Archive for September, 2008

Tuning Your S&OP Engine

How’s your business engine running? Use Steelwedge Strategic Services to help tune your S&OP process & drive improvements

If you’re like most people, you drive your car nearly every day. You’re very familiar with how to operate your vehicle and navigate your way. But do you know what’s happening under the hood? Can you anticipate problems coming before they actually manifest? For many of us, we entrust experts to maintain and repair our cars to keep us going.

In business, we’re driving hard every day. We depend on people, processes and technology to work seamlessly to deliver desired results. Do we always achieve those results? Sometimes, we fall short. Identifying the shortfall is not the hard part. Discerning ‘why’ and affecting change is the challenge.

Let Steelwedge be your expert mechanic. Leveraging deep domain experience and strong partnerships, Steelwedge brings best practices to life with focus on S&OP, demand planning, forecasting, supply planning and performance measurement. We assess your current state business processes, find potential improvement areas, develop action plans and help you get to where you need to be. We’ll even refill your wiper blade fluid!

Steelwedge strategic services begin with discovery. We focus on four key elements which illuminate current position and point to improvement opportunities.

Benchmarking: We approach each client with eyes wide open. Your business is unique and we want to understand what makes you special. At the same time, there are best practice methodologies that have helped numerous organizations achieve excellent results. We focus on documenting your current practices, results and metrics. These benchmark results and metrics are compared to industry best practices as well as your future results to measure improvement gains.

H2F2 Analysis: The H2F2 approach was developed by Steelwedge to dig deeply into the details of your data. This is not a theoretical review of generic data. This is your company data analyzed by the Strategic Services team. The result is a customized assessment which includes:

· Hierarchies – analysis of hierarchies and levels to be used for forecasting, planning and S&OP.

· History Data – Historical sales transaction data can tell a compelling story. We look for trends and make observations that help to focus attention in areas of greatest opportunity.

· Forecasting – Using your data, we generate multiple forecasts at various hierarchy levels. Our statistical engine uses a “best fit” model to choose the forecasting algorithm that minimizes forecast error and projects values into future periods.

· Forecast Accuracy – Higher forecast accuracy translates into lower inventory levels, improved customer service, increased sales revenue, increased margin and increased profit. It’s no surprise that forecast accuracy is getting more and more attention. Mean Absolute Percent Error (MAPE) is our primary tool to measure the difference between actual and forecast values. Setting appropriate offsets and frozen periods are keys to getting meaningful, actionable results.

· Conclusions – The H2F2 analysis captures a view into the organization that produces key insights which may be leveraged in the future state design.

Hierarchy Selection: Choosing the appropriate structure for interacting with data is critical. A “bottom-up” forecasting approach requires that users are able to interact with data at a very detailed, low level such as product model or SKU. A “top-down” forecasting approach requires a view of aggregated data such as product families or geographic regions. Leveraging our extensive experience, we assist you to select the optimal hierarchies and hierarchy levels to meet your unique business challenges.

Hierarchies represent the framework within which users will navigate to get to the specific slice of the data world they desire. A well-designed hierarchy structure will support field users and product managers who will need to view, analyze and collaborate at a detailed level. At the same time, top management will need to see rolled-up values at a much higher level. Intermediate levels afford other contributors to see necessary levels such as product family. Generally, companies gravitate to three hierarchies: product, customer and geography.

Hierarchies may exist within an ERP system and be transferred to an S&OP system. Another alternative is to create the hierarchy within the S&OP system. In this later case, it should still be possible to map the hierarchy to other systems such as ERP and CRM.

Optimal Forecast Levels: Statistical forecasts may be generated at any level of aggregation across any and all hierarchies. Generating a statistical forecast at the lowest detailed levels may introduce intermittent or sparse demand that leads to unstable forecast projections. At the other extreme, forecasting at a corporate level may yield stable forecast results but will certainly omit important mix details for products, customers or locations. We analyze statistical outputs to find the right balance between statistical accuracy and meaningfulness of forecast levels.

Leveraging the four discovery elements above, we’re in excellent position to construct a current state process. Then, using best practice guidelines and careful consideration of company goals, together we construct the future state vision. This vision may be readily attainable or a sizable undertaking. We work closely with you to isolate the gaps and develop a strategic roadmap.

In summary, we offer a practical, results-driven, quick-win, assessment and improvement program which incorporates the following:

  • Survey of the current environment
  • Analysis including H2F2, benchmarking, hierarchy design and optimal forecasting level
  • Identification of the gaps between current and best practices
  • Improvement Recommendations

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Monday, September 22nd, 2008 Sales & Operations Planning No Comments

S&OP Reporting: Key Requirements and Best Practices

S&OP continues to be the Holy Grail for manufacturing companies pursuing break through financial and operational performance. One of the key requirements for any successful S&OP process is reporting and analytics. While many technologies are available to provide flexible reporting, few applications are available that embrace Out-of-the-Box reporting and dashboards designed specifically for S&OP.

Steelwedge has worked with leading manufacturing companies to develop a rich set of S&OP dashboards, reports and metrics that represent the Best Practices. While certain companies and industries have their own unique reporting requirements for S&OP, the following reporting categories are critical to any successful S&OP Process.

1. Revenue & Margin Tracking

2. Forecast Accuracy

3. Inventory Tracking

4. Customer Service Levels

5. Demand Supply Balancing

Revenue and Margin reports that project into the future and track actuals against plan, are one of the most fundamental reporting requirements for any successful S&OP process. These reports are typically available in a variety of formats that include: quarter-to-date and year-to-date actuals versus targets, year over year comparisons of monthly, quarterly and year-to-date totals, rolling 3 month totals, and cumulative revenue and margin totals versus plan.

Forecast & Accuracy is another key reporting requirement that compares actual demand versus forecast. The most common measure used for measuring forecast accuracy is Mean Absolute Percent Error (MAPE). In addition, companies measure MAPE at different time lags to track how plans change and accuracy improves over time. Reports that capture planning assumptions at different time lags are commonly referred to as Waterfall Reports. Understanding forecast error over lead time is important in managing risk through the use of safety stock and flexible capacities. Finally, companies also track forecast bias to help mitigate and provide visibility to consistent under or over forecasting results.

Inventory Tracking is another key report in the S&OP process. Companies typically look at inventory from a variety of measures including: overall investment expressed in units and dollars, days or months supply, turnover, and inventory age reports. Most companies compare actual inventories against specific inventory target levels established to meet their desired customer service requirements at the lowest investment and cost.

Customer Service Levels can be measured in a variety of ways including: order fill rates, unit fill rates, order fulfillment lead time, order fulfillment reliability, backorder levels and duration. Increasingly customer service has become a lever for competitive advantage and therefore a key metric to track as part of the S&OP process.

Demand and Supply Balancing Reports are required to address the most fundamental challenge in S&OP around managing critical resources to resolve key constraints or shortages and excess supply. In this regard, companies typically look at a variety of demand supply scenarios including unconstrained, constrained, and optimized plans. Critical decisions around supplier contracts, allocation, overtime, plant closures and expansions are evaluated as part of these reports.

In addition to the functional reporting categories mentioned above, S&OP reporting also requires several unique capabilities including: multiple aggregations and views, scheduled and exception based reporting and automated “email” distribution. The ability to create different aggregate views of reports that span from planners to executives, Product Line to Business Unit, and across functional areas including sales, marketing, operations and finance is a key requirement for S&OP reporting. While this requirement is well understood, it remains to be one of the biggest challenges in implementing a successful S&OP process. Additionally, generating exception based reports that compare actuals against plan and alert planners and executives to performance that falls out of thresholds is a key requirement to ensure the most critical issues are being resolved in the day tot day planning process. Finally, creating an environment to automatically distribute scheduled and exception based reports through email is critical to enabling the most advanced S&OP process.

The Steelwedge application was designed as a single platform to support S&OP reporting across different levels of planning and across functional areas within an enterprise. The solution was architected provide a collaborative sales forecasting solution and an overlay onto existing functional applications needed to enable the S&OP process. Additionally, built in email enabled workflow allows for secure distribution of reports throughout the enterprise.

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Thursday, September 4th, 2008 Sales & Operations Planning No Comments

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