Session 7

Aggregate Operations Planning

S&OP Metrics and Check List

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S&OP Performance Metrics

▪ Production Plan performance (plan vs actual)

▪ Production plan vs Actual Absolute deviation
▪ Production plan vs Budget by family, by business
▪ Statistic Forecast vs sales
▪ Consensus demand vs Sales
▪ Profit vs Plan
▪ Customer service vs target
▪ Inventory (MTS) or backlog (MTO) vs plan

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Sales and Operations Planning: Key Performance Indicators

Customer Order Cycle Manufacturing Order Cycle

▪ Order/Case/Line Fill Rate ▪ Schedule Stability
▪ On-Time Delivery ▪ Schedule Adherence

▪ Backorder Fill Rate ▪ Manufacturing Cycle Time

▪ Ratio of Inquiries to Orders ▪ Asset Utilization
▪ Order Cycle Time (External) ▪ Rework/Reject Rate
▪ Backorder Cycle Time ▪ Unit Cost
▪ Inventory Turns
▪ Cases on Backorder Procurement Order Cycle
▪ Order Fill Rate
Replenishment Order Cycle
▪ On-Time Delivery
▪ Forecast Accuracy
▪ Reject Rate
▪ Gross Inventory Accuracy
▪ Order Cycle Time (Vendor)
▪ Lot Size/Run Time Accuracy
▪ Invoice Accuracy
▪ Replenishment Cycle Time
▪ Unit Cost
▪ Inventory Investment
▪ Inventory Time Supply
▪ Inventory

Excesses/Shortages
▪ Warehousing Cost/Case

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S&OP Check List

▪ Data accuracy
▪ Has the Product families been defined?
▪ Demand & Supply teams formed?
▪ Accountable executives defined?
▪ Is the CEO involved in the S&OP process?
▪ Has the planning horizon been defined?
▪ Is the S&OP expressed in units and monetary units?
▪ Is there an S&OP calendar and monthly meetings?

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 S&OP Process
S&OP Meeting Agendas

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 Key for focus: Key for who:
S&OP
Demand Planning DP Demand
Supply Planning

The S&OP monthly cycle

SP Supply
S&OP Review
S&OP Review FP Finance

Meeting SM Sales & Marketing

•Local account / •Strategic plan •Constrained single •Constrained single •Actions plan from pre- •One consensus plan
An overview of the S&OP process customer knowledge •Financial plan forecast forecast S&OP meeting •Agreed remedial action
•Strategic/financial plans •Issues escalated from plan
Finance •Issues from pre-S&OP pre-S&OP meeting
Planning
Align

Change Demand plan based

on one consensus plan S&OP
Change Supply plan based
on one consensus plan
•Analysis of last 3 •Demand planner builds •Communicate: •Review actions from •Review outstanding •Distribute agreed
Review months performance unconstrained forecast •Constrained forecast previous S&OP meeting actions consensus demand plan
•Rolling 12/24 month •Aggregate demand for •Agenda for S&OP •Review issues •Review issues and remedial action plan
forecast reviewed by sense check of total meeting escalated from pre- escalated from pre- with assigned owners for
Constrained
sales area / product •Communicate revised •Actions outstanding S&OP meetings S&OP and scenarios to resolution
Demand Preparation Supply Plan Supply owner forecast within demand from previous S&OP •Review scenario resolve issues
Planning for S&OP* Planning •Based on POS true and to supply meetings information for issue •Agree one consensus
demand, customer ratios •Publish report for VP resolution plan
Unconstrained Demand Plan
review

Benefits of an effective S&OP process D

SM
D D
SP
D
SP FP SM
D
SP FP SM
D
SP
P P P P P P
▪ Supply/ demand imbalances proactively identified and addressed
▪ Confidence and alignment in planning numbers
▪ Focused utilisation of resource and reduced rework of numbers
▪ Improved Forecast and Supply Plan accuracy
▪ Reduced inventory and improved customer service levels
Demand review Build unconstrained Communicate S&OP S&OP attendees Communicate S&OP
▪ Collaboration/ teamwork across functions
meetings complete demand plan materials review materials S&OP meeting consensus plan
▪ Improved confidence in monthly and quarterly financial forecasts

Week 1 Week 2 Week 3 Week 4

Publish reviewed forecast for Finance
Create initial forecast Supply Plan S&OP Review
agreement Review
Review with sales and build unconstrained Finalise changes
Analyse and enrich forecast Constrain the demand plan to create forecast Agree one consensus plan
plan to financial plan

D D D D D
SM SP SP SP FP SM SP FP SM FP
P P P P P

Create forecast Build statistical Review and enrich Prepare for Pre-
baseline forecast forecast Build supply plan Review supply plan S&OP meeting Pre-S&OP meeting Final financial review

•Base 12/24 month •ABC prioritisation to •Demand managed •Based on the •Review with production, •Review Supply and •Unresolved demand •Prepare monthly rolling
history extracted from populate account review through promotional unconstrained demand warehouse, logistics, demand plan differences and supply planning estimate
ERP system (invoiced template activities plan the supply planner supply planners and •Understand options and issues are discussed in •Calculate impact on
sales) •Most appropriate •All causal factors reviews constraints to operational accounts impact the Pre-S&OP meeting P&L based on changes
•Data at SKU level, statistical method used identified, weighted and create an aggregate •Modify initial supply •Finance compare •VP sign off of demand agreed at the pre-S&OP
organised by division for each product group analysed long term production plan created constrained forecast and forecast and/or S&OP meetings
and customer account •Performance monitored: •Seasonality trends plan and update any financial plan •Issues that still cannot •Distribute revised
forecast bias & exception evaluated by area short term requirements •VP feedback to demand be resolved are financial plan
reports analysed by prod •NPI incorporated • From this a capacity planning escalated to the S&OP
group plan is generated meeting

•Unconstrained demand •Supply Plan •Demand plan •Demand plan •Financial plan
•Historical sales data •Statistical method •Phase in/out •Strategic plan
•Forecast error •Cannibalism plan •Supply plan •Supply Plan
•Inventory •Demand/Supply gaps •Constrained forecast
•Casual factors •Capacity constraints
•Financial plan

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Rules for the firm plan period: Cider: 4 weeks Wine Fusion: 4 weeks Wine: 3 months
Contents SOP Process
Demand Planning

Supply Planning

Financial Planning

Pre SOP Meeting

Excecutive SOP Meeting

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Demand review meeting overview
Overview Key Inputs
Objectives ◼ Historical sales data ◼ Promo plans (incl.
◼ Forecast accuracy cross account)
◼ Review recent performance and set action plan to improve
◼ Statistically ◼ Local account/
◼ Build unconstrained forecast for demand per account – a view customer
calculated forecast
of what we believe we are going to sell knowledge
◼ Seasonality &
◼ Align all parties on upcoming sales and marketing plans ◼ Abnormal demand
causality information
◼ Phase in/out plans report
Meeting Demand
owner Demand Planner Account review meeting

Demand Sales
Attendees
◼ Demand planner (s) ◼ Account handler (s)

Monthly process Outputs

◼ Unconstrained demand forecast for account
Monthly per key ◼ Action plan and owners for unresolved issues
Timing and customer account
frequency ◼ Mitigating actions for abnormal demand
Week 1 Week 2 Week 3 Week 4
Create initial forecast
Publish reviewed forecast for
agreement
Review with sales and build unconstrained
Supply Plan S&OP Review
Finance
Review
Finalise changes
◼ Outstanding issues escalated to pre-S&OP
Analyse and enrich forecast Constrain the demand plan to create forecast Agree one consensus plan
plan to financial plan

meeting
◼ KPIs and metrics

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Agenda for the account demand review meeting
Account demand review meeting
Time Agenda item Purpose
5 mins 1. Review actions of the last meeting ◼ Review action status
◼ Escalate issues as required
10 mins 2. Review last month performance (focus on exceptions) ◼ Assess lessons leared and
◼ Measurement driven, including review of assumptions made: volume, define actions for improvement
forecast bias, forecast error, service levels ◼ Escalate issues to pre-S&OP
◼ Review of abnormal demand and mitigating actions
◼ Major issues, including derived learnings
10 mins 3. Review of short-term plan (1-3 months, in weekly buckets) ◼ Assess changes to forecast
◼ Changes to forecast, exception based per division (if required drill down and define actions for
to SKU level): fact-based reasons for changes, supported by experience addressing any gaps
and statistical analysis ◼ Understand upcoming
promotions and customer
◼ Current and future weeks performance review for customer service
service requirements
◼ Special attention to: new products, promotions, exceptional seasonality ◼ Escalate issues to pre-S&OP
20 mins 4. Review long term plan (up to 18 months in monthly buckets) ◼ Create unconstrained demand
◼ Focus on the big issues and special projects plan for account
◼ Understand market trends and
◼ Exception based forecast per division (if required drill down to SKU
other factors impacting demand
level): forecast volume, past performance, trends, seasonality/causal
factors, cross-account promotional plans, brand strategies, phase ◼ Assess lessons learned from
in/phase out plans this meeting and define actions
for improvement
◼ Challenge and capture future opportunities
◼ Escalate issues to pre-S&OP
◼ Flag issues on flexibility and demand variability

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Contents SOP Process

Demand Planning

Supply Planning

Financial Planning

Pre SOP Meeting

Excecutive SOP Meeting

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Supply review meeting overview
Overview Key Inputs
◼ Unconstrained ◼ Current inventory
Objectives
demand forecast snapshot (incl.
◼ Review recent performance and set action plan to improve ◼ Capacity information finished goods,
◼ Review supply chain and identify potential constraints ◼ Production plan stock in transit and
◼ Distribution plan capacity)
◼ Develop alternative scenarios and associated costs for ◼ Performance
◼ Raw materials plan
alleviating constraints to form the basis for pre-S&OP meeting information
◼ Customer service
decision making
information
Meeting Supply
owner Supply manager Supply review meeting

Supply

◼ Supply manager ◼ Transport/

◼ Production manager(s) logistics manager
Attendees
◼ Warehouse manager(s) ◼ Supply planners
◼ Materials procurement ◼ Operations Outputs
◼ Stock manager accounts
◼ Potential constraints and alternative
scenarios identified
Monthly meeting
◼ Reconciled supply plan(s)
Timing and Monthly ◼ Action plan and owners for unresolved issues
frequency Week 1 Week 2 Week 3 Week 4
◼ Outstanding issues escalated to pre-S&OP
Publish reviewed forecast for Finance
Create initial forecast

Analyse and enrich forecast

agreement
Review with sales and build unconstrained
Supply Plan

Constrain the demand plan to create forecast

S&OP Review

Agree one consensus plan

Review
Finalise changes
meeting
plan to financial plan

◼ KPIs and metrics

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Agenda for the supply review meeting
Supply review meeting
Time Agenda item Purpose
5 mins 1. Review actions of the last meeting ◼ Review action status
◼ Escalate issues as required
10 mins 2. Review last month performance (focus on exceptions) ◼ Assess lessons learned and define
◼ Measurement driven, including review of assumptions made: actions for improvement
performance to schedule, compliance to supply and production plan, ◼ Escalate issues to pre-S&OP
out of stocks, customer service levels against SLAs (e.g. on time in full)
◼ Major issues, including derived learnings
10 mins 3. Review of short-term plan (1-3 months, in weekly buckets) ◼ Assess variances from plan and
◼ Constrains and gaps with supply plan, exception based per division (if define actions for removing any
required drill down to SKU level): current production capacity, inventory gaps
levels (finished goods), warehouse space, raw materials/packaging, ◼ Review alternative scenarios for
stock in transit, logistics capabilities, flexibility of the supply plan meeting demand, including forced
◼ Alternative scenarios to elevate constraint situations, taking into allocation or expediting
account costs, service levels and flexibility requirements
◼ Current and future weeks performance review for customer service ◼ Understand upcoming promotions
and customer service requirements
◼ Special attention to: new products, slow movers, deletions and
obsolescence ◼ Escalate issues to pre-S&OP

20 mins 4. Review long term plan (up to 18 months in monthly buckets) ◼ Constrain forecast from demand
◼ Focus on the big issues and special projects planning
◼ Longer term capacity and flexibility: inventory strategies and policies ◼ Review alternative scenarios to
(including safety stock and min order quantities), production capabilities elevate constraints
and requirements (including raw materials planning), FOB/BIC process ◼ Assess lessons learned from this
and planning, logistics capabilities, warehouse space requirements meeting and define actions for
◼ Flag issues on flexibility and decide on alternative scenarios to elevate improvement
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cost, service level and flexibility impact ◼ Escalate issues to pre-S&OP
Contents SOP Process

Demand Planning

Supply Planning

Financial Planning

Pre SOP Meeting

Excecutive SOP Meeting

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Financial review meeting overview
Overview Key Inputs
◼ Unconstrained ◼ Current/ future
Objectives
demand forecast projects
◼ Review recent performance and set action plan to improve ◼ Financial plan ◼ Promotions & sales
◼ Compare constrained forecast with financial plans ◼ Strategic plan events information
◼ Performance ◼ Supply plan (s) and
◼ Develop alternative scenarios and associated costs for scenario costing
information
alleviating gaps to form the basis for pre-S&OP meeting
decision making

Meeting Finance Financial review meeting

owner CFO

Finance

◼ Finance insight ◼ Head of finance

Attendees controller accounting services
◼ Commercial finance ◼ Chief financial officer
Outputs
manager
◼ Updates business plan
Monthly meeting ◼ Scenarios and associated costs for review at
pre-S&OP meeting
Monthly during pre- ◼ Action plan and owners for unresolved issues
Timing and S&OP preparation
frequency ◼ Outstanding issues escalated to pre-S&OP
Week 1
Create initial forecast
Week 2
Publish reviewed forecast for
agreement
Week 3
Supply Plan
Week 4
S&OP Review
Finance
Review
meeting
Analyse and enrich forecast
Review with sales and build unconstrained
plan
Constrain the demand plan to create forecast Agree one consensus plan
Finalise changes
to financial plan
◼ KPIs and metrics

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Agenda for the financial review meeting
Financial review meeting
Time Agenda item Purpose
5 mins 1. Review actions of the last meeting ◼ Review action status
◼ Escalate issues as required
10 mins 2. Review last month performance (focus on exceptions) ◼ Assess lessons learned and define
◼ Measurement driven, including review of assumptions made: net sales actions for improvement
and profit by division for current quarter and total year, costs incurred ◼ Escalate issues to pre-S&OP
to fill gaps between constrained forecast and financial plan
◼ Major issues, including derived learnings
10 mins 3. Review of short-term plan (1-3 months, in weekly buckets) ◼ Assess variances from current plan
◼ Constrains and gaps with financial plan, exception based per division and define actions for any gaps
(if required drill down to SKU level): review of changes to constrained ◼ Review alternative scenarios for
plan against financial plan gap fill, including forced allocation
◼ Alternative scenarios to elevate any gaps, taking into account costs, or expediting requirements
service levels and flexibility ◼ Escalate issues to pre-S&OP
◼ Special attention to: new products, slow movers, deletions and
obsolescence
20 mins 4. Review long term plan (up to 18 months in monthly buckets) ◼ Compare constrained plan with
◼ Focus on the big issues and special projects financial plan and review any gaps
◼ Review gaps between constrained forecast and longer term financial ◼ Discuss alternative scenarios to fill
plan/targets by division gaps
◼ Flag issues on flexibility and discuss gap fill plans to elevate ◼ Assess lessons learned from this
constraints based on cost, service level and flexibility impact meeting and define actions for
improvement
◼ Escalate issues to pre-S&OP

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Contents SOP Process

Demand Planning

Supply Planning

Financial Planning

Pre SOP Meeting

Excecutive SOP Meeting

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Pre-S&OP reconciliation meeting overview
Overview Key inputs by exception
◼ Sales plan ◼ Gaps between
Objectives
◼ Demand plan financial and
◼ Review recent performance and set action plan to improve ◼ Supply plan (s) operating plan
◼ Align all parties on upcoming sales and marketing plans ◼ Capacity information ◼ Capital plan
◼ Inventory levels ◼ KPIs/metrics
◼ Update on demand, supply and finance functional areas
◼ Action item list ◼ Initiated issue
◼ Identify and resolve (or escalate) issues ◼ Current financial plan sheets

Meeting S&OP
owner Head of Brand Planning
Pre-S&OP Meeting

Finance Demand Supply

◼ Finance ◼ Sales ◼ Production

manager ◼ Marketing planner
◼ Demand ◼ Logistics /
Attendees planner dist
◼ Demand ◼ Supply
manager manager Outputs
◼ Head of brand planning ◼ Action plans and owners
◼ Issues for S&OP escalated
Monthly meeting ◼ Assigned owners for issue analysis and
S&OP presentation
Timing and Monthly
◼ Plan changes (Supply, Demand etc.)
frequency Week 1
Create initial forecast
Week 2
Publish reviewed forecast for
agreement
Week 3
Supply Plan
Week 4
S&OP Review
Finance
Review ◼ Agenda for S&OP Meeting
Review with sales and build unconstrained Finalise changes
Analyse and enrich forecast Constrain the demand plan to create forecast Agree one consensus plan

Minutes sent to fixed distribution

plan to financial plan

◼
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Agenda for the pre-S&OP reconciliation meeting
Monthly pre-S&OP reconciliation meeting
Time Agenda item Purpose
10 mins 1. Review actions of the last meeting ◼ Review action status
◼ Escalate issues as required
15 mins 2. Demand update (focus on exceptions) ◼ Review unconstrained demand
◼ Exceptions driven review of unconstrained forecast ◼ Review upcoming sales/marketing
◼ Overview of upcoming sales and marketing plans activity
◼ Major issues, including derived learnings ◼ Assign actions and escalate issues

15 mins 3. Supply update (focus on exceptions) ◼ Review constraints on demand

◼ Exceptions driven review of constraints to demand forecast ◼ Review alternative scenarios to
◼ Discussion regarding alternative scenarios to elevate constraint elevate constraints
situations, taking into account costs, service levels and flexibility ◼ Assign actions and escalate issues
◼ Special attention to: new products, slow movers, deletions and
obsolescence
◼ Major issues, including derived learnings
15 mins 4. Finance update (focus on exceptions) ◼ Review financial gaps
◼ Exceptions driven overview of gaps between constrained forecast and ◼ Review alternative scenarios to
financial plan elevate gaps
◼ Discussion regarding alternative scenarios to resolve gaps between ◼ Assign actions and escalate issues
constrained forecast and financial plan, taking into account costs,
service levels and flexibility
◼ Major issues, including derived learnings
10 mins 5. Review recent performance ◼ Review of lessons learned from
◼ Review recent performance for demand, supply and financial planning, recent performance
including assumptions made ◼ Assign actions and escalate issues
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action plan to and Proprietary
improve performance in future periods
Contents SOP Process

Demand Planning

Supply Planning

Financial Planning

Pre SOP Meeting

Excecutive SOP Meeting

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S&OP Meeting Overview
Overview Key inputs
◼ Constrained single ◼ Actions plan from
Objectives
forecast pre-S&OP
◼ Agree one plan with one set of assumptions & responsibilities ◼ Strategic plan ◼ Issues escalated
◼ Improve supply chain performance ◼ Financial plan from pre-S&OP
◼ Improve management visibility and control ◼ Agenda from pre- meeting
◼ Build a collaborative environment S&OP meeting
◼ Measure performance consistently
◼ Cascade consensus plan to wider organisation
S&OP Meeting
Meeting S&OP
owner President one
consensus
plan
Finance Demand Supply

◼ CFO ◼ SVP Sales ◼ SVP Logistics

◼ SVP Marketing ◼ VP Operations
Attendees ◼ Demand ◼ Supply
manager manager Key outputs
◼ One consensus constrained plan
◼ Head of Brand Planning
◼ One agreed remedial action plan with optimal
◼ President
supply solution
Monthly meeting ◼ Decisions to increase capacity / expedite
Timing and Monthly ◼ Agreed customer / account strategies
frequency Week 1
Create initial forecast
Week 2
Publish reviewed forecast for
agreement
Week 3
Supply Plan
Week 4
S&OP Review
Finance
Review
◼ Recommended approach for replenishment
Review with sales and build unconstrained Finalise changes
Analyse and enrich forecast Constrain the demand plan to create forecast Agree one consensus plan

NPI & promotion planning

plan to financial plan

◼
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Agenda for the monthly S&OP meeting
Monthly S&OP meeting
Time Agenda item Purpose
5 mins 1. Review actions of the last meeting ◼ Review action status
◼ Escalate issues as required
10 mins 2. Review last month performance (focus on exceptions) ◼ Analyse and apply lessons learned
◼ Measurement driven, including review of assumptions made: forecast
accuracy, service levels, performance to schedule/compliance to
supply and production plan, out of stocks, impact on profitability
◼ Major issues, including derived learnings
10 mins 3. Review of short-term plan (1-3 months, in weekly buckets) ◼ Make fact-based decisions to
◼ Exception based per division: constrains and gaps with supply plan, resolve issues
flexibility of the supply plan, major gaps (including financial impacts) ◼ Assign actions to resolve
that are not yet closed outstanding issues
◼ Decision making between alternative scenarios, taking into account
costs, service levels and flexibility
◼ Special attention to: new products, promotions, exceptional
seasonality, slow movers
20 mins 4. Review long term plan (up to 18 months in monthly buckets) ◼ Flag risks and set out mitigating
◼ Focus on the big issues and special projects actions
◼ Flag issues on flexibility and decide on alternative scenarios to elevate ◼ Make fact-based decisions to
constraints based on cost, service level and flexibility impact resolve issues/risks
◼ Review demand plan against financial plan and define actions to close ◼ Flag gaps with financial plans and
gap, with respect of long term profit plan set out mitigating actions
◼ Assess lessons learned from this meeting and define actions for
improvement

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 Session 7
Aggregate Operations Planning

SOP Implementation
Roadmap

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Maturity Profile Sales and Operations Planning

Operational Excellence
Performance Competence

• Capacity plan reviewed

Understanding quarterly
• Capacity strategy
• Capacity plan uses rolling provides key input into
3 year volume projection strategic business
Awareness and is linked to strategic planning
business plans
• Capacity plan integrated • Global and cross-
• Common report formats business unit capacity
with SOP cycle
for planning process planning
• Forward view of demand
Innocence extends beyond sales
• Online internal distribution • Online distribution of
of capacity plans. capacity plans to supply
plan horizon
• Schedule determined chain partners
• Focus on supply chain
jointly by customer facing • Master schedule
• No formal liaison between • Informal discussions perspective (production,
functions, production and reviewed and signed off
factory and customer between customer supply chain, materials)
logistics departments by operations board
facing functions (sales / facing functions and • Rolling 18-24 month
• Plan covers resources and • On line 'what if' modeling
business development / production planning horizon.
material supply used to assess
program managers) • Specific problems • Monthly meeting
• Scheduling discussions alternative solutions
• Production resolve addressed on an 'as (Production / customer
focus only on exceptions • Sales & Operation
problems with no occurs' basis facing functions) to
involvement from sales or • Informal sales forecast develop / review master • Time fences are adhered Planning (SOP) forum
marketing production schedule to used for driving forward
used to make planning
• Planning is not based on decisions (MPS) • Trade off options clearly selling and supplying
a sales forecast understood and assessed processes in an
• Key supplier schedules
on a quantified basis integrated fashion
• Planning is informal, are manually incorporated
intuitive, and not into plan. • Key supplier schedules are
documented incorporated in plan via
EDI / Internet capabilities.

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