Review Stage 3 Supply Plan Review Stage 4 Support Review

21. I can never make it 100% accurate Do you want me to Sell or Forecast ? The factory never make what I forecast anyway My business has too many unforeseen peaks My business is different - you can’t forecast it I’m measured on getting high sales - so who cares about the forecast I don’t know who’s responsiblefor it anyway It’s not in my objectives Nobody thanks me for it – so why bother ? Common Reasons for Not Forecasting

22. Forecasting – Defined A forecast is a formal request to the Supply Management function from Sales and Marketing to have the product, materials and capacity available according to the quantity and at the time that they anticipate the demand will occur from the customer to ship the product to their premises

23. Forecasting Needs a Simple Process Capture Actual Filter Demand Compute forecast Review Accuracy Agree commercial plans Agree Exceptional demand Hold Demand Review Assumptions written down and agreed C O N S E N S U S F O R E C A S T

24. Forecast Accuracy • Definition • Purpose • Horizon • Source of Information • Percent of items within a tolerance • Assess the degree of flexibility required by the supply side and to improve the process • Cumulative lead time (= purchasing plus manufacturing) • Forecasting module • Sales module

25. Forecast Accuracy Report – by Error

26. Week 1 Week 2 Week 3 Week 4 IEL Process Steps Stage 1 Stage 7 Innovation Review A C T I O N Stage 2 Customer Demand Review Stage 5 Stage 6 Priority Review Senior Team Review Stage 3 Supply Plan Review Stage 4 Support Review

27. Master \Schedule Capacity Requirements Plan Component Plan Supply Planning should happen at two levels.. Rough Cut Family Detail MRP/CRP

28. Rough Cut Capacity Planning Actual Production Per month Family Volumes x Rate per hour Demonstrated Capacity Required Capacity Critical Resources

29. Sample Output

30. Customer Service Report – Against Promise Date Customer Service to Promise = 5/6 = 83 %

31. Financial plan Pull together all the volume plans into one financial picture • Volume x price = revenue • Volume x cost = variable cost • Margin = revenue – variable cost • Overheads are fixed • Profit is the result • Assumptions on assets • Cash Flow calculation

32. Budget

33. Preparation of the budget Financial projection enables • Visibility of current year outturn – early • Visibility of subsequent year(s) to enable budget to be one set of numbers – early Requires culture change • No six month process • No sandbagging of the numbers • Simple cut-off period • “Roughly right” rather than “precisely wrong”

34. Budgets – the issues • Annual budgets irrelevant in a fast changing world • It is a game played by any number of players • Budget is used as a “control mechanism” – but it does not work

35. Week 1 Week 2 Week 3 Week 4 IEL Process Steps Stage 1 Stage 7 Innovation Review A C T I O N Stage 2 Customer Demand Review Stage 5 Stage 6 Priority Review Senior Team Review Stage 3 Supply Plan Review Stage 4 Support Review

36. Prioritisation Family Summary Major Changes Main Assumptions Threats & Opportunities Decisions Taken Decisions to Take Recommendations, Implications, Costs Alignment to Business Plan Innovation Status Senior Team Review Two Leadership Stages Continuously reviewing the balance between strategy and operations Continuously reviewing the operational projection and strategic fit

37. Summary By Family Discussions should be about assumptions and not numbers !

38. Objectives for Senior Team Review • Make decisions on major issues • Delegate issues to the right level • Review the long-term picture not short term crises • Review process based performance measures • Review and develop long-term strategy • Make it the meeting for the Executive

39. Agenda for discussion • Current Business situation • Plan versus Budget/Business Plan • Plan versus last plan (volume/value) • Strategic Review [1/quarter] • Assumptions on which plan is based • Issues for Resolution • Innovation development issues • Supply/Demand Allocation issues • Major Capacity changes required • Outsourcing • Capital Expenditure Plans • HR/IT support issues • Reorganisation requirements • Performance measures • Review of IEL process against assessment criteria

40. The Core Measures and Financial Effect Relationships to RoCE components

41. Perfect Customer Orders ROCE Profit Capital Sales Costs Fixed Current Material Labour Overhead Stocks Creditors Debtors Perfect Customer Orders

42. Removal of the budget • Get over the discussion about shareholders demand it • Recognise that budgets are for long-term financial and cash flow projection and not performance measurement • Set a long term strategy capable of being reviewed every quarter • Recognise that life changes, and dynamic business planning and execution is required • Use the Balanced Scorecard, and/or the Delos seven measures as the basis for measurement of how well you are doing, and how well the business works. • IEL is about planning the work, and working the plan to meet the customers’ requirements in all areas of the business; finance is to add up the results – that’s all. • The hardest part is to give up a lifetime of politics and numbers games in exchange for a robust set of assumptions. • Evolution happens. Revolution is sometimes necessary.

43. Prerequisites for successful process • Common agreed process • Prepared agendas • Right attendees • Focussed discussion • Actions identified and being taken • Honesty and realism throughout • Elimination of other meetings • Commitment to formal process • Commitment to follow the plan • If you can’t do it say so – Silence is approval.