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Link to the first blog of this S&OP Blog series: Sales & Operations Planning – the most important KPI’s for the S&OP process  

 

Sales & Operations Planning is still of great interest for many companies in the consumer industry. On the demand side of the process there is a growing interest in how to leverage ePOS data, on the supply side, attention is focused on inventory optimisation processes.

Although a monthly process is almost universally adopted since it gives the best balance between being too slow to react to change and excess reactivity, more companies are looking for best practices on how to re-plan simply and rapidly outside of the full monthly S&OP cycle when dynamic change occurs. Gaps may need to be evaluated when they occur and so greater automation of the S&OP process is being demanded by many customers.

Whatever the level of efficiency with which we can re-plan, we are still faced with the question of what KPI’s and reports to review. Our first blog in this series looked at the full range of potential KPI’s that companies might use. I’ve been asked several times since what are the core reports and KPI’s for S&OP?

So let’s ask our independent expert Duncan Alexander from the boutique S&OP consultancy StrataBridge what he thinks.

Duncan Alexander

Duncan Alexanderis Consulting Director for StrataBridge the Sales and Operations Planning consultants.

 

 

Duncan, what are the essential reports and KPI’s for the S&OP?

There are thousands of KPIs and predictive reports that can be used in S&OP, and although we argue that you have to tailor your KPIs to your strategic direction, like you, I’m often asked “what are the absolutely critical reports and KPIs for S&OP”. So with the health warning that ‘it depends’ ringing in your ears – what could be considered essential?  

There are three types of reports and KPIs to be considered in S&OP. Firstly Predictive and Analytical Reports; secondly Key Performance Indicators (some of which may also be shown in the highest level strategic dashboard or balanced scorecard); and finally Process Control Indicators – the boring but important stuff for S&OP like adherence to deadlines, attendance at meetings etc. These Process Control Indicators will differ by business depending on many factors such as culture, level of systems integration, maturity of S&OP process etc. so will not be further considered here. Taking the classical 5 step StrataBridge S&OP model as our framework, what Predictive and Analytical Reports and KPIs should be considered as a minimum at each step? 

 

Step 1: Managing the Portfolio and New Activities 

Predictive and analytical reports:

  • 18 month activity plan – innovation and other business changes that will impact the business in future months.
  • NPD project portfolio analysis – graphs showing various cuts of the data in the innovation funnel: 1) alignment to strategy; 2) number of projects; 3) risk versus reward; 4) number of projects at each stage.
  • SKU portfolio analysis – 1) SKU pareto analysis showing SKU count versus cumulative revenue; 2) SKU optimisation proposals  – potential delists, potential changes from make-to-stock to make-to–order class etc.

KPIs

  • Number of kill decisions as a percentage of all gate proposals
  •  % of projects judged successful after post-launch review stage 

  

Step 2: Managing Demand

Predictive and analytical reports:

  • For each product family – Latest Forecast versus target, last year and last forecast in volume and financial terms. Supported by ongoing assumptions, changes to assumptions, risks and opportunities.
  • For each product family review of actual sales performance versus planned performance.

KPIs:

  • Forecast accuracy (weighted mean absolute percentage error)
  • Forecast bias (percentage error)
  • Slow moving and obsolete stock as a percentage of total finished goods stock.

 

Step 3: Managing Supply

Predictive and analytical reports:

  • High level production forecast showing by product family / key resource the future production plan in volume compared to planned demonstrated capacity over a minimum 18 month horizon.

KPIs

  • On-Time In Full delivery %
  • Inventory days or equivalent
  • Manufacturing conformance to item schedule.

 

Step 4: Integrated Reconciliation

Predictive and analytical reports:

  • S&OP graphs showing future volume forecasts of sales, production and resulting inventory for the total business and ALL product families over a minimum 18 month horizon.
  • S&OP predictive reports for ALL product families and the total business showing the latest year end forecast in both volume and financial terms, with supporting assumptions, changes since last month and risks and opportunities.

KPIs

  • Dashboard/balanced scorecard of strategic performance indicators covering the whole business.

 

Step 5: Senior Business Management Review

Predictive and analytical reports:

  • S&OP predictive reports for STRATEGIC product families and the total business showing the latest year end forecast in both volume and financial terms, with supporting assumptions, changes since last month and risks and opportunities.

KPIs

  • Dashboard/balanced scorecard of strategic performance indicators covering the whole business highlighting areas of concern and recommended action.

 

It is amazing how quickly the number of essentials adds up! S&OP although simple in concept is very difficult to implement well. Check this list of the essentials during your next S&OP cycle and if you can tick all the boxes, you’re doing a good job and can move on to adding more KPIs and reports that ensure your S&OP process is strongly aligned to your strategy. If you are missing some of these reports and KPIs, ask the question in your next S&OP meeting – “Are we missing something here?” 

Thank you Duncan! 

 

StrataBridge are a boutique consulting firm focused on helping clients across the globe bridge the gap between strategy and operations. Dick Ling, co-founder of StrataBridge introduced the concept of Sales and Operations Planning in the late 1980s in his book ‘Orchestrating Success’, and StrataBridge people have focused on S&OP and supporting processes such as forecasting and new product development ever since. From high level planning through to detailed design, implementation and execution issues, StrataBridge will help educate guide and coach people to deliver sustainable change.” www.stratabridge.com

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  1. Vijay Vijayasankar
    I believe that S&OP should be extended to also include Marketing data. Here is my rationale – The general idea is that you want to sell for more money than it takes for you to produce stuff. You reduce costs by things like optimizing inventory etc. How do you increase sales? Common strategies to increase demand are by decreasing price, and by increasing awareness. Increasing awareness (and hence demand) is the domain of marketing – and one needs to compare marketing spend with S&OP data to get the full picture.

    On the flip side, this is not always easy from a data perspective. Example: Sales and operations expenses can some how be figured out at a low granularity of data  – like an MM number. But Marketing is typically done at a higher level – like at a brand. And it is not uncommon in certain industries to have the same MM number in different brands. This makes comparing marketing spend with S&OP data rather difficult.

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