Episode: 395 |
Jessica Lackey:
Sales, Operations, and Planning:


Jessica Lackey

Sales, Operations, and Planning

Show Notes


Jessica Lackey is an ACC Coach, a McKinsey alum with an MBA from Harvard MBA, and a  Fortune 500 Operations Leader. In this episode, she talks about the mature integrated planning process and the nuts and bolts of the traditional SAP processes.

Jessica can be reached through LinkedIn or her website JessicaLackey.com.

Key points include:

  • 01:47: A perspective on sales and operations planning (SNOP)
  • 08:56: Common issues in the sales and operations planning process
  • 16:05: AI, heuristics, and advanced planning systems
  • 18:19: Case examples of the reconciliation process
  • 25:22: Consulting opportunities in sales and operations planning


One weekly email with bonus materials and summaries of each new episode:

Will Bachman 00:01
Hello, and welcome to Unleashed the show that explores how to thrive as an independent professional. I’m your host Will Bachman. And if you go to umbrex.com slash Unleashed, you can sign up for the weekly email here about all the other episodes we’re doing on this now Daily Show. I’m very excited to be here today with Jessica Lackey. We’re gonna talk about sales and operations, planning and some other stuff. Jessica, welcome to the show.

Jessica Lackey 00:28
Thank you. Well, thanks for having me on.

Will Bachman 00:30
I’ll tell listeners that before we hit record here, we were having a private conversation about nutrition. And you were giving me all these great tips, you do some intermittent fasting and I’ve just kind of getting into it. So before we get into supply chain operations planning, tell us, you also are I think, a certified nutritionist. Do I have that right?

Jessica Lackey 00:51
I’m a certified holistic nutritionist. And I’m also a certified life coach. So expanded my horizons beyond supply chain and NOP.

Will Bachman 01:02
Alright. So I think that, you know, we should do a future episode on nutrition stuff, because that was super helpful guidance. We’re talking about breakfast and making sure I get plenty of protein. Let’s talk about sales and operations planning. So I had met few years ago, I was in a meeting with a client and they were talking about the SN o p. And I had no idea what they’re talking about. I had to sort of nod my head, I usually will ask people to say what they’re talking about. But I didn’t want to just look like an idiot, as I looked it up. And now I know enough that that it stands for sales and operations plan or, but not much more than that. What is an S and o p? Tell us about that.

Jessica Lackey 01:47
So I’ll give you the perspective from the past roles that I’ve had. So I’ve spent seven years in a footwear and apparel company doing supply chain strategy planning and snow P which stands for sales and operations planning. And I spent three years in the appliance industry leading a NOP team. So s n o P stands for sales and operations planning, you might hear it called sighup, sales, inventory and operations planning. Or you also may hear their monthly process called ibp, integrated business planning. These are all monthly processes to streamline one set of plans between demand supply and your inventory plans at the most basic levels. And as you grow in maturity to an integrated business planning process, it also encompasses additional strategic factors to make sure there’s one aligned plan for an organization.

Will Bachman 02:47
Alright, fantastic. So walk me through the that process.

Jessica Lackey 02:53
Yeah, so I’ll walk you through the the more mature integrated business planning process, because I think it’s more comprehensive and more interesting. So it really starts with a strategic overview. What is the strategy for the company? Where do they want to grow? What? What segments with customers they want to grow into? What investments are they making to support that? The next step is a product review? Do we have the right product portfolio to meet those strategic goals? Those steps are really concentrated in the more mature integrated business planning process. And then you get to the more nuts and bolts of the traditional SAP processes, which is a demand review, a supplier review and a reconciliation review. Demand review is the process that says what are we going to sell to our customers. So in the appliance industry is what we are going to sell to Lowe’s or Home Depot, the appliance dealer channel and footwear and apparel it was what we’re going to sell to Dick’s Sporting Goods or footlocker. You ideally want to align on it at the lowest level of granularity you can but at minimum aligning on what you know what our high level demand forecast is going to look like a sales forecast. You then move into a supply review that says what supply Do I need to either build or buy or transport to fulfill that demand? So if I’m in the appliance industry, and I say I want to sell this many freezers across the the spectrum of customers, what do I have in stock? How many do I need to make? And what does that mean from a capacity perspective? back last year, if anyone tried to get a freezer, you may have noticed that you had a really hard time doing that during the beginning of COVID.

Will Bachman 04:50
I thought that I did notice that actually yeah, I bought a freezer and it was a big long wait. Everybody in the world was saying oh we want to buy a freezer and store my venison or just buy everything again whenever it’s available at the grocery store. Yeah,

Jessica Lackey 05:07
exactly. And if you’re trying to buy a, any kind of supply chain good right now, in April of 2021, you’re probably noticing that there’s a lot of out of stocks because a lot of products is trapped in Long Beach with port congestion from from China and then trapped in around the Suez Canal. So that’s a supply review saying in order to meet this demand, what do we need to build buyer or transport? And then you have a reconciliation process, both financially and unit wise, I say, we have this demand, we have this, what we can build, make, or build buyer or transport? Where do we have gaps, and in some cases, you have not enough demand to fill your supply capacity. So you’ve got manufacturing, plants need to keep running, but yet, demand is not there to fulfill that to max out that capacity, or in the case of freezers last year, you have much more demand than you have supply. And then the process then says, Okay, what how do we reconcile this? What leavers Do we need to pull either on the demand side, or the supply side to decrease demand, increase demand, decrease supply or increase supply? Once those decisions are made, then it’s handed off to a presented to the executive team that says, here’s the current landscape of demand and supply. And here’s the the trade offs that we need to make in order to have demand match supply. Any integrated business planning aspect, you’re also connecting that to your financials? Because you may say, Well, I’ve got demand, appropriately balanced with supply, but yet it’s not meeting our financial targets. So what are we going to do about that scenario?

Will Bachman 06:57
Okay, wow. So there’s a lot here to discuss. So, maybe walk me through a typical month as a sales and operations planning executive, like in one of the roles that you’ve had is there, I imagine there’s a sort of monthly rhythm of tasks that you go through?

Jessica Lackey 07:17
Yes, there is. So in organizations, you sometimes find that you have an SLP leader who sits outside of a function to really orchestrate the process. And sometimes it’s just embedded as a role within the supply chain, typically. But there’s usually a week or two of a demand review. So looking at your historical sales, your accuracy on those sales, the upcoming forecast and events that you have promotions or, you know, big events that you that typically are around the corner. So you re forecast your demand sales, they say, what’s my one set of numbers for demand? then a week later, you layer that into the supply picture to say, again, what demand do I need? What supplies Do I need to make that demand, and then you have a week to reconcile those plans, and come up with a recommendation to for your leadership team before your monthly Management Review. So it’s definitely a rigor of you know, within two weeks, you have a demand review next week is a supplier review next week is a reconciliation review. And then you you start the cycle, again, with a with a product review, keeping all your launch plans in and in hand.

Will Bachman 08:36
So that’s the kind of ideal ideal picture of things. Talk to me about some of the issues that come up, or, you know, if a client was looking for help on their sales and operations planning process, what might be some of the things that they’re facing?

Jessica Lackey 08:56
Sometimes the the problems start culturally, where there’s no leadership engagement. So that’s a big challenge, where your players on the ground are seeing these major issues, but leadership isn’t really engaged or holding functions accountable. Because a lot of times the demand process is managed by sales. And if you’ve got a sales organization that culturally has a bias for over delivering to their promises, you know, it always beats their forecast, because they’re sandbagging, that causes havoc within the supply chain. So it starts with cultural. Do we have leaders that believe in this process? Do we have leaders that are going to hold their teams accountable for participating in the process and learning and adjusting when their plans go differently than expected? Another challenge is systems. So it’s very challenging to do an SNMP process on a spreadsheet. But a lot of a lot of companies start there and do that. So getting into n Integration is really challenging. And the third processes. third challenge I see mostly is that it’s requires a fair amount of diligence to really make decisions, and really activate these trade offs. And that requires a fair amount of organizational commitment and muscle in the process.

Will Bachman 10:21
Talk to me about systems. So you mentioned it’s really difficult to do in a spreadsheet, what are some of the systems that companies use for this, what’s what’s that look like?

Jessica Lackey 10:33
The landscapes pretty, pretty wide and varied based on the the needs of the company. So I’ll name some of the big players, there’s connexus, there’s SAP, SAP ibp, there’s anaplan, there’s a company called blue yonder that used to be JTA. I think there’s a reading about a company called E to open and those are just the ones that that I know that have a fully that do all segments of the, of the planning process, there are other companies that I’m not as familiar with logility does, forecasting, Oracle has some products. So there’s a lot of systems out there. And this is again, where it goes into the strategy component of this. If a company really wants to invest in a good as no PII process, and an integrated and and planning process, there needs to be commitment from the IT organization for Clean Master Data, good system setup, and a willingness to invest in integrating all these systems. Because without, you know, it’s a monthly process to at the executive level, but then it enables daily and weekly planning at the tactical operator level.

Will Bachman 11:46
Is this something that’s typically done at? It sounds like it would be done at the corporate, the business unit level, the high level? And then is something like this replicated at the plant level? So you work for a major appliance company? Would I guess you’re doing this overall for the whole United States? But then is that process for edit individual plant? Are they just doing something similar,

Jessica Lackey 12:17
At a plant level, normally, it’s done by you start you, it’s a bottoms up top down reconciliation. So all the planning is done at an item level rolled up to a plant or rolled out in the roll up to a division level. So really, you’re looking top down at the at the total at the executive level, but it’s based on a bottoms up process, we would end up doing this for cooking products, refrigeration and freezer products, dish care and fabric care. But we’ll be looking across our entire source space. So in some cases, you have capacity in one facility, and not another facility. So the question is, what products are made in facility A versus facility? b? And how can you take the demand that you have and leverage your plant base? Or sometimes it’s a make versus buy decision, you have some manufacturing, that’s, you know, that you own? But then you have a surge of demand? And can you leverage overseas capacity? Or vice versa? So it really it’s done at a holistic level, but it’s generated from a bottoms up view? I would say it’s normally not, you know, you normally do it within a geography and then maybe within a division or business unit. But then it there’s also a global roll up, particularly when you’re talking about supply chain, and raw materials. There’s a chip shortage right now, there are some challenges and resins. And so then you actually at a, at an executive global level, to be saying from a global purchasing perspective, where do I, what Where do I most need to send my supply given the demand and the current supply situation in a given geography?

Will Bachman 14:02
I was surprised so I served a small manufacturing company for a while one of my clients, and they had maybe a couple 100 skews. And some of them we would produce to stock, some of them would be only produced the order because they were more like special orders. And they only had maybe four different production lines. But I was kind of astounded at how even this sort of 20 million 10,000,010 to $20 million revenue company it got so fiendishly complicated, you know, figuring it out because of it, get at the level of Okay, what are we going to produce next? What are we producing today, figuring out this process of which orders that we want to produce today because if you go from product A to product B, there might be a shorter changeover from product A to product C and you’re trying to sequence things And also your based on, you know what inventory we have in currently in stock or out of this bottle. So we can’t produce this particular product. And it just becomes this like, massively complicated problem where you’re trying to, you know, sort, you know, shift things around and figure out like, okay, now how does the changeover times work? Now? Do we have the right, you know, do we have to set up the whole machines? Again? Do we have the right inventory in stock to produce these things? You know, who, which clients are yelling the loudest? Because their stuff is late? And how important is this client? So it was like, really complicated problem, that you could almost solve by hand for a company that size. But I imagine that as you get more and more complex, and you’re talking about multiple plants, multiple divisions, multiple products, are companies using sort of artificial intelligence or Monte Carlo simulation to, you know, just sort out all the different combinations of which plants going to produce what or is it still, like, somewhat manual? How is that process done?

Jessica Lackey 16:05
Yeah, so that’s where systems come into play. So all these advanced planning systems have algorithms and heuristics to help you plan at the, again, Snoopy is really the kind of, I would say the mid to long range, as an IP doesn’t get into the necessarily the nitty gritty of production scheduling, though many of these, those supplier, the systems that they also get into production scheduling, but really, the, the system’s health, they just, it’s a tremendous help in there as machine learning AI. On forecasting. There’s response algorithms and heuristics that run on the supply side. But it’s also so critically important to start with process and people is you shouldn’t have to wait to know which customer is screaming the loudest before you know, who’s strategically important to serve. And what are our service level agreements for them? Maybe it’s okay, that this customer who’s small, who always orders low margins, special order things, maybe it’s okay, that they screen? And how do we strategically set out that? What are the most important products to make? Where do we make our money? And maybe it’s okay, if we lose a sale on? I mean, no one wants to lose business. But how is there organizational alignment on the most important products, the most important customers and the the high level operational plan before you even get into the specific nitty gritty on changeovers? But that’s really the Snoopy process is to say, what are what’s the operational plan we want to align to and then you get into the day to day tactical scheduling, which systems definitely help with that.

Will Bachman 17:46
Walk me through the reconciliation process and a little bit more detail, I think we can sort of intuitively understand what the demand forecasting process would look like. And in the supply review process, you know, what do we have out there? You know, what do we need to produce? But that reconciliation process, give me some case examples of some trade offs or decisions that you make, you can sanitize it, if you want, but of really getting into the nitty gritty of what that process looks like and some of the decisions that are happening.

Jessica Lackey 18:19
Okay. So example from apparel, we have a, this is years ago. But let’s say that the, the sales plan for fleece is higher than the demand plan or the supply plan for fleece. And the only way we’re going to need our financial targets is by satisfying this demand plan, but there is no supply, it could be a factory has no capacity could be a materials problem. It could be that they can make it and we can’t ship it here. So really the reconciliation processes that process to say, where do we have a demand supply gap? What are the levers we can pull? Can we especially given a given time horizon? So if it’s a year out that we know that our demand plans can outstrip supply? Can we certify a second supplier? Can we form materials? Can we certify a second plant? Can we add capacity to a given plant? Can we add overtime to the plant that we have? Can we run our factories more efficiency efficiently to get more weight out? And what are the financial trade offs and the operational trade offs that are used to make that decision? So it could be that well, we can’t certify second supplier but we could airfreight supply from a different a different partner and that financial trade off is x versus y. Or it would cost us this much money to invest in certifying a second or getting extra capacity. And then you look at a well maybe That doesn’t make a lot of financial sense. So let’s look at demand. What if we actually chose not to satisfy all this demand and instead segments in our products where we are only selling it to the customers where we make the most money. So really, you’re doing a top down like a bypass financial on each of the scenarios, from a demand perspective, decreasing demand. But by increasing price, or by selling to only profitable customers, or increasing supply, they’re really looking at the operational trade offs of an ease of doing that based on their time horizon, or looking at the financial cost of the options. That’s why it’s so critically important for organizations to invest in not just leaving this as part of the supply chain, but by putting it in a place of influence across sales, merchandising, marketing, because you could same time as we’re having the supply constraint on police, your marketing team could be creating like this bang up marketing campaign, that, you know, you’re looking to say, Well, I’m not gonna have enough product to support all this kind of lifts you’re doing for this for this market, marketing campaign. So why would we spend the money on a marketing campaign for products that we know we will be out of stock, or that could be a strategic initiative for the company is to be be out there be out of stock and create that demand for more products on going? So that’s the trade off reconciliation part where you need to have organizational commitment to the plan forward?

Will Bachman 21:23
Yeah, so that’s an example where you’d have more demand than you think you can supply with with your current factories. You mentioned like a year timeline, what are the different time horizons that you are operating? Under when you do a sales and operations plan? Are they are there some explicit like, okay, here’s our one month plan, or a six month plan or one year plan or talk to me about that a bit.

Jessica Lackey 21:47
So your SAP process typically is, you know, two to 20. It’s a rolling 24 month plan. In your your next, I would say three months, it’s really a tactical sales and operations execution plan, which gets into the much more skew level, you know, it gets into the production scheduling pieces. And beyond 24 months, it’s a more of a strategic plan for the company where we strategically going to invest where we strategically need to add capacity or customers, but really a best in class, as NOP processes are rolling 24 months, but definitely, companies want to strive to get out of the next, the next they want to get out of the next 90 days at minimum.

Will Bachman 22:31
What’s the typical training and background of a someone who’s in a sales and operations planning role?

Jessica Lackey 22:42
It can really depend a lot of them rise through the ranks of supply chain and planning. But we see a lot of Snoopy leaders also come from finance. The really important, you know, and, and, and there are some companies all over White is a great example of a company that really do great SAP training, in integrated business planning, training. But they’re, you know, SMP is not really taught. And there’s, there’s elements to the sap process as being the leader of the organization where you need to be incredibly aware of the nuances of the business and really have some political authority to help run decisions to the ground. So it’s, it’s as much about training on the process, which you said is, is not traditional, not terribly complicated to understand. But it is, requires a lot of process rigor requires a lot of decision, kind of helping decisions get made in facilitation and keeping tabs on a on a fair amount of moving parts of the business.

Will Bachman 23:50
And what are the skill sets required? You mentioned that it’s not really taught anywhere? What are what are some of the skills required to be a great sales and operations planning leader?

Jessica Lackey 23:59
Um, there’s the business acumen pieces, I think, you know, knowing how to read a p&l, understanding the basics of demand and supply you run it have, you want to have good sales leaders in demand planning leaders that know demand and you want to have a good leaders on the supply side that truly understand supply capabilities. But yes, no p leader needs to be a strategic thinker, aware of all of the ssop the pillars of the processes, financially savvy, but ultimately, a good communicator and a way to see the forest through the trees and drive through drive to action. So actually being in a snow, you know, actually, former consultants are probably fantastic at being ssop leaders, even if they’re not functionally trained in each of the underlying each of the underlying pillars, because it’s really not about functional excellence, spell driving cross functional decision making Which is a skill set of many of the listeners as podcast.

Will Bachman 25:05
curious what sorts of consulting project opportunities there are in this space? Can you think of any cases where you engage consultants or your you’ve seen other firms engaged consultants on SNL? Opie kind of projects?

Jessica Lackey 25:22
Yeah, you know, there’s a lot of consultants that yeah, that did that did market, that manufacturer that you talked about, that would be a perfect case example of a company that could use SNMP processes, I think it’s their art from an independent consulting perspective, I think there’s a huge market for that mid market zone of don’t really want to invest in in high end systems, but need the cultural thinking around the Snoopy process. At my, at my experience has been that when you’re missing customer deliveries, you’re having really high supply chain cost when you have high inventory. really reduce financial performance below what you think you should have, in financial surprises. Those are the times those are the indicators that say this could be a problem with our planning and SLP processes. That would be an indication of let’s look under the hood here. So my companies that I’ve been at have engaged consultants to help with SNMP, when they’ve got the symptoms of a non integrated process. Right now, I would say that, you know, any company that has found themselves in a supply chain, pinch due to COVID, should really invest in re looking at the integrated planning process and saying, there might be strategic decisions we’ve made for cost, the single sourcing of suppliers or moving things to overseas that maybe should be relooked at and could impact the sap process. If we choose to multisource move manufacturing to be more resilient, that has an impact on the sap process. And maybe consulting consultants could help diagnose that for companies.

Will Bachman 27:17
If you’re brought in by a client, and asked to do a diagnostic of their sales and operations planning process, let’s say that executives just sense that there’s some problem because things are working out. But everybody’s pointing fingers, everybody else. So they don’t know exactly what the root cause of the problem is. Walk me through what your diagnostic would be. What data are you looking at? What questions are you asking? Who are you talking to?

Jessica Lackey 27:44
Yeah, so from a who you’re talking to perspective, you’re talking to the whoever owns the p&l, because they’re the ones that make decisions. You’re talking to your sales leader, your operations and supply chain leader, your product leader, you’re talking and you probably merchandising, that’s who you’re talking to. And then you’re also talking to supply chain, typically, where it lives in finance. From a data perspective, you’re looking at those the lagging indicators? So inventory, demand, forecast accuracy, you’re looking at your service metrics for your customers to say, what’s the level of you’re looking at transportation as a percentage of sales? Typically, from a diagnostic perspective, you’re looking at culture and or leadership, engagement, people process and tools. From a people perspective years, you’re looking at the skill set of the of the players on the ground? Have they been trained in their function? And are they? What’s their fluency with systems and starting to get to that advanced machine learning perspective for some companies? From a process perspective, you’re looking at the functional pillars of do we do a product review a demand review or supply review? Do we have the building blocks, functionally? Or in? Do we have the cross functional integration? And then you’re looking at tools? Do we have systems that these each of these functional pillars, but don’t have a cross functional system or we just gapping on systems across the board?

Will Bachman 29:20
Fantastic. Well, Jessica, if people want to do follow up with you, and you know, get in touch, where would you point them?

Jessica Lackey 29:29
I’d point them to LinkedIn, Jessica Lackey. I’m an independent consultant. also partnering with some colleagues in the footwear and apparel space, to be the operational experts and to end in footwear operations. So you can find more information about me and you can also find more information about the colleagues I’m working with in the footwear apparel space.

Will Bachman 29:51
Fantastic. Well, Jessica, thank you so much for joining today, telling us about SLP. I feel a lot smarter about it now. And for listeners. Who are so inclined to give this show a five star review on iTunes that would be really much appreciated. It does help people discover the show, Jessica. Thanks again for joining. Thank you.

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