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Posts Tagged ‘s&op’

When Not All ERP Implementations Are Created Equal…

January 7th, 2013 Comments off

As a Finance leader, one of the projects you can always count on having to lead, or at least becoming a key stakeholder in, is the implementation of an ERP program. For myself, I’ve been “lucky” enough to participate or lead the implementation of Fourth Shift, MAS-200, Oracle, and most recently the global SAP initiative with DC Shoes and Quiksilver. All of those projects were with companies that were relatively mature, had established revenue streams, and long histories to contend with in the implementation. However, with a start-up, the rules are entirely different and there’s actually a slightly higher degree of difficulty.
With the SAP implementation at DC/Quiksilver, there was not only the history to deal with, but the “democracy” of finding a solution that everyone could agree on. Not to mention, we also had to go through the process of outlining our processes for the consultants, which up until that point, were mostly undocumented. That SAP implementation became more of an S&OP project as we found ourselves scrutinizing internal process more than the ERP systems we were entertaining as solutions. Nonetheless, there was significant history that played a key contributor in finding the proper solution for our business.

For a start-up, what do you have? Yes, you might have a business plan, but at that point, it is basically still a vision. A vision that does not have a definitive, or at least realized, revenue streams, established & matured expense structures, or even the functional area titles that have been tested and affirmed. While the business plan will be the 95% version and the blue print everyone refers to, it is still subject to change…and will change. That’s the one level of certainty in a start-up. With that in mind, you are then tasked with defining your needs and the vision of the company to the consultants. You need to be able to take an honest look, while understanding the business well enough, lead the consultants through the process and outline your specific needs, not just in the current time, but for the needs your business will have 2-5 years down the line.

Your solution will not be based on what platform is offering the best end of year discount and implementation package, but the best solution for what the business will need and the ability to accommodate the growth and properly report on its activities. At a start-up, you better be able to honestly assess what the needs of your company are down to every level or you shouldn’t be in the position. At a start-up, you won’t have a team of consultants doing the heavy lifting…it’s going to be you. You’ll be the one building the import files, building the vendor files, and configuring the general ledger structure to report at the desired level of detail. You’ll be the one defining the customer and product hierarchies for your management reporting.

It’s definitely a much more challenging task than an implementation for an established company. But then again, that’s what makes life at a start-up so much fun and a test/testament to what you’ve really been doing during your career.

Thanks for reading…

Jeffrey Ishmael

S&OP, Inventory Levels, A/O, & Your Forecast….

October 29th, 2009 Comments off

            Lately we’ve started getting back into the heart of the earnings season and the scheduling of Quarterly calls to discuss results. With a keen focus on the Retail and Apparel sector, it’s been interesting to hear the shift in planning for many of the manufacturers.  Whether right or wrong, I’m hearing a consistency in the approach that we are taking, at my own company, relative to our peers in the industry. There’s clearly been a shift towards tightening the gap between inventory planning commitments relative to the PO commitment on the part of customers. With a decrease in PO commitment by customers, their shift to a reliance on A/O for the Holidays, how’s a manufacturer to plan if retailers are planning flat growth but PO submissions are noticeably down?

 

            Although this was not the quandary we were dealt at MGE, we had other significant challenges that forced us to implement a comprehensive Sales & Operation Planning initiative aimed at improving our supply chain, our demand & supply planning, as well as develop the indicators that would be used in the future to measure our success. For MGE, we were fortunate enough to have a team that believed in the potential of the initiative, but the support & involvement of our global executive team (ok…mandate) in the process. It was also a huge undertaking for our company due to the necessary personnel that needed to be involved. The scope of the project was truly impressive.

 

            However, most fail to appreciate the scope of such a process. “Oh…interesting – a new Sales & Operation Planning process. That must be some work….” Now there’s a simplistic view.

 

Let’s really break down what our S&OP process entailed:

Ø  Necessary involvement on the part of Sales & Marketing, Manufacturing, Product Design, Finance, and Planning & Logistics.

Ø  Development of Weekly, Monthly, and Quarterly planning schedules for all key areas.

Ø  Dissecting planning down to the levels of Lines of Business, Product Segment, Product Families, SKU’s, etc.

Ø  Identifying all the key variables that would affect the process, which included raw material lead times, manufacture lead times, freight times to key markets, processing times at destination port, etc.

You can quickly see that this is an incredibly involved and detailed process that will affect every area of the organization. This is not merely a Purchasing or Finance function, it’s an organization endeavor.

 

            When discussing a targeted improvement in your working capital, this process touches just about every portion. Let’s really break this process down:

Ø  The company engages in a data gathering process and determines the depth/detail of the reporting they want considering in their decision making.

Ø  All collected data will be used for the Demand Planning stage analyzing sales data, production data, and any other KPI’s or metrics currently in place.

Ø  All the data compiled and analyzed in the demand planning phase will be utilized in the Supply Planning stage. The need here will be to take into account any constraints in capacity analysis, the supply of existing product lines, introduction of new lines, and the review of factor supply plans.

Ø  The effort put forth in the supply planning phase will lead to a Preliminary S&OP Review, which essentially will be a nearly final supply plan, distribution plan, and the resulting financial plan.

Ø  The final stage is the Executive Review, in which the management team is reviewing the expected performance analysis, assessing the necessary investment decisions, resolving any potential conflicts, and escalating any necessary portions of the plan. At this stage, the Executive Team is expected to provided the necessary approval and support to execute.

 

            Need to cut your inventory levels a bit? Need to get a quicker delivery of your product? Need better terms from your vendors? All achievable with a rather simplistic approach. However, if you are truly working with a global entity with a complex design, manufacture, and distribution model, a half-ass piece meal approach isn’t going to work, nor will it give you the long-term sustainable advantage needed to get to the next level. If you want to create a truly competitive advantage then the effort needs to reach across the entire organization.

 

Thanks for reading . . . .

 

Jeffrey Ishmael

Sales & Ops Planning: Where do I start . . .?

September 16th, 2008 Comments off

My apologies again, but it has been a very hectic couple of weeks between a client project and possible career considerations. But let’s jump back in with a link to our last post of Sales & Operations Planning (S&OP). As I’ve mentioned, this is not a simple process and will reach across the entire organization. In my last post I outlined the significant funtional areas that will be involved in such a project. Let’s keep pushing down and look at some of the steps involved and where we’re headed in our further analysis.

Please note that each one of the areas listed below is an entire discussion in themselves and deserving of a dedicated post. However, there are 5-key steps that that fall within the S&OP process. These steps include:

1. Data Gathering.
2. Demand Planning.
3. Supply Planning.
4. Preliminary S&OP Review.
5. Executive Review.

The amount of data that will contribute to this process is extensive and will range from your closed financials, to bookings, pending projects, and other considerations potentially affecting the Forecast. The data gathering will extend into data points relative to the Production process and the ability to deliver on Forecast in the necessary time constraints. There will be various time considerations with respect to the short-term and long-term goals, both of which will be considered in this process.

When I was first brought in to be a part of this process, I had no prior S&OP experience and was a bit frustrated at being pulled away from my “core duties” and having to spend time on a process that seemed more “Production-oriented”. However, it didn’t take much more than the project introduction to see the value that this project was going to play in the validation of our financial forecasts and to bring an even higher degree of accountability and transparency to the planning process. It also further strengthened what was already a healthy relationship with the Production department. From a Finance-perspective, it allows for a much higher level of information support and accuracy in budgeting, forecasting, and more importantly, working capital management.

Thanks for reading . . . .

Pending projects – September topics planned

August 29th, 2008 Comments off

Today is really turning into one of those days where it’s not quite coming together for a quality update and I’ve really tried to focus on Quality versus Quantity in my postings. Maybe it’s partly due to the looming holiday weekend & that its also been an incredibly busy week. Between a client project I’ve been working this week, as well as “meetings” with a number of other companies, recharging the batteries are key this weekend.

However, I have been thinking about all the topics I do want to address in the coming weeks. I’ve been trying to schedule more time to address these since I think they’ll be very interesting subjects to table. I really want to address points #2 and #3 since these have the potential to have far reaching implications in the conversion to IFRS. Some of what I had in mind:

1. Further breakdowns of the Sales & Operations Planning (S&OP) process and the development of a white paper on this topic.
2. Revenue recognition and the differences between IFRS and GAAP.
3. Fair Value reporting and the differences between IFRS and GAAP.
4. Overviews of the Budget/Forecast process as it relates to a traditional 4-quarter view versus the implementation of a rolling 5-quarter approach.
5. SEC reporting and the differing levels of transparency between companies in the same industry. (Not all 10-K’s are created equal….)

I also need to compile a few of my multiple updates into a single white paper, such as the Internal Audit thread. I’ve also created an account on SlideShare where I plan on posting some of my slide presentations. Looks like it’s going to be a busy month ahead…..

Thanks for reading . . . .

Projects: Sales & Operations Planning

August 12th, 2008 Comments off

During a career we can look back & recall projects that shaped our experience level and positioned us better to take on new challenges presented in our career. Some of those projects also involve pulling together such a large group of folks that it simply eclipses any “projects” you might have encountered during your B-school stint. For myself, one of these projects was the Sales & Operations Planning (S&OP) implementation that was started during our integration with APC. This was a project that was kicked off with a North American meeting that pulled together approximately 40 key individuals throughout NAM and was introduced by the company President. There were also other global kick-off meetings that happened in the other regions. This was a major corporate effort.

As the company moved farther into the implementation process, it became clear that there were going to be some major challenges to effectively integrate our two entities and leverage our operational resources. However, in the short-term, there were a number of issues to address. At a consolidated level, there were a number of potential concerns in this $6.5b merger. Primarily:
1. The potential for declining customer service levels.
2. Inaccurate sales forecasts.
3. Declining product margins.
4. Rising inventory levels.
5. Misaligned performance metrics.

Any one of the potential areas of risk listed above had the ability to materially effect our results and compound an already difficult integration process. As we kicked off the meeting, this was a process that many were not familiar with and there were only a few that had gone through a similar situation with previous employers. The meeting was focused on covering some key areas such as:
1. Why were we implementing S&OP? What are some the signs that would signal such an effort?
2. Conduct and overview of S&OP and the efforts we should anticipate would be necessary.
3. We needed to review the common terminology that would be utilized globally in this effort.
4. We need to review the necessary roles & responsibilities for this effort and individuals assigned.
5. What was the anticipated timeline?

It’s pretty apparent from just this topline synopsis that this is not a multi-week project. This was a project that was anticipated to take the better part of a year to complete and fully implement. This was a project that was going to involve just about every functional area in the organization and had an equally opportunistic ability to improve our financial results and improve our working capital performance. I do plan on covering the elements of this implementation in more detail in further postings. If you have participated in an S&OP implementation I’d love to hear from you…

Thanks for reading . . . .