Janis Novak, the controller, raises her hand. “When demand and supply are decoupled, don’t you increase the risk of higher inventories?” she asks. “That can occur,” Nolan replies, “if inventory is not managed.” He explains that sales and operations planning is a process to make sure that inventory is managed. He also asks the class to consider another risk. If demand and supply are not decoupled, companies risk higher manufacturing costs, higher material costs, and poor customer service. Sales and operations planning provides the means to keep inventory, costs, and service under control during the natural, ongoing changes in demand that occur in most businesses.
“How are inventory and customer lead-time targets established in sales and operations planning?” Susan asks. “Good question,” Nolan replies, “but I would like to defer answering it for now. We will spend considerable time on this issue during the two-day detailed class as well as during the implementation. For now, let me give you my quick one-word answer: carefully.” Seeing that Susan is not entirely satisfied, Nolan adds that some of the key considerations include:
■ What is necessary to meet customer expectations
■ What is necessary to be better than the competition
■ The variability and accuracy of the forecast
■ How quickly the supply side of the business can respond to change
■ The cost of making change in the supply side of the business
■ The financial strength of the company
■ The current business situation
“If you take these, plus other considerations, into account with a large dose of common sense, you will come up with a starting point for the targets,” Nolan says. “The company should then commit to continuously improve upon these targets over time.”
“Does that imply you may have different targets for different product lines?” Susan asks. “Yes, it does,” Nolan answers. He explains that one practice employed by many companies is to use what is sometimes called a “peanut butter” approach, where one standard is used for all product lines. This practice usually results in two conditions that put the company at either a financial disadvantage or a service disadvantage. Poor utilization of inventory can be the result, or delivery lead times do not match market requirements on different product lines.
“这意味着你可能对不同的产品线，不同的目标？“ 苏珊问。“是的，是这样，”诺兰回答。他解释说，一个实践被很多公司使用的，就是所谓的“花生酱”的方法， 一个标准用于所有产品线。这种做法的结果通常导致两个结果，或者把公司置于一个财务不利的境地，或者服务跟不上。结果是库存利用少，或交货时间满足不了不同产品线的市场需求。
“Why does this peanut butter approach occur?” Nolan asks. “It is either a result of management by accident, meaning that management does not make a decision with regard to individualized targets, or it is the direct result of misguided senior management, which often occurs through what we like to call management by edict. Neither one of the two methods is truly professional management in my opinion.”
Susan turns toward Mark and looks him straight in the eye. “Did you hear that, Mark?” she asks. “Guilty as charged,” Mark acknowledges. “But that is why Ross and Nolan are here. I want them to help us change some of our less-than-effective and inefficient practices, including my own.”
Sam raises his hand. “Nolan, the supply side of the business has made commitments to shorten its cycle times and reduce its costs. Would the results of these efforts normally be reviewed in a supply review?” Ray Guy, the final assembly manager, squirms in his seat. Reduced cycle times have not been achieved, and he is especially chagrined that someone on the sales side of the business is pointing out this deficiency.
Nolan ignores Ray’s discomfort. He explains that the supply review provides an excellent forum to review the status of supply-oriented activities, such as cycle time reduction and cost reductions. The executive in charge of the supply review should be monitoring the progress of these activities at least monthly anyway. Some companies have introduced a performance measurement that addresses cycle time reductions.
Nolan searches through the presentation program until he finds the slide he wants (Figure 23). “This is a measure of velocity, often expressed as a velocity ratio,” he says, pointing to the graphic. He explains that the objective of this measurement is to make visible how well nonvalue-added time is minimized in a process cycle. This measurement can be used to measure process cycles in all areas of a company, not just the supply organization. For example, it is useful for measuring order-entry processing time and invoicing processing time, as well as any other processes. Companies that utilize a lean or agile methodology consider velocity ratio a key measure of progress and success.
Ray Guy wants to shift the focus from supply issues to demand issues. He raises his hand. “I have a question regarding the process. How is the updated demand forecast communicated to the supply side of the business?” “I meant to mention communication when I discussed the demand review process,” Nolan replies. “There are two aspects that must be considered. One is the quality of communication; the other is the mechanics, or tools, used to communicate.”
雷想要把重点从供应问题转移到需求问题。他举起手。“我有一个关于进程的问题。如何将更新的需求预测与企业的供给相联系？“ “我的意思是说，当我讨论需求评审过程的沟通时，” 诺兰回答说。“有两个方面，必须考虑。一个是沟通的质量；二是用沟通的技巧和技术工具。”
He explains that it is assumed that the demand review meeting will be attended by key marketing and sales management people as well as invited guests. These invited guests may include someone representing the product development or engineering function, finance, and the supply function. Usually, the supply planner represents the supply side of the business.
The supply representative does not attempt to influence the demand decisions in this meeting. The supply representative’s role is to observe and hear the conversation regarding the updated plan, in particular changes to the demand request for product. This approach facilitates efficiency and understanding. The supply side does not have to wait for an official memo or e-mail to begin its analysis of how it will support the changes to the demand plan.
The mechanics of communicating the demand plan depends on the availability of communications tools. The demand plan, or request for product, ideally is communicated via a database that is accessible by the supply side of the business. This database may be part of a communication and presentation tool specifically designed for sales and operations planning. It may be part of a forecasting software tool. It may be part of the enterprise resource planning system. It may also be as simple as a spreadsheet file.
Determining the tool that will be used is part of the detailed process design. Tools for sales and operations planning have been largely ignored by enterprise resource planning software suppliers. Some of the information needed to support sales and operations planning should be available in Universal Products’ systems, but the reporting and presentation tools will need to be developed.
Jim Simpson, the manufacturing director, raises his hand. “In the discussion about the supply review, you showed us a sample of performance measurements. Will performance measurements be reviewed during the demand review, too?” “Yes, they will,” Nolan replies. He explains that the basic practice for all subprocesses is to:
■ Review performance
■ Discuss known changes
■ Review the assumptions
■ Review resource utilization (on both the demand and supply side)
■ Determine any desired or recommended changes to action plans and resource
■ Conduct both a qualitative and quantitative review and update of the plan
“The sales and operations planning process should be focused on the future,” Nolan says, “but it should be pointed out that the past often influences the future.” He tells the group that performance measurements increase the accountability to achieve the plan. Each person is responsible and accountable to do what he or she said they were going to do.
“销售与运营规划过程中应关注的是未来，” 诺兰说，“但应该指出的是，过去常常影响未来。” 他告诉小组，绩效评估，加大实现计划的责任追究。每个人都有责任和义务去做他或她说他们要做的。
Performance measurements have been found to fundamentally improve performance.Measurements of past performance provide a statistical basis for confidence or concern. If there has been high variability in performance in the past, it is only reasonable to expect high variability in performance in the future unless the cause of the variability is understood and corrected. nderstanding past performance should have a significant influence on executive decision making.
“Do the demand review and supply review address the financial impact to changes in the plans?” Janis Novak asks. “Yes,” Nolan replies. “On the demand side, two views of the plan are reviewed. There is a review of volume changes in whatever unit of measure is meaningful to both the demand and the supply side of the business. There is also a review of pricing assumptions, which enables calculation of projected revenue over the planning.” “On the supply side,” he continues, “the impact of changes to the plan on anticipated costs is used to calculate the projection of cost of goods sold as well as gross margin by product line.”
“你的需求和供应评审会导致财务计划的变化吗？“珍妮丝问。“是的，”诺兰回答说。“在需求方面，对该计划的两种观点进行了综述。有任何数量的变化对需求和商业供应方面都有意义。还有的定价假设的审查，使预计收入在规划时可以得到计算。” 在供应方面，”他继续说，“ 对于计划变化的预期成本的影响是，用来计算预测产品销售成本和产品线毛利。”
Nolan also notes that, like the demand review, invited guests attend the supply review meeting. Those invited guests typically include representatives from finance, product development or engineering, and the demand function. The individual from the demand side would most often be the demand planner.
Peter Newfeld, the product development/engineering director, shifts uncomfortably in his chair. “Since it seems so many of the same people attend the product review, demand review, and supply review meetings, why can’t there simply be one meeting? Wouldn’t that be more efficient?” Nolan explains that many companies have tried this approach, but the end results have been disappointing. While a single meeting may be better than no communication at all, the purpose of the reviews is diluted. “Remember,” Nolan says, “the purpose of the subprocess reviews is not
just to communicate. The primary purpose is to serve as functional management meetings.”
Nolan tells the group that many of the topics that should be discussed in the demand review meeting are of little use to the supply side. Likewise, much of the discussion at the supply review is of little use to the demand side. It is a potential waste of some of the individuals’ time.
Another critical reason not to combine the two meetings is the need for the supply side to have the time to analyze the demand request for product. The supply side needs time to determine whether and how it can support the updated demand request.
“In the absence of facts,” Nolan says, and then he is interrupted by Jim Simpson. “The only answer you can give is yes,” Jim concludes. “The supply side should not be forced to commit to a plan it can’t achieve,” Nolan says. “This often occurs when companies use a single review meeting, and then the supply side is unfairly criticized for poor performance.” Again he is interrupted by Jim. “For not doing what it said it was going to do,” Jim says. Mark and the rest of the group laugh. “Very good, Jim,” Mark says. “I guess you must be learning something.”
“在缺乏事实依据的情况下，”诺兰说，被吉姆中断。“唯一的答案是肯定的，”吉姆的结论。“供应方面不应该被要求承诺不能实现的计划，” 诺兰说。“这常常发生在公司使用一个单一的评审会议， 然后供应方经常受到不公正的批评因为表现不佳。” 他又是被吉姆打断。“没有做它说这是要做的，” 吉姆说。马克和小组其他人笑起来。“很好，吉姆，”马克说。我想你已经学到了很多。”
Jim laughs as well. “Mark, it’s just that every day we do most of what Ross and Nolan say shouldn’t be done.”
Nolan does not want to lose momentum. This is an opportunity to point out how the sales and operations planning process should not be conducted.
“I have seen some companies conduct what they call a pre-sales and operations planning meeting,” he says. He explains that an effective pre-sales and operations planning meeting is usually attended by a cast of twenty or thirty middle managers who represent most of the company functions. The meetings are long and typically degenerate into meaningless exchanges and name-calling. The reason pre-sales and operations planning meetings often fail is that neither demand nor supply is properly prepared. Both sides try to update their plans during the meeting itself, and there is no one with the authority to make a decision.