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Sales and Operations Planning Las Vegas 2011
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Member 2009/10
Sales and Operations PlanningSupported by Demand Management Capability
Keith Holliday- Director Corporate Supply Chain & Operating Excellence
Sonoco Products Company
Purpose
The intent of this discussion is to share our approach to improving a critical business
process – The Supply Chain
Sonoco Products has been a traditionally organized manufacturing company with
functions organized under a general manager with P&L accountability
The supply chain was viewed like any other function – a set of practices to be
employed in support of making product and a cost to be reduced
In 2007, the company realized that the end to end process would not improve as much
as required by traditional cost reduction methods and it was determined a cross
functional process approach would be needed
Sales and Operations Planning was chosen as the process change
starting in our paper based supply chains
Eleven Decades of Packaging Leadership
Founded 1899 in Hartsville, S.C.
Diversified provider of consumer and industrial packaging,
and services
$4 billion in sales
312 operations in 35 countries
17,000 employees
Products sold in 85 countries
Global PlasticsIndustrial
Converted Products Primary Materials
Product Lines
Global ServicesGlobal FlexiblesGlobal Rigid Paper
and Closures
Product Lines
What Makes a Lean Supply Chain Lean?
Low Inventory
Synchronized Flows - Information, Materials, Dollars
Optimized logistics full truckload, on time and in full
Perfect quality, perfect transactions
Demand pull from the customer back
All of these objectives require a good view of Demand
S&OP was a Part of a Larger Transformation Effort
Conflicts between disciplined planning and agile response
Traditional production to a forecast with set lead time agreements with customers (and suppliers)
Demand driven pull, short lead time processes emphasized in lean supply chains
Sonoco Products has blended the use of forecast based supply chain
practices with demand pull processes to create agile supply chains
Collaborative demand management
Sales & Operations Planning (S&OP)
Lean transformation and cash/ cost optimization
Industrial Products- Supply Chain
Paper
Manufacturing
Converting
Tubes & Cores
Composite Cans
S&OP Impact in Push and Pull Supply Chains
Conversion (Pull from End Customer) Many customers, short 2-3 day order fulfillment lead time
Inventories concentrated on raw materials with primarily make to order FG
Postponement strategy with many small facilities close to customer
Forecast effort is on raw materials to prepare supplier
MAPE on raw material demand averages ~5-10%
Paper (Push from Forecast) Runs integration process through monthly S&OP cycle
Integrates input from 3 internal divisions and external sales
Operates a forecast based push process for asset optimization
Each mill tracked weekly on Perfect Order performance
ABC categorization for inventory strategy & lead time promise
Installed a Standard 5 Step Monthly Cycle First
Supported the Process with
spreadsheets and trend analysis in
Minitab
Displayed using a web based display
tool
Built support for and credibility for the
process, then looked for a software tool
to improve integration and analysis
10
STRATEGYBUSINESS PLANPERFORMANCE
STRATEGYBUSINESS PLANPERFORMANCE
DemandReview
SupplyReview
PortfolioManagementReview
ManagementBusinessReview
System follows Process!
A cross functional selection team selected Logility
Decision Criteria
Leverage a suite of integrated supply chain tools that would allow us to do more
than Demand forecasting and analysis
Logility offered a unique combination of integrated supply chain modules, relatively
simple administrative requirements, and solid statistical capabilities
Project implementation was projected to be 3-4 months - actual start up of Demand
Planning was Jul 1, 2009 after authorization Feb 1
Total Cost of Ownership
How we use the System
Forecast demand from 3 internal divisions and external trade sales
Internal divisions add knowledge on upcoming market changes
Sales collaborates to adds knowledge on external customer changes
Impacts
Sales has demand visibility and can potentially shape demand
Rough Cut Capacity Planning highlights the supply/demand imbalances ahead
11
12
Example
from the
December
S&OP
Demand
Meeting
S&OP is Contributing to Improved Performance
Perfect Order = (On time %) * (in full %) * (Perfect Condition %) * (Invoice Accuracy %)
As demand has filled plant capacity, perfect order performance has suffered and expedited freight has increased
Cash Gap improved 14 days (full year average) between Dec05 and Mar10
As the recession hit, cash emphasis continued to drive inventory down and sustain gains in AR & AP
0
10
20
30
40
50
60
2005 2006 2007 2008 2009 2010
Now ~90%
Perfect Order %
Cash Gap Days
-27%
13
-14 Days
Key Takeaways
Lean pull systems are most effective in combination with data driven,
disciplined supply chain practices - Push Pull integration
S&OP provides the cross functional process to make decisions based
on the best demand information available
Demand Management is critical to prepare to meet customer
requirements
Customer information must be supported by statistical view of Demand
There is too much data and the world moves too fast to manage with
spreadsheets
Lean pull systems provide the response capability to deal with the
remaining error
www.logility.com
© 2011 Logility, Inc. Proprietary & Confidential
Innovative Reliable Proven
• Global Provider of Collaborative Supply Chain Software Solutions
40+ years of supply chain expertise
• Over 1,250 customers in more than 70 countries
• Comprehensive Best of Breed S&OP and SCM product suite
• Long-term customer relationships
• Deep Domain Expertise in development, implementation and support
• Financial and Organizational Stability
www.logility.com
© 2011 Logility, Inc. Proprietary & Confidential
The Hierarchy of Supply Chain Metrics
Supplier
Quality
Supplier
On-Time
Purchase
Costs
Direct
Material
Costs
RM
Inv
Cost
Detail
Production
Schedule
Variance
Plant
UtilizationWIP + FG
Inventory
Order
Cycle
Time
Perfect
Order
Detail
DPO DSOInventory
Total
Cash-to-Cash
Perfect
Order
SCM
Cost
Demand
Forecast
Source: AMRResearch
What It Is What It Tells You
Demand Visibility Perfect Order Predictor
Responsiveness
Cost/MarginsPerformance Tradeoffs
Cash-to-Cash Cashflow Health
Customer v. Supplier
Operational
Effectiveness
Root Cause Analysis
Surgical Intervention
www.logility.com
© 2011 Logility, Inc. Proprietary & Confidential
S&OP Success Factors
• Ongoing routine S&OP meetings
• Structured meeting agendas
• Establishing TRUST in the numbers and people from various
departments
Cross-functional participation
Participants empowered to make decisions
Pre-work to support meeting inputs
• An unbiased baseline forecast to start the process
• An unbiased, responsible organization to run a disciplined process
• Internal collaborative process leading to accountability/consensus
• Shared metrics across key business areas
www.logility.com
© 2011 Logility, Inc. Proprietary & Confidential
What Does Good Look Like?
Stage
I
Reacting
II
Anticipating
III
Collaborating
IV
Orchestrating
Balance:
S&OP
Goal Alignment Development of
operational plan
Demand and Supply
matching
Profitability Demand sensing,
shaping and a
profitable demand
response
Frequency Monthly Monthly Monthly As Needed
Metrics Frequent changes.
Each function has
their own metrics
with little alignment
Consistent metrics,
but not all players
equally own the
metric
Shared and
consistent metrics
Shared metrics with
an outward focus on
the market
Ownership Single function Multiple functions,
but not the entire
organization
Marketing and sales
own the forecast, the
organization owns
the process
All functions are
equal partners in
demand-shaping
activities
S
OP
S
OPS
OPS
OP
Average Leaders*Source: AMR Research
www.logility.com
Thank You
