The Aerospace & Defense Forum Arizona Chapter January 12, 2017 - PDF document

The Aerospace & Defense Forum Arizona Chapter January 12, 2017 1840 West 1 st Avenue Mesa, AZ 85202 www.phxlogistics.com sales@phxlogistics.com INTRODUCTION TO SALES, INVENTORY AND OPERATIONS PLANNING (SIOP) Thank you to our Chapter Host: Thank you to our Chapter Sponsor: 1

The Aerospace & Defense Forum Arizona Chapter January 12, 2017 PRESENTATION AGENDA • SIOP Definition • SIOP process overview • Attributes and objectives of SIOP • SIOP implementation challenges • Foundation components for successful SIOP • Benefits of SIOP (Resources: APICS/TF Wallace and Company) Sales, Inventory and Operations Planning (SIOP) Definition A process to develop tactical plans that provide management the ability to strategically direct its businesses to achieve competitive advantage What is Sales, Inventory and on a continuous basis by integrating customer- focused marketing plans for new and existing Operations Planning (SIOP)? products with the management of the supply chain. The process brings together all the plans for the business (sales, marketing, development, manufacturing, sourcing, and financial) into one integrated set of plans. APICS Dictionary , 14th edition 2

The Aerospace & Defense Forum Arizona Chapter January 12, 2017 SIOP – A Balancing Act Supply Demand Resources/ Actual Inventory Orders Forecasts Capacity Orders Supply Demand SIOP Process Demand and Supply and Volume and Mix F Business Plan O R E R VOLUME C E A S SIOP S O D S T U Sales & Operations E I R U Marketing Plan N C Plan M P G E & A P P N L L D PRODUCT MIX A E D Y Master Scheduling N M N A I N N D MRP G M G M Plant and Supplier T Scheduling Adapted from Wallace, Sales & Operations Planning, 3rd ed. , p. 207 3

The Aerospace & Defense Forum Arizona Chapter January 12, 2017 SIOP Processes Demand Forecast Product/ SIOP Brand Plan Demand Demand Supply Marketing Plan Management Planning Planning Sales Plan Production Resources Inventory Distribution Production Facilities Investment Transportation Plan Planning Targets Master Labor Channel Warehousing Scheduling Planning Distribution Detailed Labor and Machine Shipment Planning and Equipment Planning Plan Scheduling Major Attributes of SIOP Connects business planning to tactical planning Balances supply and demand at the product family level Plans at the volume level using aggregate time buckets, not the individual end-product mix level Enables in a better understanding of the customer and market opportunities and company capabilities Involves sales, marketing, manufacturing, logistics, finance, and other departments Is a demand- and strategy-driven process 4

The Aerospace & Defense Forum Arizona Chapter January 12, 2017 Objectives of SIOP Supports and measures the business plan Ensures that the strategic plans are realistic before being passed to tactical planning Enables the organization to effectively manage changes to plans (AKA Re-planning Process) Provides for the effective management of finished goods inventories and order backlog to support customer service Enables performance measurement to identify when actual performance has deviated from the plan Enables the organization to be focused, aligned , and engaged . Common SIOP Implementation Challenges 58% Lack of strategic coordination among departments Insufficient interaction and 58% involvement among groups Lack of common vision or 51% purpose Lack of commitment from 49% top management Lack of technology and 42 % belief in existing business systems 37 % Inadequate communication and soft skills 33 % Insufficient training or skill in data analysis Source: APICS, “Sales and Operations Planning Practices and Challenges” 5

The Aerospace & Defense Forum Arizona Chapter January 12, 2017 Foundations of Successful SIOP SIOP Leader- Tiered Integrated Grids Perfor- ship Deep Planning Sub- and mance Account- Analytics Horizon Process Graphs Metrics ability Change Management Continuous Improvement #1 – Tiered Planning Horizon Long-range plans, aggregate financial Strategic data Medium-range plans, product family Tactical volume data Short-range plans, detail product mix Operational data for day-to-day planning Key benefits: • Linkage of strategic corporate goals to SIOP processes • Build coordination and alignment of demand and supply management functions and corporate business objectives • Provide ease of consensus building between corporate goals, demand objectives, and supply objectives • Ability to step away from day-to-day management and see the big picture 6

The Aerospace & Defense Forum Arizona Chapter January 12, 2017 #2 – Integrated Sub-Processes Corporate Plan Demand Supply Plan Plan Sub-processes Inventory/ Marketing Production Resource Logistics Brand Sales Plan Plan Plan Plan Plan Plan New products/services, new market Production strategy, capacity planning, segments, price/promotions, demand inventory targets, distribution channel forecast, Internet sales, brands design, logistics plan SIOP Process #3 – Leadership Accountability Makes decisions on critical issues, authorizes Executive spending for production, reviews financial plan to SIOP team business performance Sets top management expectations, authorizes Executive necessary resources, and clears obstacles sponsor Leadership accountability answers the Leads the monthly SIOP planning process, manages SIOP process question “Who are the owners of the conflict, and guides the SIOP teams toward owner SIOP process.” consensus Determines the sales forecast, pricing and Demand promotions. Researches the marketplace, manages planning team sales, products, and customer service Sets production plan to meet demand, details Supply production rates and capacities, validates resource planning team availability Makes decisions on demand and supply balance, Pre-SIOP team resolves problems, identifies issues, develops alternatives, sends findings to executive SIOP 7

The Aerospace & Defense Forum Arizona Chapter January 12, 2017 #4 – Deep Analytics The data and the application of analytics is at the heart of SIOP Analytics-based reporting tells the SIOP planning teams: Where they are What actions need to be taken and driven down into tactical and operations SIOP processes What results and trends are emerging from their decisions What corrective steps do the SIOP planning teams which to take #5 – Performance Metrics Performance metrics drive accountability and ownership for SIOP objectives Performance metrics make the SIOP process rigorous, disciplined, and factual so executives gain confidence in the integrity of the SIOP process Tiered approach: supply chain performance example Tier 1: Forecast variance SC cost (%COGS) Logistics costs Inventory carrying costs Tier 2: Resource utilization Production plan execution (%) Fill rates Days of inventory on hand Tier 3: Obsolescence cost Material, l abor, & overhead costs 8

The Aerospace & Defense Forum Arizona Chapter January 12, 2017 #6 – Grids and Graphs Current Past Periods Forecasted Periods Period SALES May January February March April June July August Sept Oct FORECAST 2,000 2,000 2,000 2,050 2,100 2,100 2,100 2,150 2,150 2,150 ACT SALES 2,150 1,950 2,200 2,150 DIFF. MO 150 -50 200 100 CUM 150 100 300 400 DIFF. % 7.50% 2.50% 5.00% 4.97% PRODUCTION PLAN 2,000 2,000 2,050 2,100 2,200 2,300 2,300 2,300 2,300 2,300 ACTUAL 1,950 2,000 2,000 2,150 DIFF. MO -50 0 -50 50 CUM -50 -50 -100 -50 DIFF. % -2.50% -1.25% -1.65% -0.61% FINISHED GOODS INVENTORY PLAN 1000 1000 1050 1100 900 1100 1300 1450 1600 1750 ACTUAL 950 1000 800 800 DIFF. MO -50 0 -250 -300 CUM -50 -50 -300 -600 DIFF. % -5.0% -2.5% -9.8% -14.5% DAYS ON HAND 9.7 9.1 7.4 7.6 8.6 10.5 12.1 13.5 14.9 #6 – Grids and Graphs (cont.) Promotional Sales 2,500 2,000 Machine Forecast Down Actual Sales 1,500 Prod Plan Actual Prod 1,000 Inv Plan Actual Inv Target Inv 500 0 January February March April May June July August 9

The Aerospace & Defense Forum Arizona Chapter January 12, 2017 #7 – Change Management “An SIOP project is 60 percent change management, 30 percent process development, and 10 percent technology”* Effective drivers of change management: Effecting acceptance towards ownership and restructuring of roles and responsibilities Developing necessary adjustments to company culture and capabilities Training employee’s around the appropriate changes Winning support of employees with persuasiveness about the appropriateness of the adjustments Iyengar and Gupta, “Building Blocks for Successful SIOP, ” Supply Chain Management Review, Vol. 6, No. 17, 2013, 17 #8 – Continuous Improvement “A never-ending effort to expose and eliminate root causes of problems: small-step improvement as opposed to big-step improvement.” APICS Dictionary, 14th edition Continuous improvement is important because: Ideas for process improvement come from the SIOP team participants – hence more realistic SIOP enables continuous monitoring, feedback, and sharing of improvement ideas Once SIOP teams see their ideas are heard, they will continually seek ways to improve their own performance Encourages employees to take ownership and reinforces team working, thereby improving level of motivation 10