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Sales and Operations Planning

This case study relates to the deployment of S & OP for a Japanese HQ manufacturer, with a turnover of around
$2bn. The company has manufacturing operations in Japan, France, South Africa, Sierra Leone, Brazil, Chile and the
USA. Sales and distribution operations exist in around 90 countries. The companys products are both made
internally and sourced from third party suppliers. They are sold globally, in a wide variety of retail and wholesale
markets.

The company had implemented sales and operations planning initially at plant level in 2007-8, but the deployment
had been variable in sustainability and quality. In 2009, it was decided to make supply chain operations more global,
to consolidate supply and procurement functions, and to implement robust and relevant S & OP processes to
integrate and align all worldwide operations. The company uses SAP R/3 and APO systems, which were used as the
platform for the new processes.

The new S & OP processes achieved significant business improvements in customer service, working capital and
EBITDA. Early benefits enabled the programme to pay for itself before final deployment. In addition, the project set
in place an enduring structure and culture to enable continuous improvement.

Key Benefits achieved

The project achieved a wide range of business benefits, including:

Inventory reductions of 10-40% by SKU

Capacity utilisation improved by 15% at key plants
Procurement savings on 5%-15% by material from consolidation
Customer service performance up by 18%
Customer complaints down by 90%
 Reduction of third-party outsourcing for manufacturing by 50%
Number of warehouses planned to reduce by 30%

Enablers

The results of the project derived from a number of key enablers developed with the client team:
A common definition and understanding of sales and operations planning
Consolidation of separate departmental planning data to provide a single business planning base for each region,
as appropriate
A supply chain planning strategy which aligned data, calendars and meeting content across the business
A planning framework to standardise processes across the business.

Working with the appropriate teams, we developed the detail required for implementation, such as:

With the sales and supply organisations, to drive differential service levels and prioritisation through a robust ABC
product segmentation.

We developed a new set of KPIs, with consistent definitions and clear accountabilities. These provided early
quick wins and benefits as the organisation quickly became focused on improvements consistent with business
strategy and goals.

With the operations, to ensure a higher degree of data quality and integrity in the existing systems, and to ensure
information was shared between groups on a timely, complete and consistent basis. This provided more value from
existing IT, especially the SAP R3 and APO systems.

We helped to structure the demand planning processes and (system) hierarchies to enable the new global
procurement and sourcing teams to manage materials, ingredients and packaging more efficiently.

Approach

During the course of this project, Total Logistics provided:

Programme management
Leading Governance processes
Change management
Education and training
Discovery and analysis
Process improvement
 KPI identification

Our approach to the project followed 5 key steps:

1. Workshops to re-position S & OP

2. Data consolidation
3. Discovery phase
4. Develop supply chain planning strategy and framework
5. Communication and roll-out

Initial Workshops

The initial workshops enabled all stakeholders to hold a common and consistent view of what sales and operations
planning best practice embraces. This was particularly important in the context of the limited effectiveness of earlier
implementations.

S & OP provides a forward-looking, globally integrated set of processes to align and synchronise value chain
strategies and to enable commercial, supply and financial plans and decisions to be optimised, whilst jointly
managing opportunities and risks to keep demand and supply in balance.

Data consolidation

We highlighted areas of discrepancy in

planning data and emphasised the need
to work from one set of numbers at local,
regional and global levels. This ensured
a consistent basis for future decision
making, and that sales and operations
planning is aligned to another budget,
planning and review processes.

Discovery phase

Having ensured a solid platform to agree on the basis of the approach, we commenced the initial discovery phase.
Some of the issues this highlighted were:

Incomplete and inconsistent demand signal - various units of measure, some countries had incomplete data,
different plan horizons, no relationship to a bill of materials, a lack of understanding of the key drivers of the demand
signal.
Materials and packaging bought piecemeal at local and regional levels, not optimising sourcing and negotiating
power.
Inventory levels not aligned to demand signals, with frequent impact on service levels.
No global capacity visualisation, inhibiting opportunities to optimise asset utilisation and improve production
efficiencies.
The business largely operated on a make to order basis, which was not applicable to the target service levels of
specific products and markets.
IT systems were not standardised globally.
S & OP reviews were operational discussion meetings. They were not strategic, forward-looking or decision-
making meetings.
An inappropriate agenda for S & OP reviews. These were operational discussion meetings, not strategic, forward-
looking, decision-making meetings.

Supply chain planning strategy and framework

A clear supply chain planning strategy was developed, as well as clear supply chain policies, rules and approaches.
Emphasis was placed on the definition of the appropriate policies and processes for local, regional and global levels
so that they aligned and were relevant.

The objectives of the sales and operations planning framework were to:

Drive improvements to procurement,

materials planning, working capital
improvements, global capacity
management, and strategic adjustments
to the supply chain
Ensure a robust process, built upon an
improved, consistent and complete
demand planning process
Leverage existing systems (SAP, SAP
APO, iScala, ForecastPro, Cognos) and
improve their use and deployment to support planning and S & OP
Provide a clear set of processes to align and integrate S & OP at local, regional and global levels
We adopted a 4 step framework, focused on providing a complete and consistent view of demand, underpinned by
improved demand planning.

Communication and roll out

In order to ensure adoption of the

strategy, we worked with key personnel to
provide education and coaching to deliver
improvements.
This platform was communicated across
the business from the outset to get a
common understanding of the key
participants, process, areas of scope and
outputs of every level of the organisation.
We were then able to align planning
calendars, roles and responsibilities,
meeting agendas, and key objectives.
The framework, which received
considerable internal support at all levels. The relationships between all levels was always clearly presented to help
to understand; as shown in the example below:

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"We wanted to bring

in external expertise
to help us deliver a
strategic upgrade to
the management of
the site. We looked
at several supply
chain consultancies
but it was only Total
Logistics that was
able to grasp our
brief and
demonstrate both
the resources and
the major
implementation
experience that we
were looking for. It
has been a textbook
consultancy project
that has delivered
everything it set out
to do. What's more, it

came in on-time and

 came in on-time and
on-budget."

Shell
Technical Services Manager

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