Introduction to Oracle Demantra Sales and Operations Planning

Overview

Sales and operations planning is a formal management process that creates a unified business plan based on a consensus between an organization's sales, marketing, manufacturing and financial functions. This process also extends to include key customers and suppliers. Collaboration among an organization’s functional areas results in an integrated set of plans that all stakeholders understand and are committed to support.

Sales and operations planning is an iterative process typically led by senior management. Results from one planning cycle are compared with the next to give senior management trends within their business. They evaluate time-phased projections for supply and demand, inventory and order backlog to ensure that the tactical plans in all business functions and geographies are aligned and in support of the company's strategy.

With traditional "silo-based" companies, sales, manufacturing and financial functions often compete against each other. Without a consolidated plan, small problems can quickly grow into much larger issues. Using Sales and Operations Planning reports and KPIs, these problems can be quickly identified. Plan over plan net change reports can be run against key metrics to identify the largest changes automatically. With the high-level differences identified, further detail and understanding of the underlying causes are analyzed through various views and reports. With the exceptions and issues identified, alternative scenarios can be developed.

Some of the benefits of an effective sales and operations planning process include:

• Increased customer service levels

• Improved profitability

• More products to increase revenue

• Lower inventories and obsolescence

• Reduced lead times

• Quicker responsiveness

• Top-down management control

• Predictable operating performance for shareholders

In addition, a sales and operations planning process should also help to answer the following basic questions:

• What has changed since the last review?

• How are the performance to plan metrics?

• How are product categories performing?

• Is new product development on track?

• How does projected demand compare to projected supply?

• What are the projected resource requirements to meet both service and cost targets?

• What actions are required to ensure the appropriate levels of resources are available when needed?

What is Sales and Operations Planning?

While the sales and operations planning process can differ greatly between industries and organization, there are specific elements that are common to virtually all processes. A typical sales and operations planning process can be described in the following major steps:

1. Updating demand, new product introduction (NPI), supply, and financial plans with the latest data.

2. Analysis and reconciliation of the demand, NPI, supply, and financial plans. Assumptions are recorded, risks and opportunities identified, recommendations are made.

3. Senior management reviews the consolidated plans and alternatives. Decisions are made and put into action.

However, in practice, different companies will have varying practices and time frames for the process, ranging from a high-level, strategic process to a more short-term, operational focus. Sales and Operations Planning's flexible design allows you to map your existing sales and operations planning process.

The following diagram illustrates the typical sales and operations planning business process:

Demand Plan Review

A demand plan is a company’s agreed-upon forecast of future demand for its products. Demand plans are based on historical information on sales, sales campaigns, or other future initiatives that can affect demand. The purpose of the demand review is to generate a consensus forecast as input to the supply review.

The demand plan review is a meeting involving all interested stakeholders (for example, marketing and sales departments, or even customers). The purpose of the demand review phase of the S&OP process is to generate a consensus forecast as input to the supply review. This meeting typically involves reviewing:

• The baseline demand forecast.

• Changes in marketing plans.

• Changes in sales plans.

• Customer issues.

• New product introduction plans.

The demand plan review produces a consensus demand forecast. This forecast feeds supply planning to create a supply plan that includes rough-cut capacity, production and inventory plans.

Supply Plan Review

A supply plan is a company's forecast of how to meet demand based upon manufacturing constraints and inventory targets.

The supply review determines the firm's ability to meet the consensus-based demand, measures past performance and projects future performance. There is also comparative analysis of alternative supply plan scenarios. The supply review meeting typically involves reviewing:

• The company's current performance, including inventories, backlog, assumptions, risks and opportunities.

• Changes in production plans.

• Changes in inventory plans and backlog.

• Changes in capacity plans.

• Any supplier issues.

• New process and equipment.

Financial Plan Review

The purpose of the financial review is to evaluate the demand and supply plans against financial targets. This high-level view gives an indication of how well the demand and supply plans meet financial objectives.

Reviewing exceptions shows whether any out of tolerance metrics related to the financial performance need to be reviewed and reconciled. Changes in revenues, costs and budget from the previous cycle indicate whether the company’s performance is on target.

Reconciliation

Reconciliation is a continuous, interactive process to assess the impact of demand shaping and changes in supply performance and capacity. This step typically involves a pre-sales and operations planning meeting where a senior cross-functional team examines emerging business issues such as the latest views on new products and anticipated demand and supply. They highlight major issues, such as the:

• Impact of changes upon volume and financials.

• Gaps between the latest view and budget.

• Business plan strategic direction over the sales and operations planning horizon.

Lastly, the team prepares for the executive review to ensure it runs efficiently.

Note: In Oracle Demantra Sales and Operations Planning, the financial plan review is incorporated into the Executive review.

Executive Review

The senior management meeting, also know as the executive sales and operations planning meeting, is when decisions are made on the plans and additional actions proposed to close the gap between the operations plan, the budget, and the strategic plan. This meeting is an opportunity for all major stakeholders to meet and:

• Review key metrics and financial performance.

• Review baseline plans and alternative scenarios.

• Review strategies, assumptions and assign actions required to bring operations in line with the strategic direction.

• Review identified risks and opportunities.

• Approve operations plan.

Demantra Sales and Operations Planning Overview

Oracle Demantra Sales and Operations Planning is a configurable web-based product to help your organization perform those tasks associated with the sales and operations planning process. Demantra Sales and Operations Planning is built around collaboration, and takes advantage of workflows to automate the S&OP process.

The Demantra Sales and Operations Planning Process

The following diagram illustrates the Demantra Sales and Operations Planning process:

Collect and Download Data

Most businesses regularly schedule their Demand Management process weekly, monthly or daily. During this period, data from various sources are loaded into the Demand Management system for use in forecasting future demand. The source systems can be an ERP system, legacy system or another Oracle APS (Advanced Planning Suite) module such as Advanced Supply Chain Planning, Inventory Optimization, Global Order Promising, Collaborative Planning or Rapid Planning.

The S&OP Administrator initiates (either manually or scheduled) the collection and downloading of data required by S&OP. This creates the items, locations, and sales data in Demantra.

Demand Review

Prior to the demand review, demand analysts should have made forecast changes and saved the data in the Demand Management Demand Analysis worksheet.

Note: When using the Demand Analysis worksheet in conjunction with S&OP, the Approval and Final Approval check boxes that are used to accept the forecast are omitted. This is necessary when using S&OP, because selecting the Approval check box in Demand Management makes all worksheet series’ read-only.

During the demand plan review meeting, participants use the Consensus Forecast worksheet that contains the separate stakeholder forecasts. Each stakeholder may assign weights to each series, as well as an override to the calculated (weighted) consensus plan. Any assumptions (for example, regarding causal factors) can be recorded in the worksheet’s Notes section.

Once the forecast has been agreed-upon, the S&OP manager (or other final approver) approves the consensus forecast by product category. After reviewing and approving all product categories, the S&OP manager indicates that the forecast is ready for export using the Demand Review Completed workflow. This workflow notifies an administrator that the forecast is available for export to the supply plan step.

Supply Review

The supply review determines a company’s ability to meet the consensus-based demand, measures past performance and projects future performance, and serves as the main input into the senior management meeting. The supply review uses the following supply plan data to create a supply plan/rough-cut capacity plan:

• Constrained forecast by organization and item.

• Production plan by organization and item.

• Inventory plan by organization and item

• Resource (or rough-cut) capacity plan by organization and resource.

• Supplier capacity by supplier organization and critical component.

Once these have been imported to Demantra, the S&OP manager and strategic planner(s) are informed via a workflow that the consensus forecast is available for supply planning. The stakeholders review consolidated demand, supply and inventory plans worksheet as well as production and inventory levels by product category or family. By using exception alerts, the S&OP manager can identify any exceptions that arise from comparing the supply plan with any specified supply metric(s) thresholds.

At this point planners revise the production and capacity outside of the fixed time fence to meet inventory targets. If the strategic planner required a capacity increase within the fixed time fence, they would seek approval by escalating. A method (available from the right-mouse menu) can run an approvals workflow to notify the appropriate approvers. Finally, the S&OP manager approves the revised supply plan scenario by product family.

Financial Review

The financial review, commonly referred to as the pre-S&OP meeting, reconciles consensus demand and supply plans with financial performance objectives. Financial exceptions are identified at the product category (or family) level and investigated. This phase includes what-if financial analysis of demand shaping opportunities and the risks associated with lead-time and capacity constraints. Adjustments are made to the financial forecast based upon the latest consensus forecasts. The goal of the financial reconciliation is to prepare for the executive review by gathering a feasible set of operational plans to meet revenue targets while maximizing profitability.

Executive Review

The executive review examines year-to-date performance of key metrics, considers alternative scenarios and seeks to achieve consensus. The result of this meeting is a single set of finalized consensus demand and supply plans, which are broadcast as operational plans.

Sales and Operations Planning Users and Groups

Oracle E-Business Suite (EBS) has two pre-seeded user responsibilities for Demantra Sales and Operations Planning to control security and access:

• Sales and Operations Planner responsibility has access to Collaborator Workbench and worksheets.

• Sales and Operations Planning Administrator responsibility has the ability to maintain the system, run collections, access the Workflow Manager, open the Business Modeler, and so on.

These responsibilities provide single sign-on access to Demantra Sales and Operations Planning. The administrator can modify user security settings directly in the Demantra Business Modeler. If an EBS user already has access to Demantra Demand Management, then the user name in Demantra Sales and Operations Planning includes the suffix "_SOP".

For non-EBS customers, there are other seeded users in the Business Modeler:

• SalesMgr1 is an example of a stakeholder in the Sales department. This user can edit forecast data in the Sales Forecast worksheet.

• Marketing1 is an example of a stakeholder in the Marketing department. This user can edit forecast data in the Marketing Forecast worksheet.

• Finance1 is an example of a stakeholder in the Finance department.

• Strategic1 is an example of a supply planning stakeholder. For example, a Strategic Planner receives notification of approved consensus demand forecasts and generates supply planning data for import and comparative analysis in Sales and Operations Planning.

• Sop1 is an example of a stakeholder that facilitates the Sales and Operations Planning process and participates in all review meetings. This user has access to methods for approving forecasts and downloading supply plan data.

• SopAdmin is an example of a system administrator. This user runs workflows such as the workflow that uploads the consensus forecast.

• sop is the Demantra Sales and Operations Planning component owner.

There is also a seeded user group in the Business Modeler. The SOP group members can share forecast notes in worksheets.