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A successful S&OP Implementation, improving forecasting and increasing margins

The company is the manufacturer of niche and highly seasonal products.

Situation at the start

To date, they have had limited competition, which has allowed them to focus on offering innovative products to their clients with little pressure on cost and service levels.

Recently, as a result of health concerns, the market has been shrinking and margins are being squeezed on the mainstream products. This same situation is also forcing competitors to enter the client’s niche area in order to increase their own market share.

The challenge

The client needed to be more agile and cost competitive whilst delivering a best in class service to its customers.

To add to the challenge, the client did not have a formal, cross-functional planning process in place. It used different sets of numbers within their organisation and adjustments to the planning system could be made by virtually anyone, at any time, over any horizon.

The goal

The key enabler to overcome these challenges was the introduction of an effective S&OP process. To achieve this, a whole S&OP programme had to be designed, built and implemented. The process needed to be aligned with best practices but at the same time was tailored to reflect the client’s environment, which we managed by working in tandem with the Client’s managers.

Over 9 months, we took a 3-phase approach to the introduction:

  • Phase 1 – Design, which included engaging with the Senior Leadership team on the key S&OP principles e.g. One Set of Numbers.
  • Phase 2 – Building an efficient and structured monthly cycle to facilitate the decision-making process and to provide visibility over both the short and long term. We also helped introduce a dynamic dashboard for monitoring the process, as well as digital tools for efficiency.
  • Phase 3 – Implementation was carried out with a masterplan, that combined the introduction of the new S&OP process with the “Human Dynamics” aspect that was centred on Adoption, Leadership and Anchoring activities for all the different groups of people involved.

Putting strategy into action

« Boosting performance by acting on Value, Flow, Asset and People dynamics»

To encourage buy-in, the Consultants and Client managers developed and implemented the programme in tandem. Part of the design was:

  • Creating a Master Product Group – which developed a product hierarchy in order to enable forecasting at Product Group level up to 24 months ahead
  • Developing a Digital S&OP Dashboard
  • Improving Forecast Accuracy and Bias tools
  • Creating a financial margin projection tool
  • Initiated the identification and skills & capability development of one of the Client’s managers to become the S&OP Manager

Recognising that successful initiatives are dependent on their Adoption by the different populations, require clear guidance from the Leadership team and have to be Anchored in new ways of working, we instigated the following:

Design – We carried out Business Performance Related interviews and Behavioural interviews to understand the environment into which the S&OP Process was being implemented.

Build – We ensured that there was 1 to 1 engagement with the Senior Management and we also ran workshops with key populations to share the coming changes and to discuss their impact.

Implementation – The S&OP Process follows the best practice concept of the Infinite Loop – the classic monthly S&OP cycle has been coupled with a quarterly Continuous Improvement cycle that reviews priority KPIs like Forecast Accuracy and Inventory management.

Deliver concrete results

« Improving your results today, securing your results for tomorrow »

  • Increased margins by 8%
  • Increased forecast accuracy by 45%
  • Reduced Conversion cost by 2%
  • Reduced inventory working capital by 4%

The Managing Director declared that “The S&OP process is how I will steer the business – are we on track; are we growing margins; are we servicing our customers; are we planning the factories efficiently? Importantly, it will become the single source of all our numbers so that there can be no confusion over our performance and forecasts. It is not an easy process and we need to embrace it as part of how we do our jobs. It will not answer all the difficulties we have in the business, but it should help visibility, planning and managing our agenda.”

The Finance Director stated that “…significantly reduced costs and increased service levels as we produce to the Forecasts….”

The Commercial Director commented that “Better commercial information – gross margin management, both short term and long term budget planning”.

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