Sales & Operations Planning remains a talking point
Whilst the hype surrounding Sales & Operations Planning (S&OP) seems to have subsided, there are still many companies actively implementing the process. And as the first day – which focussed on Demand Planning – of the three-day Logicon congress at Schiphol (1st – 3rd February 2011) illustrated, there is plenty of room for improvement.
“The key to a successful S&OP process is a collective understanding of what this term actually means,” states Philippe Meouchy, Supply Chain Director Europe at Campbell. One important decision is the practical scope of the planning process. “The reason why the Titanic sunk is not so much the hitting of the iceberg, but the fact that the crew hadn’t spotted it in time.”
The S&OP process that Campbell was already working with was far from perfect. “It’s difficult to draw up a business plan for an existing S&OP process,” Meouchy admits. Once the finance department had been convinced that they had been good at forecasting there in the past, Campbell decided to train all of the planners in Europe. According to Meouchy, the reduction in lead times has had an enormous knock-on effect on stock. In the end, the whole project generated a saving of twenty per cent on stock.
Campbell’s finance department is responsible for the S&OP process throughout the whole company and synchronises the financial and sales data. Meouchy: “We have a financial buffer when reporting to head office in the US but we don’t have two different sets of figures. The sales are always unambiguous.”
Successful S&OP depends greatly on what is discussed during meetings. “Don’t discuss the numbers. Only discuss the assumptions they are based on,” he warns. “S&OP needs to take place in the same place as the discussions are held.”
Differentiated customer approach
According to Henning Reihe, Supply Chain Planning Manager Europe for Mars, the key to successful forecasting is a differentiated approach to product and customer classification. “You cannot take a ‘one size fits all’ approach for all your product lines – so there’s no need to give all of your products the same amount of attention. Focus on a particular number of customers and serve the rest with safety stock. Then take over the forecasting from one of your retailers, especially if you’re working with weak products.”
Reihe likes to fine-tune according to customer preferences: “The customers are the ones who pay our salaries. It’s important to look at the standard deviation versus the Sales Forecasting Accuracy for every customer. Focus on ten to twenty per cent of your items/customer combinations.”
One essential way of getting your forecasting within your S&OP process on track, is to use user-friendly software. “To eliminate the chance of human errors, have your supply chain planners use software for statistical forecasting,” recommends Reihe. Erik Brouwer, Director Supply Chain Management North-West Europe for sweet manufacturer Perfetti Van Melle agrees with this advice: “Give your staff their own responsibilities and empower them to achieve results. This is what we have done by implementing software from Every Angle in addition to our SAP Enterprise Resource Planning. A few years ago, we were using this user-friendly tool to generate weekly analyses. Now, the planners can track their results and achievements on a daily basis.”
5 tips for forecasting
Henning Reihe, Supply Chain Planning Manager Europe for Mars, has five practical tips for improving forecasting:
1. Only use hands when they will add value.
2. Automate parts of your forecasting to reduce the workload.
3. Differentiate to improve the planner’s efficiency.
4. Communicate: improve collaboration between internal and external accounts
5. Focus on forecast bias in order to lower stock and free up cash.