SOP Presentation

Sales and Operations
Business Forecasting
Planning
Taruna Nagpal
Sean ODonnell
Anthony Stramecki
Vivian Yu
Agenda
Sales and Operations Planning Overview

Process
Certification
Applications in Semiconductor Industry
Standard Monthly Procedure

Planning(S&OP)
Definition:
A formal process, consisting of series of meetings,

where data from various areas of business is
discussed and decisions are made.
The goal is agreement between various departments

on the best course of action to achieve the
optimal balance between supply and demand and to
meet profitability goals.
Normal Time Frame
Takes a monthly look at product groups at

least 6- 12 months across the planning
horizon.
Some companies go out as far as 18 months.
Sales and Operations Planning

(S&OP)
C r e a t e a d e m a n d p la n f o r t h e t a r g e t t im e p e r io d
C o r r e s p o n d in g s u p p ly p la n is c r e a t e d f o r t h e t im e p e r io d
P la n s a r e f e d in t o a p r e - S & O P p r o c e s s , w h e r e s o lu t io n s t o a d d r e s s t h is im b a la n c e a r e f o r m u la t e d
S & O P m e e t in g a t t e n d e d b y s e n io r le a d e r s h ip f r o m s a le s , m a r k e t in g , o p e r a t io n s , f in a n c e a n d o t h e r o p e r a t io n a l a r e a s .
D is c u s s t h e is s u e s r e c o m m e n d e d s o lu t io n s
R e v ie w s a lt e r n a t iv e s
M a k e s d e c is io n s
Type of Data considered
Current plan for each product group

Current finished goods inventory
Sales forecasts
Purchase Orders received
Materials available
Manufacturing plans and capacity
Distribution capacity
Shipping capacity
Performance measures
Customer Service
S&OP Software
Dash Optimization Supply Chain Planning Software

DCRA Solutions
Demand Solutions - Demand Solutions Sales and
Operations Planning Software (DSOP)
Futurcast
IBM Stratum
S&OP Software
Steelwedge Software Interface
A typical model of the Sales and Operations Planning

process
Source: WP
Salesoperationsplanning12.pdf
Demand Review Process
The ultimate goal of the demand plan is to gain

consensus on what will be sold and what revenue will
be produced
Participants discuss factors that influence demand

and agree on a single demand plan that is then
passed
Supply Review Process
Create a supply plan that includes rough-cut

capacity plan, procurement plan, and accompanying
costs.

Planning Meeting
Discuss and resolve any imbalances between

supply and demand
All decisions are published as a single authorized

plan which becomes the operating plan for each
function within the company
Benefits:
Increase plan accuracy

Increase product margins
Improve customer satisfaction
Reduce costs through efficient use of resources
Drive organizational flexibility
Reduce inventory and obsolescence costs
Better communication between groups
Improved cash flow and Shorter lead times
Reduced transportation costs
Tips for Successful Planning processes
Include specific schedules and participants.

Identify Key Performance Indicators prior to
beginning
Have an attitude of continuous improvement
Stabilize the Demand Planning process prior to the
Supply Planning process.
Hold regular meetings
S&OP Certification - CPIM

Company Benefits
More Effective Personnel Selection
Improved Forecasting Practices and Processes for Your
Business. Enhance knowledge of those already in the field.
Better Forecasts and Related Business Decisions
Forecaster Benefits
Professional Development
Forecasting Knowledge Development and Expansion
Career Advancement
Validation of Forecasting & Planning Knowledge and Skills
Globally Recognized Credential

Benefits of Certified in Production and Inventory Management
A CPIM education can help you to

Increase your functional knowledge of production and inventory
management
Improve efficiency across the processes of your organization's
supply chain
Streamline operations through accurate forecasting
Predict outcomes more accurately
Maximize customer satisfaction by delivering products and
services Just-in-Time
Increase profitability by optimizing your organization's inventory
investment
Enhance your credibility among peers, employers, and
customers.

Candidates must pass all exams for the
following modules
Basics of Supply Chain Management

Master Planning of Resources
Detailed Scheduling and Planning
Execution and Control of Operations
Strategic Management of Resources

Who should earn the CPIM designation?
A CPIM education is essential for professionals involved in
* Production and inventory management
* Operations
* Supply chain management
* Procurement
* Materials management
* Purchasing
S&OP application in industry
Semiconductor industry
Surveyed 9 global semiconductor companies
Only 10-15 so survey covered half; therefore, its a good

reflection of the overall industry
Purpose
Investigate the extent of S&OP used and

determine its strengths and weaknesses.
Focuses on 2 parts:
Forecasting: Driving force behind ops planning

Operations planning: Main focus
S&OP in the semiconductor industry

-All companies use it in at least
their marketing, operations, and

finance depts. Most also employ
it in sales and service/logistics
-Sales/marketing and
manufac/ops
are the main drivers of the S&OP
process
Forecasting
Relative importance of different factors in the demand forecast
generation
Frequency of forecasts: 1 weekly, 1 quarterly, and the rest

monthly
Primary time horizon:
3 companies = 24 months; 3 = 18 months; 1 = 15 months; 2 = 12

months
Forecasting (cont.)
Software used in forecasting
Most popular method is spreadsheets then SAP America,

followed by software developed internally and I2
How frequently do you measure and review forecast

accuracy?
5 companies measure and review on monthly basis, 1

bimonthly and 2 quarterly
Operations Planning
Planning horizon for S&OP
Primary objectives of your S&OP process
Except for three companies which use a planning horizon of

12 months, all use 18 months
3 companies primarily use it to align plans with demand/sales.
The other 6 use it to align plans with both demand/sales and
business strategy.
Length of time to complete one cycle of the S&OP process
3 companies spend one month, 3 spend two weeks, 1 spends

three weeks, and 2 spend more than one month
Operations Planning (cont.)
Software used and satisfaction levels
As can be seen there is equal satisfaction between

spreadsheets or software developed internally and
customized software that was outsourced
Overall satisfaction levels medium to low. No
company has a high level of satisfaction
Key items covered in the process

- Sales, production issues,
and demand/production
gap closure plans are
named to be the key item
by most companies. New
product schedules,
customer service and
inventory also key factors.
Financial forecasts and
capital planning are key
items to only a few
companies.
Are there metrics in place to measure effectiveness (or

quality) of the production plans, commonly the output of the
S&OP process?
All but one said yes. Most fall within the responsiveness
category (fulfillment of production plan, flexibility, on-time
delivery) followed by inventory (availability, shortage, excess)
Are financial estimates integrated within the SOP process?
One company has them fully integrated, two companies keep

financial estimates and SOP totally seperate, and the
remaining 6 adjust financial numbers according to SOP
output.

Strengths
and weaknesses of the S&OP process
Conclusions
Many companies complain about the length of their SOP

cycle, its complexity, and input data validity/integrity.
Solution: Building integrated databases and automating the

process (expediting communication and streamlining decision
making)
Need for better forecasting since it is the driving force

behind the process.
Integration of finance into S&OP process
All companies agree that its strength lies in the integration of

decision making by bringing several depts. together; however,
tendency is to keep it at operations level. In order to fully
benefit from process financial planning should be integrated
into it.
The monthly sales and

operations planning process
STEP 5
Exec SOP
Meeting
Decisions
STEP 4
Pre-SOP
Meeting
STEP 3
Supply
Planning
STEP 2
Demand
Planning
STEP 1
Data
Gathering
End of month
Recommendations
For executive S&OP
Capacity constraints
2-nd pass spreadsheet
Management forecast
1-st pass spreadsheets
Statistical forecasts
Field sales worksheet
Wallace: 2nd edition Sales & Operations Planning
Step 1 Data gathering
Month end data
Actual sales
Inventory
Production
Sales and marketing
All pertinent information
Sales
Jan
Feb
Mar
Apr
May
June
Jul
Aug
Forecast
100
100
100
120
120
120
120
130
Actual sales
90
95
85
Difference
-10
-5
-15
-15
-30
Cum. difference
Production
Jan
Feb
Mar
Apr
May
June
Jul
Aug
Planned
production
100
100
100
110
120
120
120
130
Actual production
98
100
101
Difference
-2
-2
-1
Cum. difference
Inventory
Jan
Feb
Mar
Apr
May
June
Jul
Aug
Planned
inventory
100
100
100
142
142
142
142
142
Actual inventory
111*
116
132
11
16
32
Difference
*January Inventory = 103
Comparing actual to forecast
Step 2 Demand planning
Sales and marketing review information

received from Step 1
Sales forecast
By product
By family
Total
Demand planning team
Demand manager
Salesperson
Product manager
Customer service
Forecast analyst
Accounting manager
Sales manager
Supply chain manager
Forecasting: Inputs, Process,

Outputs
OUTPUTS
INPUTS
Current Customers
New customers
Forecasts That:
Competition
Are reasoned
Economy
New products
Pricing
Bids
Promotions
Management directive
History
Other
THE
PROCESS
Are realistic
Are reviewed
Represent demand
Step 3 Supply planning
Bill of resources
Rough-cut capacity
Interaction of lean manufacturing
Demand/Supply Strategies
Rough-cut capacity plan
Interaction with lean

manufacturing
Aligned resources
Flow
Takt time
Demand/Supply Strategies
Product Family: 1
1.
2.
3.
Make-to-stock
Target customer service level 99%
Target finished goods inventory
1 month
Product Family: 2
1.
2.
3.
Make-to-order
Target customer service level 98%
Target customer lead time
2 weeks
Step 4 Pre-SOP meeting
Make decisions to balance supply/demand
Resolve differences where possible
Identify areas of disagreement
Develop scenarios
Set agenda for Executive S&OP meeting
Step 5 Executive S&OP

meeting
Make decisions
Authorize changes in S&OP plan
Relate dollarized version
Resolve issues
Review performance, product issues, special
projects, etc.
Preliminary close meeting

Day of month
Reports
Attendance
Key objectives
3rd business
day after
month end
-Income
Statement
-Balance sheet
-Control book
-Plant manager
-Plant
controller
-Financial/
operations
Analyst
-Results
-Comparing
forecast to
actual
-Inventory
levels
-A/R
-A/P
Final close meeting

Day of month
Reports
Attendance
Key objectives
7th business
day
-Income
Statement
-Balance sheet
-Actual vs.
forecast
-Variance
-CFO
-Financial/
operations
Analyst
-Controller
-Cost
accountant
-Results
-Comparing
forecast to
actual
-Inventory
levels
-A/R
-A/P
Sales forecast
Pricing adjustments
Customers forecasts
Due by the 10th
Prepared by sales/marketing
Sales and operations plan
Prepared by plant manager and controller
Capacity issues
Productivity
Produced by the 15th
Questions?

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What is the goal of the Sales and Operations Planning (S&OP) process?

What is the goal of the Sales and Operations Planning (S&OP) process?

What types of data are considered in the S&OP process?

What types of data are considered in the S&OP process?

Sales and Operations

Sales and Operations Planning Overview

Sales and Operations

A formal process, consisting of series of meetings,

The goal is agreement between various departments

Normal Time Frame

Takes a monthly look at product groups at

Some companies go out as far as 18 months.

Sales and Operations Planning

Type of Data considered

Current plan for each product group

Dash Optimization Supply Chain Planning Software

A typical model of the Sales and Operations Planning

Demand Review Process

The ultimate goal of the demand plan is to gain

Participants discuss factors that influence demand

Supply Review Process

Create a supply plan that includes rough-cut

Sales and Operations

Discuss and resolve any imbalances between

All decisions are published as a single authorized

Increase plan accuracy

Tips for Successful Planning processes

Include specific schedules and participants.

S&OP Certification - CPIM

S&OP Certification - CPIM

A CPIM education can help you to

S&OP Certification - CPIM

Basics of Supply Chain Management

S&OP Certification - CPIM

S&OP application in industry

Surveyed 9 global semiconductor companies

Only 10-15 so survey covered half; therefore, its a good

Investigate the extent of S&OP used and

Forecasting: Driving force behind ops planning

S&OP in the semiconductor industry

their marketing, operations, and

S&OP in the semiconductor industry

Frequency of forecasts: 1 weekly, 1 quarterly, and the rest

3 companies = 24 months; 3 = 18 months; 1 = 15 months; 2 = 12

S&OP in the semiconductor industry

Software used in forecasting

Most popular method is spreadsheets then SAP America,

How frequently do you measure and review forecast

5 companies measure and review on monthly basis, 1

S&OP in the semiconductor industry

Planning horizon for S&OP

Primary objectives of your S&OP process

Except for three companies which use a planning horizon of

Length of time to complete one cycle of the S&OP process

3 companies spend one month, 3 spend two weeks, 1 spends

S&OP in the semiconductor industry

Operations Planning (cont.)

Software used and satisfaction levels

As can be seen there is equal satisfaction between