Supplier development project

28. Aug. 15

Extended Sales and Operation Planning (ES&OP)- customer and supplier

Operated by Valcon & Implement

Supplier development project 28. Aug. 15

What is S&OP ?

Supply Demand

Sales and Operation Planning can be described as:

”A set of decision-making processes to balance demand and supply, to integrate financial planning and operational planning and to link high level strategic plan with day-to-day operations.”

APICS (American Production and Inventory Control Society

Supplier development project 28. Aug. 15

• Improve delivery service• Focus on opportunities also outside the forecast• Capacities and resources are in place when needed

To enable growth

• Balancing demand and supply also from a cost effective perspective• Differentiated planning strategies, planning and performance level

To reduce cost

and working capital

• One aligned and committed plan at management level• Transparent and fast decision making and communication of action plans• Clear rules and prioritisation guidelines for tactical and operational level

To reduce iterations and workload

Purpose of the S&OP process

Supplier development project 28. Aug. 15

S&OP in the planning hierarchyPlanning buckets

Process cycles

Focus level

Yearly

Monthly

Weekly/daily

Weekly/daily

Yearly

Monthly

Weekly

Weekly/daily

Product group, capacity group

SKU level, individual capacity

Strategic planningup to 5 years

Sales & Operations Planning

2-18 months

Operational planning0-6 weeks

Tactical planning1-3 months

SKU level, capacity level

Opportunities/actions

Commercial strategy (markets, customers, products) Requirements for new production facilities

New customers/developmentof existing customers/campaigns Increase/decrease in production capacity (shifts) or subcontracting Build up/reduce inventory

Levelling demand/prioritisation between ordersOvertime/time off in production/ temporary employeesBuild up/reduce inventory

Prioritisation between ordersOvertime/time off in productionBuild up/reduce inventory

Product group, capacity group

Polices, rules and

parameters

Actual planning data and

capabilities

Supplier development project 28. Aug. 15

Extended S&OP process

Internal S&OP process

Cu

sto

mer

Su

pp

lier

Review critical capacities and

resources

Signed off purchasing forecast

or takt

Identify issues and make scenarios

Decision (S&OP) meeting

Common demand and supply plan and agreed

actions

Implement plan and actions

Implement plan and actions

Capacity and resource gaps and scenarios

Review raw material and semi-finished

stock vs. target

Customer demand planning

Supplier inventory planning

Supplier capacity planning

Identify issues and make scenarios

Inventory gaps and scenarios

S&OP balancing Plans and actions

Supplier development project 28. Aug. 15

Framework for ES&OP meeting

Purpose

The purpose of the ES&OP meeting is to:

• sign off on the forecast for month 2 to x

• decide actions for imbalance between demand and supply

• decide actions for deviation on KPI’s

Ground rules e.g.

• The S&OP presentation and recommendations are sent to participants min. 2 days before the meeting

• Questions regarding data validation not to be discussed at the meeting

• Mandate to be handed over if not able to participate

• Decisions are made in the meeting (not before or after)

Practicalities

Frequency: TBD

Horizon & aggregation level: TBD

Time and place: TBD

Participants• Decision makers customer e.g.:

• Purchasing director/manager• Planning director/manager

• Decision makers supplier e.g.:• Sales director/manager• Planning director/manager• Production director/manager

Input

• Customer purchasing forecast

• Supplier capacity and inventory issues and scenarios

• KPI measures and gaps

Output

• Balanced demand and supply plan and list of agreed actions

• Agreed action to close performance gaps

Agenda

• Follow up on actions from last meeting

• Update on market trends, market share and market requirement

• Last month sales, forecast and development incl. large orders

• Capacity and inventory issues and scenarios

• New Product Introductions

• Decisions and actions

• KPI update, deviations and actions

Supplier development project 28. Aug. 15

Implementation of ES&OP processPolicies and rulesHow can supplier use forecast (e.g. buy raw material, produce to forecast)Which planning strategies to be used (make-to-stock, make-to-order, JIT, Takt, min./max. on selected products)Who holds inventory on semi-finished products?Rules for prioritisation of production/orders

Horizon and focus/aggregation levelHorizon long enough to cover reaction time on ramp-up and down on capacities, resources and inventoryFocus level detailed enough to uncover issues

KPI measures and targetsShould cover QDC (quality, delivery and cost)What to measure, how to measure it and who to collect dataDifferentiation on product groups and/or A, B and C

Process and meetingWho prepares and leads S&OP meetings?Who owns and adjusts service level agreement?Who owns the process and continues improvement on the process?

Tips

It will take some iterations to get a good process up and running.

Don’t spend too much time on getting the data side right.

Support the ES&OP process with a tactical planning meeting at manager level

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