Execute Your Sales & Operations Plan
Do sales forecast “misses” cause Operations and Supply Chain to make last minute changes to plans and schedules that affect the entire organization? Does your decision-making process lack alignment between key functional areas? Do these ripple effects negatively impact sales, supply chain, and financial performance? If you struggle to turn your sales forecast into a reality because operations, supply chain, sales and finance are not aligned, then you need to consider Sales and Operations Planning (S&OP). Sales and Operations Planning is an integrated planning process that includes demand planning, supply planning, and financial planning to help make informed decisions. In short, it involves business planning across functional areas to improve profitability, on-time delivery, and other metrics by breaking down silos and coordinating business processes.
Sales and Operations Planning has often been associated with manufacturing; however, this considerably limits its use and usefulness. Any company with resource constraints can use the S&OP process to improve profitability. Some of the most effective users are service firms with very specialized human resources and distributors managing inventory.
To help you get started developing and implementing your S&OP process, Supply Velocity’s consultants will conduct an Assessment. We will evaluate your business for symptoms of ineffective planning processes. During the Assessment, we often discover necessary pre-S&OP process development work – for example inventory management, supply chain planning, or production planning. The deliverable of an S&OP Process Assessment is a detailed implementation plan and pre-S&OP work required to ensure success.
Implementing Sales and Operations Planning:
- Start with a pilot using only one product family and a core team of stakeholders
- Define your product families based on: product characteristics, production process, market-segment, distribution channel
- Limit to 9 product families for the entire company if possible
- Determine units-of-measure (UOM): each, case, pounds, gallons, pallets, truckloads
- Determine how to measure your capacity (for the operations plan): labor hours, machine hours, production space, warehouse pallet positions, dock doors
- Decide on your time fences and how far in the future you will plan (forecast) internal operations and your supply chain: production lead-time, average supplier lead-time, longest critical supplier lead-time
- Create your S&OP meeting spreadsheet, tracking forecast, actuals, and available to promise
Sales and Operations Planning – Timing
The monthly S&OP Process includes four distinct S&OP meetings as pictured above.
- Demand Planning Meeting: this meeting is typically led by the sales team using sales forecasts, marketing plans and / or sales planning to determine future demand. Automating these processes reduces the effort of data gathering and ensures consistency over time. We recommend combining a statistical forecast with sales representative input on specific customer demand information to improve forecast accuracy. The output from demand planning is an unconstrained demand forecast. New product development and timing are also an important consideration when forecasting demand.
- Supply Planning Meeting: this meeting is led by the operations team and uses the unconstrained demand forecast and key KPIs such as forecast accuracy and forecast bias as key inputs. Available inventory, resource and production capacity will be integrated with the unconstrained demand forecast. The output from this meeting will be constrained sales forecasts, aggregate product family dashboards, and opportunities to fulfill potential unmet demand. These opportunities will be reviewed and discussed in the following two meetings.
- Balancing Meeting: this meeting brings together the demand planning and supply planning teams to resolve any open issues and identify opportunities for escalation to the Executive S&OP Meeting. The teams will leave this meeting prepared to present to the executive team. The key output is the data and analysis including any critical KPIs to support decision-making by the executive team. These decisions may be investing in inventory to win an order, dealing with supply disruptions, moving production to fill in demand gaps, or accelerating (delaying) new product introductions.
- Executive S&OP Meeting: this is the final sales and operations planning meeting each month. The teams will present the demand and supply plans as well as any issues or opportunities that arose during the monthly process to the executive team. The purpose of this meeting is not review, it is decision-making. At the end of this meeting, there will be a clear path forward on how the company will execute the plan in the short- and medium- term. Additional strategic plans focusing on the long-term gaps may also be decided.
S&OP “Lite”
Is sales and operations planning a ‘four letter word’ in your company? Have you already tried S&OP and instead of helping you make informed decisions it became S&OP meeting bureaucracy? This is because many S&OP consultants use a ‘textbook’ approach. Instead, we apply the parts of S&OP that will solve your problems, not make you sit through four meetings a month, with a possible pre-S&OP meeting as well. Our ‘lite’ approach focuses on solving your problems, such as increasing capacity or throughput; improving inventory performance; successfully launching new products. S&OP lite is sustainable, where many ‘textbook’ implementations fall apart when a new management process becomes the focus of leadership. Keep it lite!
Buy-in, Buy-in, Buy-in
A successful sales & operations planning process requires collaboration across all business units and functions. If your executive team does not see this process as critical to executing your sales, operations, and financial plan, it will die. They must participate in every meeting. If monthly is too frequent, use quarterly S&OP meetings. When a S&OP process becomes a core part of your business, you can use it to plan for new products, adjust pricing based on market conditions, and achieve cross-functional collaboration throughout the entire organization.
S&OP and Supply Chain Management
Another important consideration of the S&OP process is the integration of supply chain management. If you are not using this type of business planning, then the center of your supply chain (your company) will be out-of-balance. If your company is not aligned, how can your supply chain (suppliers and your customers) be aligned? A functioning S&OP process creates the foundation for supply chain management, customer satisfaction, and business processes excellence. It mitigates disruptions because not only does forecasting allow you to plan for known variability, but some disruptions are created by a lack of a cross functional supply chain planning process. By creating an S&OP Plan, you can ensure procurement’s inventory planning, finances financial planning, and the overall supply chain plan accounts for the sales groups forecasts.
What is IBP, S&OE and SIOP?
S&OP has created variants that can seem confusing. They differ in the focus and level of thinking. IBP, (Integrated Business Planning) is meant to cover two issues not often part of S&OP; financial integration and link to the strategic plan. Financial integration means linking budgeting and financial forecasting to the demand forecast. S&OE is more short-term focused, using sales input and forecasting to make informed decisions about scheduling and resource allocation. SIOP puts the focus on inventory management and not resource allocation.
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“Supply Velocity has helped Clean succeed in a number of ways. First, they provided the education that kicked off our Lean Process Improvement journey. They also facilitated a number of large supply chain and process improvement projects including: 1) building quality into our direct-labor productivity incentive program, 2) designing the layout of our garment warehouse, and 3) streamlining our route service process.We have integrated the methods that Supply Velocity taught us into our management and strategic planning. In the process our quality measurement has improved 22% from 2013 to 2015, we have reduced required annual labor by 2200 hours from the garment facility layout project and we’ve seen 50% decrease in error rate. Obviously the numbers speak for themselves, but just as important, Supply Velocity has been fun to work and have become true partners. They have “taught us how to fish” so our internal teams are able to implement change on their own, with the skills we learned from Supply Velocity. This relationship has been invaluable.”
“We engaged with Supply Velocity to help us embed process improvement at all levels of the business. Our team learned from Mitch to let the data drive decisions, to use Lean tools to help us see our processes critically and objectively, and to create a control plan to manage all of the tasks that were the outcome of the data study.The project turned out to be very significant to the company and most importantly, our customers. We reduced our customer wait times by 40%, and cut in half the labor cost to fulfill customer orders.
Some results are not able to be measured. However, as a result of this project, we have started to build a Lean mindset and culture, which is part of our strategic mission to save our customers money. Supply Velocity has been a valued partner in this mission.”
“In a time of volatile supply chain disruption, Supply Velocity is helping us develop Demand and Supply Planning processes to proactively tackle these new challenges. They are genuine partners, working with our team, facilitating and teaching.”
“Supply Velocity’s Lean Six Sigma System has given us new tools to help improve our sales performance. We have learned new ways to analyze our business which makes problem solving more accurate and has made us better leaders.”
“Our experience with Supply Velocity was one of the best values we have ever had from a consulting project. Cyril Narishkin brought a structured lean methodology, invaluable experience and engaging facilitation skills to help us streamline a very complex and disjointed sales order process. Just as importantly, our team now has the knowledge and process competencies to address other business improvement opportunities going forward.”
“Supply Velocity created visibility within our Assurance Services Group… visibility of performance, Client-service, employee satisfaction and processing time. Using the Supply Velocity System, Audit Report Cycle time is down over 50%. We are using his strategies to create greater Client loyalty.”
“Your process encourages this group to work together, better communicate and have fun doing it.”
“Supply Velocity is driving instrumental change in our inventory management processes. This is critical for us to be competitive in a supply chain environment with numerous disruptions. They are making change happen, which can be challenging in a 182 year old organization.”
“We used Supply Velocity on our Warehouse optimization project. One of the key characteristics of Supply Velocity is that they listened to our requirements and provided a clear path for our Warehouse processes using lean tools and our future sales growth as objectives.”
“For several years we have worked with Supply Velocity to support us with their expertise on Lean Operations and Supply Chain Management. Supply Velocity has helped us implement Lean, improve our inventory systems, and educate our people. They are professionals who are always available to help us as needed.”
“Myerson engaged Supply Velocity, specifically Ray Davis to visit our plant in Trinidad to conduct a two day assessment of our production procedures and provide us feedback on areas for improvement and where applicable, areas for future analysis.Put simply, we got everything we paid for and in addition to more in depth analysis, we got specific tasks that were immediately actionable. Our local management team found Ray to be engaging, highly credible and insightful based on his wide experience. In other words the cultural differences and lack of specific industry knowledge weren’t impediments to things we could implement immediately and on our own. In a nutshell it was money well spent and will pay itself back many times over.”
“In the spring of 2003, the St. Louis Area Chapter of the American Red Cross engaged Supply Velocity, Inc. to perform a study and make recommendations to streamline office processes, maximize cash flow in purchasing and warehousing and restructure and enhance our maintenance department. Supply Velocity, Inc.’s process was methodical, flexible, staff-oriented, inclusive and, above all, trackable.In the last six months, our Chapter has realized expense savings of over $380,000 annually, and significant improvement in intra-company service levels has been attained. Supply Velocity, Inc. will return to the Chapter periodically throughout the next 18 months to audit our newly implemented processes. We have been pleased with our results and Supply Velocity, Inc.’s professionalism.”
“Mitch Millstein and his team helped guide our shop fabrication division in the re-layout of our custom pipe and steel fabrication facility when we moved into a new building. It is not only the results but how he helped. We were involved in every step. I personally did time studies and was able to see the non-value added steps required to manufacture in our old layout. When we created our new layout, everyone was involved, from the executive team to our direct labor force. With Mitch’s help we increased our throughput by a 3x multiple, while providing more competitive prices to our clients as a result of the efficiency improvements.This has enabled us to not only make more money but also to expand our commercial reach and serve more, and larger customers. I would recommend Supply Velocity to any company that wants to make improvement in supply chain and operations.”
“Many thanks to all three Supply Velocity presenters. I think you guys took a very difficult time for learning and capitalized on everyone’s time and training needs. I truly hope this helps your business as this was a considerable undertaking on the part of Supply Velocity. Outstanding!!”
“Closure Medical recently completed a major reorganization in order to enhance our ability to rapidly create innovative medical devices. We hired Supply Velocity to help us map out the process and service flows of the new organization that would maximize our product development process (PDP). In four weeks, Supply Velocity helped us envision a new PDP structure, develop measures and accountability for each step, and gain consensus within the organization. Supply Velocity’s focus on speed and accountability helped us complete a critical project in a timely fashion.”
“We are pleased that Essex selected Supply Velocity, Inc. as our Lean Implementation Partner. At one facility, we have saved over $350,000 in work-in-process inventory, reduced throughput time from 2 weeks to minutes and increased inventory turns 3 to 8 times per year. All these results are in just 6 months. Our return of investment is very high.”
“We are using Supply Velocity’s Lean Six Sigma methods to analyze a variety of processes including rationalizing SKUs (stock-keeping-units). By using math to evaluate SKUs we took some of the emotion out of our decisions. We expect significant increases in sales and productivity from reducing poor performing SKUs.”
“Supply Velocity gave us the tools to analyze our business and processes based on the facts and numbers versus our perceptions. Our common quote was “Let the numbers lead us”. The key for our organization was how quickly we moved from classroom to actual project initiation. We were able to jump in, start using the tools and see a difference right away.
The get-into-action approach was good for our culture.”
“The role of the Erie Insurance Marketing Department has been evolving over the past several years – from a support role to a more critical role of driving growth in our organization. Because of our increased workload and desire to prioritize the most critical projects, we hired Supply Velocity to teach us the skills of Lean Six Sigma.Participants included the Promotions, Market Research and Agency Licensing sections of the Marketing Department.
We learned valuable tools to help us to prioritize based on the voice of the customer.
I firmly believe these skills made a difference in how we work every day. We are moving new projects forward, eliminating or changing ineffective processes, and we are a much stronger department. We continue to use the tools to help us with our highly-complex and time-consuming projects. Supply Velocity helped us to accomplish our goals.”
“In thirty years of hiring consultants, Supply Velocity, Inc. was the first to tell me what they were going to do, set a price they stuck to and substantially exceed my expectations. I have recommended them to friends and acquaintances. They were true partners in assisting with the turnaround of an acquisition we had been struggling with for two years.Their math-based technology, solid down-to-earth facilitation skills, and positive, patient and enthusiastic attitude combined to make our implementation of Lean a very rewarding experience.
We increased our production by 50% in the first month of implementation and continue to see improvements. Improvements have not only been realized in productivity, but also in quality and morale. We have increased profitability by $2M on flat sales of $10M.
Based on Supply Velocity, Inc.’s integrity and our results, I will continue to refer them to others and utilize them in the future as we expand our company through acquisitions.”
“C&R was struggling with labor productivity. The construction crews were often missing materials that they needed to do their work. This caused significant idle time. Supply Velocity, Inc. and C&R used value stream mapping and visual management tools to make dramatic improvements in operations. Most importantly, two years later C&R is sustaining and improving on the implementation. C&R’s return on investment was 11:1. C&R had a record year last year in both sales and profits and would not have been able to pull it off without the changes Supply Velocity, Inc. helped us make.”
“Isolating a problem, finding short, and long term solutions with measurable results is what was promised and results is what was delivered by Supply Velocity. Upon launch of the Lean Six Sigma Selling System, we knew more about our customers, our products, and were able to create a solid plan to increase sales of our most profitable products. Within months of implementation, our booked sales jumped 60% and our most valued customers were getting direct, active, and calculable attention.”
“Supply Velocity has provided the technical expertise and political capital to move our project forward. They have just the right amount of push and the right amount of support. Supply Velocity has helped us make real changes to improve efficiencies in logistics without jeopardizing our performance. We’re happy and our customers are happy.”
“Anheuser-Busch Precision Printing had been implementing Lean Operations on our own for the past two years. We needed to move faster and partnered with Supply Velocity, Inc. Through Supply Velocity, Inc.’s mathematical workflow balancing and visual management tools, dramatic improvements were achieved. The entire converting operation was rearranged based on Lean principles. The result is a 20.6% productivity improvement, enabling us to operate with 23 fewer people in production.”
“I am thrilled to provide this testimonial for Supply Velocity and their outstanding work in implementing Lean Warehouses and processes at Crescent Parts & Equipment through the COVID pandemic. With their data-first focus and Mitch’s exceptional coaching and experience, they transformed our business into a more supply chain-oriented organization, enabling us to grow while prioritizing employee safety and creating a better work environment. Supply Velocity’s expertise in Lean methodologies and their comprehensive evaluation of our customers have been instrumental in optimizing our operations and increasing customer satisfaction. We highly recommend Supply Velocity to any company seeking to implement Lean processes and enhance their supply chain efficiency.”
“In 2015 we began working with Dr. Mitch Millstein to optimize our inventory locations supporting e-commerce and in-store inventory needs. From this work we developed a new omni-channel warehousing and inventory plan that entirely redefined our approach to warehousing, inventory management, store distribution and fulfillment. As a result of the analyses by Dr. Millstein we have begun the move to an improved omni-channel design by reassigning MSAs to new warehouses, greater leveraging of in-store inventories to satisfy e-commerce demands, and exploring acquisitions of new warehousing space in strategic locations. We have already seen an improvement of $300,000 from both more efficient shipping strategies due to better inventory management.”
“We used Supply Velocity to rethink our sales process. By analyzing the entire process we found wasted time in our Sales, Admin and Operations departments. Streamlining this process created extra time for each Sales Rep, allowing them to spend more time with Customers and increase the value we add. Gross profit margins are up 40%!We are now using Supply Velocity to help us rethink our entire Strategic Plan.”