Page 354 - Orlicky's Material Requirements Planning

CHAPTER 20 Sales and Operations Planning 333

FIGURE 20-3 Past Months Future Months

Product family Sales –3 –2 –1 1 2 3 4 5 6 7 8 9 Ann
volume plan. Planned 1200 1200 1200 1200 1200 1200 1200 1200 1200 1200 1200 1200 14400
Previous 1211 1197 1200 1200 1200 1200 1200 1200 1200 1200 1200 1200 14408
Act/Proj 1211 1197 1251 1125 1250 1250 1250 1250 1250 1250 1250 1250 14890
Diff 11 –3 57 25 50 50 50 50 50 50 50 50 490
Cum Diff 11 8 65
Production
Planned 1200 1200 1200 1200 1200 1200 1200 1200 1200 1200 1200 1200 14400
Previous 1195 1202 1200 1200 1200 1200 1200 1200 1200 1200 1200 1200 14397
Act/Proj 1195 1202 1197 1200 1200 1400 1250 1250 1250 1250 1250 1250 14894
Diff –5 2 –3 0 0 200 50 50 50 50 50 50 494
Cum Diff –5 –3 –6
Inventory
Planned 600 600 600 600 600 600 600 600 600 600 600 600 600
Previous 584 589 589 589 589 589 589 589 589 589 589 589 589
Act/Proj 584 589 529 504 454 604 604 604 604 604 604 604 604
Diff –16 –11 –71 –96 –146 4 4 4 4 4 4 4 4
Cover (Wks) 2.06 2.07 1.83 1.75 1.56 2.08 2.08 2.08 2.08 2.08 2.08 2.08 2.08

S&OP, THE UNIFIER—TRADITIONAL S&OP CHALLENGED

Following the initial euphoria resulting from getting control, enthusiasm waned, and tra-
ditional S&OP started to be seen as a logistics project, merely demand and supply vol-
ume planning focused on year end only, with too much detail (stock keeping unit/pack
level/line item forecasts going out for 12 months). The dream that S&OP was the unifier
faded, and it started to be seen as a middle-management logistics responsibility. Demand
planners, often reporting to the supply organization, owned the numbers rather than
sales and marketing management, and the process was designed not to cope with the
impact of increased innovation and customer responsiveness that many organizations
were driving. It appeared at the time that S&OP was relevant only in organizations with
limited innovations committed to a cost leadership strategy.
A single set of numbers was a supply-chain dream, but it was an obstacle to other
functions. Sales, marketing, and finance were more interested in a range, doing their own
financial scenario planning in separate activities from supply. Executive management
manages uncertainties, probability odds on events planning, and ranges of numbers.
Without robust financial linking, volume forecasting became a lower priority than
financial forecasting. Sales, marketing, and general management were measured on finan-
cial results, and manufacturing and the supply chain were measured on operational targets
based on volume predictions, where new activities were not well forecast (Figure 20-4).
The two vertical arrows illustrate the point: Whatever the output is from S&OP (thin
upward arrow), the weight carried by the budget number (thick downward arrow) takes
precedence, overriding any decisions made in S&OP. Because the operational number for
the supply chain was lower in priority than the financial number and very often was dif-
ferent, the S&OP meeting became the forum where supply people grumbled about fore-
cast accuracy against their single set of numbers—the impossible dream. It was becom-
ing apparent that getting a single number from a pre-S&OP meeting where people had