Supplier development
project
Extended Sales and Operation Planning (ES&OP)
- customer and supplier
Operated by Valcon & Implement
28.
Aug.
15
Supplier development
project
28.
Aug.
15
What is S&OP ?
Sales and Operation Planning can
be described as:
Supply
Demand
”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
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Supplier development
project
Purpose of the S&OP process
To enable growth
To reduce cost
and working capital
To reduce iterations and workload
• Improve delivery service
• Focus on opportunities also outside the forecast
• Capacities and resources are in place when needed
• Balancing demand and supply also from a cost effective perspective
• Differentiated planning strategies, planning and performance level
• 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
28.
Aug.
15
Supplier development
project
28.
Aug.
15
S&OP in the planning hierarchy
Planning
buckets
Yearly
Monthly
Process
cycles
Strategic planning
up to 5 years
Sales & Operations Planning
Focus
level
Yearly
Product group,
capacity group
Monthly
Product group,
capacity group
Weekly
SKU level,
capacity level
Weekly/daily
SKU level,
individual capacity
2-18 months
Polices, rules
and parameters
Weekly/
daily
Tactical planning
1-3 months
Weekly/
daily
Operational planning
0-6 weeks
Opportunities/
actions
Commercial strategy (markets,
customers, products)
Requirements for new production
facilities
Actual planning data
and capabilities
New customers/development
of existing customers/campaigns
Increase/decrease in production
capacity (shifts) or subcontracting
Build up/reduce inventory
Levelling demand/prioritisation between
orders
Overtime/time off in production/
temporary employees
Build up/reduce inventory
Prioritisation between orders
Overtime/time off in production
Build up/reduce inventory
4
Supplier development
project
28.
Aug.
15
Customer
Extended S&OP process
Customer demand planning
Internal
S&OP
process
S&OP balancing
Signed off
purchasing forecast
or takt
Plans and actions
Implement plan
and actions
Supplier
Supplier capacity planning
Review critical
capacities and
resources
Identify issues
and make
scenarios
Capacity and
resource gaps
and scenarios
Decision
(S&OP)
meeting
Implement plan
and actions
Supplier inventory planning
Review raw
material and
semi-finished
stock vs. target
Identify issues
and make
scenarios
Inventory gaps
and scenarios
Common demand and
supply plan and agreed
actions
5
Supplier development
project
28.
Aug.
15
Framework for ES&OP meeting
Practicalities
Participants
• Decision makers customer e.g.:
• Purchasing director/manager
• Planning director/manager
Frequency: TBD
Horizon & aggregation level: TBD
Time and place: TBD
• Decision makers supplier e.g.:
• Sales director/manager
• Planning director/manager
• Production director/manager
Purpose
Ground rules e.g.
The purpose of the ES&OP meeting is
to:
• The S&OP presentation and
recommendations are sent to
participants min. 2 days before the
meeting
Agenda
• Questions regarding data validation
not to be discussed at the meeting
• Follow up on actions from last
meeting
• Mandate to be handed over if not able
to participate
• Update on market trends, market
share and market requirement
• Decisions are made in the meeting
(not before or after)
• Last month sales, forecast and
development incl. large orders
Input
Output
• Customer purchasing forecast
• Balanced demand and supply plan
and list of agreed actions
• Capacity and inventory issues and
scenarios
• 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
• Supplier capacity and inventory
issues and scenarios
• KPI measures and gaps
• Agreed action to close performance
gaps
• New Product Introductions
• Decisions and actions
• KPI update, deviations and actions
6
Supplier development
project
28.
Aug.
15
Implementation of ES&OP process
Policies and rules
How 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 level
Horizon long enough to cover reaction time on ramp-up and down on capacities,
resources and inventory
Focus level detailed enough to uncover issues
KPI measures and targets
Should cover QDC (quality, delivery and cost)
What to measure, how to measure it and who to collect data
Differentiation on product groups and/or A, B and C
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
Get started and get some
learning!
Process and meeting
Who prepares and leads S&OP meetings?
Who owns and adjusts service level agreement?
Who owns the process and continues improvement on the process?
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