© delos partnership 2009. all rights reserved. sales and operations planning flexible dynamic lean...

© Delos Partnership 2009. All rights reserved.

Sales and Operations PlanningFlexible Dynamic Lean Business Planning


Conflicting objectives

Inventory

Customer Service

ManufacturingCosts

ManufacturingFlexibility


Vertical Functional Organisation

MDMD

SalesSales MarketingMarketing TechnicalTechnical OperationsOperations FinanceFinance HRHR

R& D

R& D

MKTG

MKTG

SALES

SALES

OPS

OPS

ACCTS

ACCTS

HR

HR

Directors

Managers

Supervisors/Team Leaders


Disintegrated Business Planning

Long termplan

Short termPlan

Medium TermPlan


The Delos ModelFor Business Integration

InnovationInnovation

VisionVision

StrategyStrategy

PrioritisationPrioritisation

DemandDemand

SupportSupport

SupplySupply


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


Integration of Processes and Tools

Strategic Review

IEL Review

Demand Plan

Master Schedule

Project Plan

MRP/CRP/

Activities

WTL/

Orders/

Tasks

How Often Yearly Monthly Weekly Daily Hourly

Who Board Board Managers Computer Computer

Units £’s Families Families/

Products

Parts/

Activities

Parts/

Tasks

Horizon 5 years 3 years 2 years 2 years 2 years

Focus 3-5 years 0-3 years 0 to Cum Lead Time

0 to Cum Lead Time

Part Lead Time

Time buckets

Years Months Weeks Days Hours

DetailDetail


IntegrationMission, values, and

envisioned future

OperationalRequirements

Business of The Future

Winningbusiness

Strategy, SWOT, Critical success factors,

Measures, responsibilities

Strategy, SWOT, Critical success factors,

Measures, responsibilities

Integrated Operational Plan for all of the functions in the business

ProgrammeManagement

OperationsManagementContract

delivery

Tactics, Detailed plans, Measures, Development

Plans

Tactics, Detailed plans, Measures, Development

Plans

Delivery of requirements for

customers and shareholders

Delivery of requirements for

customers and shareholders

LearningAnd

DevelopmentPerformanceManagement


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”.


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


Integrated Enterprise Leadership

AACCTTIIOONN

AACCTTIIOONN

Week 1 Week 2 Week 3 Week 4

InnovationReview

InnovationReview

CustomerDemandReview

CustomerDemandReview

SupplyPlan

Review

SupplyPlan

Review

PriorityReview

PriorityReview

Stage 1Stage 1

Stage 2Stage 2

SeniorTeam

Review

SeniorTeam

Review

Stage 5Stage 5

Stage 7Stage 7

Stage 3Stage 3

SupportReview

SupportReview

Stage 6Stage 6

Stage 4Stage 4


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


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.


Integrated Business Plan

Integration of Innovation

Innovation

Supply Chain

DemandPlan

SupportActivities

0

5,000

10,000

15,000

20,000

25,000

30,000

Euros

Sales Contrib

Sales/Profit

Financial Analysis

Budget

Previous

Current


Management of Innovation needs a process

Stage/Gate Process

Gate1

Gate1

Gate2

Gate2

Gate3

Gate3

Gate4

Gate4

Gate5

Gate5

Stage 0Stage 0 Stage 1Stage 1 Stage 2Stage 2 Stage 3Stage 3 Stage 4Stage 4

Review

InitialInvestigation

InitialInvestigation

ResearchAnd Develop Full businessCase

ResearchAnd Develop Full businessCase

Develop Product in lineWith customerRequirements.

Develop Product in lineWith customerRequirements.

Test market products and service . Develop market

Test market products and service . Develop market

Full production marketing and Sales of product

Full production marketing and Sales of product

Stage 5Stage 5

IdeationIdeation

Is it a good idea?

Does it fit our

criteria ?

BusinessCase and

prioritisation.

Meets customer, supply and

financial criteria.

Meets customers’

and operations

needs..


Management of Innovation

Integrated Project Management – Programme Management

0

20

40

60

80

100

120

1st Qtr 2nd Qtr 3rd Qtr 4th QtrQtr

Capacity - Design Resource

Dem Cap

Req Cap


Integration with Supply Chain

Design

Purchase

Intermediate Manufacture

Sub-assemble

Finish

Distribute

Cumulative Lead TimeCumulative Lead Time

Insert NewProducts Here

Insert NewProducts Here


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


NPD Performance ReportProject reference

Planned Date

Actual Date

Hit/ Miss

Comment

A1001 23/1/08 02/2/08 Miss Scope change

A1096 23/1/08 15/2/08 Miss Key components not available

B2304 24/1/08 17/1/08 Hit

B2403 25/1/08 18/1/08 Hit

D1237 26/1/08 27/1/08 Miss

D1453 26/1/08 20/1/08 Hit

NPD Performance = 3/6 = 50 %


IEL Process Steps

AACCTTIIOONN

AACCTTIIOONN


InnovationInnovationReviewReview


CustomerCustomerDemandDemandReviewReview


SupplySupplyPlanPlan

ReviewReview


ReviewReview

PriorityPriorityReviewReview


Stage 1Stage 1

Stage 2Stage 2

SeniorSeniorTeamTeam

ReviewReview


ReviewReview

Stage 5Stage 5

Stage 7Stage 7

Stage 3Stage 3

SupportSupportReviewReview


Stage 6Stage 6

Stage 4Stage 4


Common Reasons for Not ForecastingI can never make it

100% accurate

My business has toomany unforeseen

peaksMy business isdifferent - you can’t forecast it

I don’t know who’s responsible

for it anywayIt’s not in my

objectives

I’m measured on getting high sales

- so who cares about the forecast

The factory nevermake what I forecast

anyway

Nobody thanks me for it – so why

bother ?

Do you want me toSell or Forecast ?


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


Forecasting Needs a Simple Process

Filter Filter DemandDemand

ComputeComputeforecastforecast

CaptureCaptureActualActual

C O N S E N S U S C O N S E N S U S F O R E C A S TF O R E C A S T

C O N S E N S U S C O N S E N S U S F O R E C A S TF O R E C A S T

Hold Demand ReviewHold Demand Review

Agree commercialAgree commercial plansplans

AgreeAgreeExceptional demandExceptional demand

AssumptionAssumptions written s written down and down and

agreedagreed

AssumptionAssumptions written s written down and down and

agreedagreed

ReviewReviewAccuracyAccuracy


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


Forecast Accuracy Report – by Error

Group Product Forecast Actual Error % Error

Product Group A

Product 123 100 120 +20 20

Product 456 200 150 -50 25

Product 789 300 330 +30 10

Total 600 600 0 17 %

Product Group B

Product 345 200 300 +100 50

Product 567 500 300 -200 40

Product 890 600 700 +100 17

Product 678 200 400 +200 100

Total 1500 1700 200 40 %


IEL Process Steps

AACCTTIIOONN

AACCTTIIOONN







ReviewReview


ReviewReview



Stage 1Stage 1

Stage 2Stage 2


ReviewReview


ReviewReview

Stage 5Stage 5

Stage 7Stage 7

Stage 3Stage 3



Stage 6Stage 6

Stage 4Stage 4


Supply Planning should happen at two levels..

-3 -2 -1

Supply Plan 125 125 125

Actual Supply 119 118 121

Difference -6 -7 -4

Cum Diff -13 -17

1 2 3 4 5 6 7 8 9

Last Supply Plan 125 125 120 120 120 120 120 120 120

New Supply Plan

Difference

Cum Diff

Q4 Q1

360 360

FamilyFamily

DetailDetail Master \Schedule

CapacityRequirements

Plan

ComponentPlan

RoughCutRoughCut

MRP/CRP

Filling Machine : Cap Req

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

1 2 3 4 5 6 7 8 9 10 11 12

Months

Hours

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000


Rough Cut Capacity Planning

RequiredCapacity

DemonstratedCapacity

Family Volumes x

Rate per hour

Family Volumes x

Rate per hour

Actual ProductionPer month

Actual ProductionPer month

CriticalResources


Sample Output


Order Promised Date

Actual Date

Promised Quantity

Actual Quantity

Hit/ Miss

1435 22/1/09 22/1/09 1050 1050 Hit

1560 23/1/09 23/1/09 2000 2000 Hit

1573 24/1/09 23/1/09 300 300 Miss

1745 25/1/09 25/1/09 500 500 Hit

1800 26/1/09 26/1/09 650 650 Hit

1820 26/1/09 26/1/09 1000 1000 Hit

Customer Service Report – Against Promise Date

Customer Service to Promise = 5/6 = 83 %


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


Budget


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 – earlyRequires culture change

– No six month process– No sandbagging of the numbers– Simple cut-off period– “Roughly right” rather than “precisely wrong”


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


IEL Process Steps

AACCTTIIOONN

AACCTTIIOONN







ReviewReview


ReviewReview



Stage 1Stage 1

Stage 2Stage 2


ReviewReview


ReviewReview

Stage 5Stage 5

Stage 7Stage 7

Stage 3Stage 3



Stage 6Stage 6

Stage 4Stage 4


Two Leadership Stages

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

SUMMARY BY FAMILY

MAJOR ASSUMPTIONS________________________________________________

DECISIONS OUTSTANDING________________________________________________

RECOMMENDATIONS________________AND COSTS ________________

________________________________

MAJOR CHANGES ________________________________________________________________

DECISIONS MADE ________________________________________________________________

VULNERABILITIES ________________________________________________________________




________________________________

MAJOR CHANGES ________________________________________________________________

DECISIONS MADE ________________________________________________________________


Demand Supply InventoryBudget Current Plan Previous Plan Prior Year

SUMMARY BY FAMILY




________________________________

MAJOR CHANGES ________________________________________________________________

DECISIONS MADE ________________________________________________________________





________________________________

MAJOR CHANGES ________________________________________________________________

DECISIONS MADE ________________________________________________________________



SUMMARY BY FAMILY




________________________________

MAJOR CHANGES ________________________________________________________________

DECISIONS MADE ________________________________________________________________





________________________________

MAJOR CHANGES ________________________________________________________________

DECISIONS MADE ________________________________________________________________



Total Number of Changes

Current Last Project

1020

30 4050

6070

Engineering

20

2530

35

40

Other


20

2530

35

40

Business Review

-8 -4 0 +4 +8


1020

30 4050

6070

20

2530

35

40

20

2530

35

40

-8 -4 0 +4 +8-8 -4 0 +4 +8

Current Goal

Current Plan FY9x

Plan Actual

0

2550

75

100

10

1520

25

30

100

125150

175

200

100

125150

175

200

Current

Margins

Revenue

Project Cost to Date

0

2550

75

100

10

1520

25

30

100

125150

175

200

100

125150

175

200

1st Pass Test Percent

-3 -2 -1 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

INVENTORY

ACTUAL

BUDGET

DEMAND PLANSUPPLY

ACTUAL

ACTUAL

VOLUME

TIME/MONTHS TIME/MONTHS-3 -2 -1 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

BUSINESS PLAN

ACTUAL

£ M'sREVENUE

BUSINESS PLAN

PROFITABILITY

ACTUAL

Weeks0

20

40

60

80

100

O/T Delivery Performance

3 1 3 2 0 0 0

7 7 12 6 8 6 11

#No. of Late Deliveries #No. of On-Time Deliveries

A

B

CMonths

Customer's Rating

A

B

C

STDHRSOR

UNITS

WEEKS

REQUIRED CAPACITY

PLANNED CAPACITY(DEMONSTRATED OUTPUT)

RESOURCE A

Total Number of Changes


1020

30 4050

6070

Engineering

20

2530

35

40

Other


20

2530

35

40

Business Review

-8 -4 0 +4 +8-8 -4 0 +4 +8


1020

30 4050

6070

20

2530

35

40

20

2530

35

40

-8 -4 0 +4 +8-8 -4 0 +4 +8

Current Goal

Current Plan FY9x

Plan Actual

0

2550

75

100

10

1520

25

30

100

125150

175

200

100

125150

175

200

Current

Margins

Revenue

Project Cost to Date

0

2550

75

100

10

1520

25

30

100

125150

175

200

100

125150

175

200

1st Pass Test Percent

-3 -2 -1 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

INVENTORY

ACTUAL

BUDGET

DEMAND PLANSUPPLY

ACTUAL

ACTUAL

VOLUME

TIME/MONTHS TIME/MONTHS-3 -2 -1 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

BUSINESS PLAN

ACTUAL

£ M'sREVENUE

BUSINESS PLAN

PROFITABILITY

ACTUAL

Weeks0

20

40

60

80

100


3 1 3 2 0 0 0

7 7 12 6 8 6 11

#No. of Late Deliveries #No. of On-Time DeliveriesWeeks0

20

40

60

80

100


3 1 3 2 0 0 0

7 7 12 6 8 6 11

#No. of Late Deliveries #No. of On-Time DeliveriesWeeks0

20

40

60

80

100


3 1 3 2 0 0 0

7 7 12 6 8 6 11

#No. of Late Deliveries #No. of On-Time Deliveries

A

B

CMonths

Customer's Rating

A

B

C

A

B

CMonths

Customer's Rating

A

B

C

STDHRSOR

UNITS

WEEKS

REQUIRED CAPACITY


RESOURCE A

STDHRSOR

UNITS

WEEKS

REQUIRED CAPACITY


RESOURCE A

Strategic Programme 1Strategic Programme 2 Strategic Programme 3 Strategic Programme 4 Strategic Programme 5 Strategic Programme 6 Strategic Programme 7 Strategic Programme 8 Strategic Programme 9 Strategic Programme 10 Strategic Programme 11 Strategic Programme 12 Strategic Programme 13 Strategic Programme 14

Strategic Programme 1Strategic Programme 2 Strategic Programme 3 Strategic Programme 4 Strategic Programme 5 Strategic Programme 6 Strategic Programme 7 Strategic Programme 8 Strategic Programme 9 Strategic Programme 10 Strategic Programme 11 Strategic Programme 12 Strategic Programme 13 Strategic Programme 14

Continuously reviewing the balance between strategy and operationsContinuously reviewing the operational projection and strategic fit


Summary By Family

SUMMARY BY FAMILY




________________________________

MAJOR CHANGES ________________________________________________________________

DECISIONS MADE ________________________________________________________________





________________________________

MAJOR CHANGES ________________________________________________________________

DECISIONS MADE ________________________________________________________________



DiscussionsDiscussionsshould be aboutshould be aboutassumptionsassumptionsand not numbers !and not numbers !


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


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

© Delos Partnership 2009. All rights reserved.41 Perfect Customer Orders

ROCEROCE

ProfitProfit CapitalCapital

SalesSales CostsCosts

MaterialMaterial LabourLabour OverheadOverhead

FixedFixed CurrentCurrent

StocksStocks CreditorsCreditors DebtorsDebtors

Perfect Customer OrdersPerfect Customer Orders


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.


Prerequisites for successful process1. Common agreed process2. Prepared agendas3. Right attendees4. Focussed discussion5. Actions identified and being taken6. Honesty and realism throughout7. Elimination of other meetings8. Commitment to formal process9. Commitment to follow the plan10. If you can’t do it say so – Silence is approval.

© delos partnership 2009. all rights reserved. sales and operations planning flexible dynamic lean...

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