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Measuring Sales & Operations plan

By Anonymous - Posted on 28 January 2012

Reviewing key performance indicators is an important part of any working S&OP process. Experience suggests a set of standardized measurements (sometimes called key performance indicators-KPI’s or vital signs) that should be published during the process, and reviewed at the meetings that make up the process. Some performance indicators will be reviewed in the early steps of the S&OP process, but not at the executive meeting. The critical metrics will be reviewed in the executive meeting.

Vital signs reviewed during the S&OP process:
Measure whether the needs of customers are being met (on-time and in-full).
Measure whether the financial objectives of the business as defined by the business plan are being met.
Identify problems and then assist in prioritizing problems so they can be solved.
Provide a scorecard for monitoring improvement.

The sales & operations plan is validated by resource planning process. Resource planning is concerned with identifying the load placed on all potentially constraining resources over the medium to long term time frame. This load is compared to the existing capacity capabilities & a judgment is made as to whether those capabilities are going to be sufficient for this future anticipated load. The process is iterative in nature & may be repeated many times before the sales & operations plan is finalized

Reviewing Historical performance:
The sales and operations planning system should include capabilities to capture and report the following:
1. Customer service performance by family and overall
Customer delivery performance (on-time and in-full – OTIF) to request date
Customer delivery performance (on-time and in-full) to promised date

2. Performance to budget (dollars) by family and overall
Latest sales plan vs. budget dollars
Profit projections for year
Inventory versus budget dollars

3. Performance to plan (units) by family
Actual shipments versus plan typically expressed as percentage attainment.
Actual sales versus forecast (some measurement of accuracy or variability) typically expressed as attainment, percentage error, or mean absolute percentage
Actual supply versus supply plan expressed as percentage attainment, or percent variability from plan.
Actual inventory versus inventory plan (make-to-stock products) expressed as a percentage.
Actual backlog versus backlog plan (make-to-order products) expressed as a percentage.

The way these are actually reported will vary from company to company. In nearly every company, the “performance to plan” metrics will be reviewed as part of the family by family review, so summarizing them to a scorecard is somewhat redundant. For example, Below figure shows common performance
to plan metrics displayed as part of the S&OP display itself. Metrics on this make-to-stock example show actual sales to budget, actual sales to plan, actual production to plan, and actual inventory to plan expressed as a percentage of the budget or plan for the period.

Identify the causes for variation from the plan:
Determine the root cause of any variance to the plan. The investigation should determine if the cause is
likely to continue or if it can be rectified within a short time frame. If the cause can’t be rectified then the
future plan will have to be adjusted for the projected trend from the historical performance.

Target Inventories & backlog:
Review of current & future targets for inventory &/or backlog levels.
These targets should be reviewed in terms of actual performance & revised where necessary by the management team.

Consistency to previous Sales & Operations Plan:
Determine of the new plans are consistent with the previous sales & operations plan.
The output of the SOP process is an agreed upon plan for operations called the production plan.

Measuring Sales Performance:
Sales can be measured on the basis of the following factors:

Market Share is a measure of total market penetration.

Customer Share is measure of how many potential customers are attracted to a brand. It is a measure
of the recognition of the brand in the market place & the predisposition of the customer to buy the
brand when presented with a choice pf competing brands.

Customer Retention is a measure of the loyalty of customers to the provider of products & services.
Customer acquisition is a rate at which the new customers are signed up.

Product Acceptance is a measure of the way in which a market reacts to a particular product or
service. The higher the degree of acceptance the more likely the product or service will be continued
demand in the future.

Service Contracts are used to provide additional support to the customer after the sale.’
Customer Satisfaction is a measure of the overall perception f a customer with the supplier of a
product or service.

Customer Complaints is a measure of the dissatisfaction of the customer with a supplier of a product
or service.

Product returns is another measure of customer dissatisfaction.

Warranty claims are another measure of customer dissatisfaction

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