Symphony Consulting: Cases

Sales Operation Planning

Mini-Case Study: How does a company improve the linkages and responsiveness between its revenue planning and the product plans it executes with its suppliers? How can you manage increasing product complexity with additional products, sku proliferation while maintaining cost competitiveness and inventory levels? How is product transition planning completed with minimal inventory exposure?

Problem: Company A had revenue of about $750M, had annual revenue growth between 10-20% and sku growth of 40-50%. The company was very successful in creating innovative products and in creating new categories that could extend their brand presence on a global scale. Product life cycles shortened to 9 months, as product was refreshed for each holiday selling season. The sales planning process took place on a monthly basis, but a disconnect existed between the production planning process that scheduled manufacturing capacity and established a material pipeline with component suppliers. Supply feedback to the sales forecasting process took two months to implement. Inventory levels increased, costs increased and customer satisfaction dipped as the company struggled with how to manage the growth in revenue and product complexity.

Solution: There is no quick fix solution that you can implement to fix forecasting issues. What is needed is a process that addresses the need for each company to:

improve financial performance and customer service
support inventory and lead-time objectives by managing supply and demand
manage total landed cost

We have been successful in putting in the process and organization to create a structured sales operation planning (SOP) process that enables companies to evolve and continually improve the business planning to production planning process.

The following maps out the steps that we took to successfully introduce this structure into the organization:

Mapped out existing process from revenue and sales forecast to master scheduling and MRP execution. Documented information and data sources that were available and how they were currently organized and categorized.
Set-up informal interviews with the Executive team to benchmark the understanding of the current process, benefits and shortcomings that they believe exist. This was an important step to educate and gain support for the need to what appeared to be “yet another meeting” in the very busy time of the executive team. When implemented successfully, this became “the meeting” that drove the critical operational decisions for the management team.
Categorized a template of information in appropriate families for revenue and unit volume reporting and review.
Laid-out the initial phases of the process that created a consolidated review of both the sales (demand) forecast and the production (supply). The critical action was to get the basic process in place, and the executive review happening prior to having the perfect information and format. Issues raised in the informal interviews were addressed at this point. Although not all issues needed be solved, a roadmap of future capabilities in the reviews was covered. The initial reviews were lengthy as process, terminology and format are learned and experienced by the executive team. The timeframe of the initial discussion usually centered in the current quarter, which was typically on the radar screen of the executive team. After a number of cycles, the focus of the review moved to more appropriate timeframes of approximately 3-9 months, where the real benefits of the process took place.
Introduced new product roadmaps to review impact on product transitions, and to review status and revenue risks.
Incorporated inventory projections to bring visibility to inventory levels and to review specific inventory exposure items for review and decision making by the executive team.
Established forecast metrics to set current performance, and to track ongoing improvement.

The SOP process provided a structured vehicle for the company to better link its strategic sales forecast plans with the operational execution. As the foundation of the process was put in place, the company was better able to evaluate further investments in systems that could provide more data, add capabilities (statistical methods), and help decrease process cycle times to make the process a competitive advantage.

Result: Within the first six months of implementing the changes, inventory had dropped by 30% and obsolescence had dropped by 50%. The productivity of the process improved each month, and soon focused on downstream quarters. This enabled the executive team to focus on the issues that needed attention and in a time frame where the supply chain could respond to required changes.. This created a more robust and believable revenue and P&L plans of the company.

When implemented, the SOP process can become a catalyst for linking strategic and operational execution of the company. The SOP process will continue to evolve in content, informational and system requirements as it is utilized.