Leveraging Risk Management in the Sales and Operations...
Transcript of Leveraging Risk Management in the Sales and Operations...
Leveraging Risk Management in the Sales and Operations Planning
Process
Yanika Daniels and Timothy Kenny
21 MAY 2008
Advisor: Larry Lapide
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Agenda
• What is Sales & Operations Planning (S&OP)?
• What is Risk Management?• Why is Risk Management needed in
S&OP?• Research Methods• Risk Management Findings
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What is S&OP?
Step #1Data
Gathering
End of Month
Step #5ExecutiveMeeting
Decisions &Game Plan
Conflict Resolution, Recommendations &Agenda for Exec. Mtg.
Sales Actuals, Statistical Forecasts
&Production Actuals
Step #2DemandPlanning
Step #4Pre-S&OPMeeting
Capacity constraints2nd-pass spreadsheets
Management Forecast1st-pass spreadsheets
Step #3Supply
Planning
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What is Risk Management?
• Identify Risk • Assess Risk• Mitigate Risk
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Why is Risk Management needed in S&OP?
• Global Expansions• Increased Lead Times• Capacity Constraints• Supplier Reliability
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Research Methods
• Case Reviews• Expert Interviews• Industry Survey • Onsite Visit
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• Demand Shaping• Variable Customer Service Level Promising• Product and Customer Segmentation
• Varied Use of Fixed, Variable, and Spot Rate Supply Contracts• Dual Sourcing Key Supplies• Product and Customer Segmentation
• Inventory Buffers• Component Commonality• Product and Customer Segmentation
• Lock-in Supply of Scarce Materials and Components• Varied Use of Centralized and Decentralized Inventory• Product and Customer Segmentation
• Postponement of the Final Steps in Production• Range and Scenario Planning• Product and Customer Segmentation
• Maintain Reserve Production Capacity• Range and Scenario Planning• Product and Customer Segmentation
Demand Side RiskManagement Techniques
Supply Side RiskManagement Techniques
CapacityRisk
InventoryRisk
TimeRisk
Risk Management Techniques
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Risk Framework
Step 1: Business Importance Scorecard by Product and/or Customer
Step 2: Business Importance vs. Demand Forecast and/or Order Lead Time segmentation
Decision Making: Implement Tactics
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Step One: Business Importance ScorecardCustomer Business Importance Scorecard
Score AttributeRevenue ContributionLength of RelationshipStrategic Importance
Potential for Sales GrowthPortfolio Expansion
Total
Product Business Importance Scorecard
Score AttributeRevenue and Margin Contribution
Stage in Product LifecycleLead Time
Growth PotentialProduct Type
Total
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Short Long
Capacity/Inventory/Time Tactics:
1) Widen (Pad) Delivery Window
2) Centralized Inventory
Capacity/Inventory/Time Tactics:
1) Widen (Pad) Delivery Window
2) Centralized Inventory
Capacity/Inventory/Time Tactics:
1) Demand Shaping
2) Mix Centralized / Decentralized Inventory
Capacity/Inventory/Time Tactics:
1) Demand Shaping
2) Mix Centralized / Decentralized Inventory
Capacity/Inventory/Time Tactics:
1.) Reserve Capacity
2.) Decentralized Inventory close to customer
Capacity/Inventory/Time Tactics:
1.) Reserve Capacity
2.) Decentralized Inventory close to customer
Step 2 - Risk Management Tactics: Customer
Bus
ines
s Im
porta
nce
Tier
1
Order Lead Time
Tier
2Ti
er 3
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Capacity/Inventory/Time Tactics:
1.) Pre-Build Inventory
2.) Component Commonality contracts
Capacity/Inventory/Time Tactics:
1.) Inventory Buffer
2.) Multi-sourcing supply
Capacity/Inventory/Time Tactics:
1.) Pre-Build Inventory
2.) Component Commonality
Capacity/Inventory/Time Tactics:
1.) Inventory Buffer
2.) Multi-sourcing supply contracts
Capacity/Inventory/Time Tactics:
1.) Use Inventory as the Main Mitigation Strategy as Inventory Write-offs are Low Probability
2.) Maintain Excess Production Capacity
Capacity/Inventory/Time Tactics:
1.) Range Planning; Produce to Low Demand Confidence Levels, Maintain Flexible Production Capacity for High Demand Confidence Levels
2.) Postponement of Production Steps
Step 2 – Risk Management Tactics: Product
Bus
ines
s Im
porta
nce A-L
evel
ForecastabilityLow High
B-L
evel
C-L
evel
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EXECUTIVEMEETING
DEMANDPLANNING
DATA GATHERING
OPERATIONSPLANNING
PRE-EXECUTIVE MEETING
BusinessImportance
Forecastability orOrder Lead Time
Tactics (Range
Planning)Analyze
DetermineStrategy
RISK MANAGEMENT
Format Source: SemiCo
EXECUTIVEMEETING
EXECUTIVEMEETING
DEMANDPLANNINGDEMAND
PLANNING
DATA GATHERING
DATA GATHERING
OPERATIONSPLANNING
OPERATIONSPLANNING
PRE-EXECUTIVE MEETING
PRE-EXECUTIVE MEETING
BusinessImportance
Forecastability orOrder Lead Time
Tactics (Range
Planning)Analyze
DetermineStrategy
RISK MANAGEMENT
Format Source: SemiCo
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Thank You!