ACADEMY OF ECONOMIC STUDIES OF MOLDOVA

FACULTY OF INTRNATIONAL ECONOMIC RELATIONS

DEPARTMENT OF INTERNATIONAL ECNOMIC RELATIONS
ADEOLA Sodeeq Adedoyin
PLANNING THE SALES WITHIN THE
COMPANIES WITH FOREIGN TRADE ACTIVITY
PROJECT IN IER
Speci!i"#ion Wo$!d Econo%y nd IER
A&#'o$(
student of group EMREI 123,
full-time study
ADEOLA Sodeeq Adedoiyn
________________________
(signature)
Scientific coordinator:
P!", #ssoc"prof" Rodica $R%!%
________________________
(signature)
$isinau & 2'1(
PLAN
INTRODUCTION))))))))))))))))))))))
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CHAPTER I , GLO-AL MAR.ETING STRATEGIES))))))***
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CHAPTER II , GLO-AL SALES
STRATEGIES)))))))))))*0/
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CONCLUSIONS)))))))))))))))))))))))
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REFERENCES))))))))))))))))))))))))
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INTRODUCTION
)e first significant glo*al acti+ity *y a domestic firm is te importing and
e,porting of goods and ser+ices" )e purpose of tis paper is to analy-e te international
trade pase for a domestic firm tat *egins to import goods and ser+ices from foreign
suppliers and to e,port to foreign *uyers"
Managers around te glo*e are recogni-ing te increasing necessity for teir
companies and organi-ations to de+elop te s.ills, aptitudes and .no/ledge to compete
effecti+ely in international mar.ets" )e emergence of a more open /orld economy, te
glo*ali-ation of consumer tastes and te una*ated e,pansion of Internet access glo*ally
all increase te interdependency and interconnections of nation economies across te
glo*e"
)e need for managers to de+elop te s.ills to respond to tese pressures affects
companies of all si-es"
)ere are se+eral /ays to e+aluate te e,port potential of your products and
ser+ices in o+erseas mar.ets" )e most common approac is to e,amine te success of
your products domestically" If your company succeeds at selling in te domestic mar.et,
tere is a good cance tat it /ill also *e successful in mar.ets a*road, at least tose
/ere similar needs and conditions e,ist"
#noter means to assess your company0s potential in e,porting is *y e,amining
te uni1ue or important features of your product" If tose features are ard to duplicate
a*road, ten it is li.ely tat you /ill *e successful o+erseas" # uni1ue product may a+e
little competition and demand for it migt *e 1uite ig"
2inally, your product may a+e e,port potential e+en if tere are declining sales in
te domestic mar.et" Si-ea*le e,port mar.ets may still e,ist, especially if te product
once did /ell in your country, *ut is no/ losing mar.et sare to more tecnically
ad+anced products" 3ter countries may not need state-of-te-art tecnology and4or may
*e una*le to afford te most sopisticated and e,pensi+e products" Suc mar.ets may
a+e a surprisingly ealty demand for domestic products tat are older or considered
o*solete *y domestic mar.et standards"
In $apter I, /ill *e introduced te concepts of international mar.eting, ena*ling
tem to ac1uire an appreciation of te comple,ities of mar.eting on an international *asis
and of o/ tis acti+ity differs from operating purely in domestic mar.ets" In te
follo/ing sections /ill *e defined international mar.eting, e,amine te important trends
in te glo*al mar.eting en+ironment and introduce te reader to te international
mar.eting strategy de+elopment and international mar.eting planning process"
In $apter II I /ill present some guidelines of an International 5usiness Plan"
It /ill ser+e as a step-*y-step guide to lead you troug te process of e,porting your
product to an international mar.et" )is /ill *e ready and de+eloped international
*usiness plan to e,port your product"
CHAPTER I
GLO-AL MAR.ETING STRATEGIES
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%sually, selling focuses on te needs of te seller, mar.eting on te needs of te
*uyer 6customer7" )e purpose of *usiness is to get and .eep a customer" International
mar.eting in+ol+es te mar.eting of goods and ser+ices outside te organi-ation8s ome
country"
Multinational mar.eting is a comple, form of international mar.eting tat engages
an organi-ation in mar.eting operations in many countries" 9lo*al mar.eting refers to
mar.eting acti+ities coordinated and integrated across multiple mar.ets"
# firm8s o+erseas in+ol+ement may fall into one of se+eral categories:
1" Domestic: 3perate e,clusi+ely /itin a single country"
2" Regional exporter: 3perate /itin a geograpically defined region tat crosses
national *oundaries" Mar.ets ser+ed are economically and culturally omogenous" If
acti+ity occurs outside te ome region, it is opportunistic"
3" Exporter: Run operations from a central office in te ome region, e,porting finised
goods to a +ariety of countries: some mar.eting, sales and distri*ution outside te ome
region"
(" International: Regional operations are some/at autonomous, *ut .ey decisions are
made and coordinated from te central office in te ome region" Manufacturing and
assem*ly, mar.eting and sales are decentrali-ed *eyond te ome region" 5ot finised
goods and intermediate products are e,ported outside te ome region"
/* International to global: Run independent and mainly self-sufficient su*sidiaries in a
range of countries" ;ile some .ey functions 6R<!, sourcing, financing7 are
decentrali-ed, te ome region is still te primary *ase for many functions"
9* Global: =igly decentrali-ed organi-ation operating across a *road range of countries"
>o geograpic area 6including te ome region7 is assumed a priori to *e te primary
*ase for any functional area" Eac function including R<!, sourcing, manufacturing,
mar.eting and sales is performed in te location6s7 around te /orld most suita*le for
tat function" )ecnology and glo*ali-ation sape te /orld" )e first elps determine
uman preferences: te second, economic realities" Standardi-ed consumer products, lo/
price and tecnology are .ey points for successful glo*ali-ation"
)e glo*ali-ation of mar.ets is at and" ;it tat, te multinational commercial
/orld nears its end, and so does te multinational corporation" )e /orld8s needs and
desires a+e *een irre+oca*ly omogeni-ed 6mar.et needs7" )is ma.es te multinational
corporation o*solete and te glo*al corporation a*solute" >o*ody is safe from glo*al
reac and te irresisti*le economies of scale 6reduction of costs and prices7 and scope"
)e multinational and glo*al corporation is not te same ting" )e multinational
corporation operates in a num*er of countries and ad?usts its products and practices in
eac at ig relati+e costs" )e glo*al corporation operates /it resolute constancy at lo/
relati+e cost 6price7 as if te entire /orld 6or ma?or regions of it7 /ere a single entity: it
sells mar.ets te same ig-1uality tings similarly e+ery/ere" 5ut, many glo*al firms
produce te same products te same /ay for a glo*al mar.et *ut tailor teir selling
approaces to local +ariations in te glo*al mar.et"
)e modern glo*al corporation contrasts po/erfully /it te aging multinational
corporation" Instead of adapting to superficial and e+en entrenced differences /itin and
*et/een nations, it /ill see. sensi*ly to force suita*ly 6more or less7 standardi-ed
products and practices on te entire glo*e" 6tin. glo*ally, act locally7"
#ltoug some /ould stem te foreign in+asion troug protecti+e legislation,
protectionism in te long run only raises li+ing costs and protects inefficient domestic
firms 6national controls7" )e rigt ans/er is tat companies must learn o/ to enter
foreign mar.ets and increase teir glo*al competiti+eness" 2irms tat do +enture a*road
find te international mar.etplace far different from te domestic one" Mar.et si-es,
*uyer *ea+ior and mar.eting practices all +ary, meaning tat international mar.eters
must carefully e+aluate all mar.et segments in /ic tey e,pect to compete"
;eter to compete glo*ally is a strategic decision 6strategic intent7 tat /ill
fundamentally affect te firm, including its operations and its management" 2or many
companies, te decision to glo*ali-e remains an important and difficult one 6glo*al
strategy and action7" )ypically, tere are many issues *eind a company@s decision to
*egin to compete in foreign mar.ets" 2or some firms, going a*road is te result of a
deli*erate policy decision 6e,ploiting mar.et potential and gro/t7: for oters, it is a
reaction to a specific *usiness opportunity 6glo*al financial turmoil, etc"7 or a competiti+e
callenge 6pressuring competitors7"
5ut, a decision of tis magnitude is al/ays a strategic proacti+e decision rater
tan simply a reaction 6learning o/ to *usiness a*road7"
Reasons for glo*al e,pansion are mentioned *elo/:
a7 3pportunistic glo*al mar.et de+elopment 6di+ersifying mar.ets7
*7 2ollo/ing customers a*road 6customer satisfaction7
c7 Pursuing geograpic di+ersification 6climate, topograpy, space, etc"7
d7 E,ploiting different economic gro/t rates 6gaining scale and scope7
e7 E,ploiting product life cycle differences 6tecnology7
f7 Pursuing potential a*road
g7 9lo*ali-ing for defensi+e reasons
7 Pursuing a glo*al logic or imperati+e 6ne/ mar.ets and profits7
Moreo+er, tere can *e se+eral reasons to *e mentioned including comparati+e
ad+antage, economic trends, demograpic conditions, competition at ome, te stage in
te product life cycle, ta, structures and peace" )o succeed in glo*al mar.eting
companies need to loo. carefully at teir geograpic e,pansion" )o some e,tent, a firm
ma.es a conscious decision a*out its e,tent of glo*ali-ation *y coosing a posture tat
may range from entirely domestic /itout any international in+ol+ement 6domestic
focus7 to a glo*al reac /ere te company de+otes its entire mar.eting strategy to glo*al
competition" In te de+elopment of an international mar.eting strategy, te firm may
decide to *e domestic-only, ome-country, ost-country or regional4glo*al-oriented"
Eac le+el of glo*ali-ation /ill profoundly cange te /ay a company competes
and /ill re1uire different strategies /it respect to mar.eting programs, planning,
organi-ation and control of te international mar.eting effort" #n industry in /ic firm
competes is also important in applying different strategies"
)rac.ing te de+elopment of te large glo*al corporations today re+eals a
recurring, se1uential pattern of e,pansion" )e first step is to understand te international
mar.eting en+ironment, particularly te international trade system" Second, te company
must consider /at proportion of foreign to total sales to see., /eter to do *usiness in
a fe/ or many countries and /at types of countries to enter" )e tird step is to decide
on /ic particular mar.ets to enter and tis calls for e+aluating te pro*a*le rate of
return on in+estment against te le+el of ris. 6mar.et differences7" )en, te company
as to decide o/ to enter eac attracti+e mar.et" Many companies start as indirect or
direct e,port e,porters and ten mo+e to licensing, ?oint-+entures and finally direct
in+estment: tis company e+olution as *een called te internationali-ation process"
$ompanies must ne,t decide on te e,tent to /ic teir products, promotion, price and
distri*ution sould *e adapted to indi+idual foreign mar.ets" 2inally, te company must
de+elop an effecti+e organi-ation for pursuing international mar.eting"
Most firms start /it an e,port department and graduate to an international
di+ision" # fe/ *ecome glo*al companies /ic means tat top management plans and
organi-es on a glo*al *asis 6organi-ation istory7"
0*6 G!o3! %$4e# en#$y 5#$#e2ie5
E,porting represents te least commitment on te part of te firm entering a
foreign mar.et" E,porting to a foreign mar.et is a strategy many companies follo/ for at
least some of teir mar.ets" Since many countries do not offer a large enoug opportunity
to ?ustify local production, e,porting allo/s a company to centrally manufacture its
products for se+eral mar.ets and terefore to o*tain economies of scale"
2urtermore, since e,ports add +olume to an already e,isting production
operation located else/ere, te marginal profita*ility of suc e,ports tends to *e ig" #
firm as t/o *asic options for carrying out its e,port operations" )e form of e,porting
can *e directly under te firm@s control or indirect and outside te firm@s control" It can
contact foreign mar.ets troug a domestically located 6in te e,porter@s country of
operation7 intermediary-an approac called indirect e,porting" #lternati+ely, it can use an
intermediary located in te foreign mar.et-an approac termed direct e,porting"
Indirect Exporting: Indirect e,porting includes dealing troug e,port
management companies of foreign agents, mercants or distri*utors" Se+eral types of
intermediaries located in te domestic mar.et are ready to assist a manufacturer in
contacting international mar.ets or *uyers" )e ma?or ad+antage for managers using a
domestic intermediary lies in tat indi+idual@s .no/ledge of foreign mar.et conditions"
Particularly, for companies /it little or no e,perience in e,porting, te use of a domestic
intermediary pro+ides te e,porter /it readily a+aila*le e,pertise" )e most common
types of intermediaries are *ro.ers, com*ination e,port and manufacturers@ e,port
agents" 9roup selling acti+ities can also elp indi+idual manufacturers in teir e,port
operations"
Direct Exporting: !irect e,porting includes setting up an e,port department
/itin te firm or a+ing te firm@s sales force sell directly to foreign customers or
mar.eting intermediaries" # company engages in direct e,porting /en it e,ports
troug intermediaries located in te foreign mar.ets" %nder direct e,porting, an e,porter
must deal /it a large num*er of foreign contacts, possi*ly one or more for eac country
te company plans to enter" #ltoug a direct e,porting operation re1uires a larger
degree of e,pertise, tis metod of mar.et entry does pro+ide te company /it a greater
degree of control o+er its distri*ution cannels tan /ould indirect e,porting" )e
e,porter may select from t/o ma?or types of intermediaries: agents and mercants" #lso,
te e,porting company may esta*lis its o/n sales su*sidiary as an alternati+e to
independent intermediaries" Successful direct e,porting depends on te +ia*ility of
relationsip *uilt up *et/een te e,porting firm and te local distri*utor or importer" 5y
*uilding te relationsip /ell, te e,porter sa+es considera*le in+estment costs"
)e independent distri*utor earns a margin on te selling price of te products"
#ltoug te independent distri*utor does not represent a direct cost to te e,porter, te
margin te distri*utor earns represents an opportunity tat is lost to te e,porter" 5y
s/itcing to a sales su*sidiary to carry out te distri*utor@s tas.s, te e,porter can earn
te same margin" ;it increasing +olume, te incenti+e to start a sales su*sidiary gro/s"
3n te oter and, if te anticipated sales +olume is small, te independent distri*utor
/ill *e more efficient since sales are canneled troug a distri*utor /o is maintaining
te necessary staff for se+eral product lines" )e lac. of control fre1uently causes
e,porters to sift from an independent distri*utor to /olly o/ned sales su*sidiaries"
Many companies e,port directly to teir o/n sales su*sidiaries a*road,
sidestepping independent intermediaries" )e sales su*sidiary assumes te role of te
independent distri*utor *y stoc.ing te company0s products and4or ser+ices, sometimes
?ointly ad+ertising and promoting te products, selling to *uyers and assuming te credit
ris." )e sales su*sidiary offers te manufacturer full control of selling operations in a
foreign mar.et" Suc control may *e important if te company@s products re1uire te use
of special mar.eting s.ills suc as ad+ertising or selling" )e e,porter finds it possi*le to
transfer or e,port not only te product *ut also te entire mar.eting program tat often
ma.es te product a success" )e operation of a su*sidiary adds a ne/ dimension to a
company@s international mar.eting operation" It re1uires te commitment of capital in a
foreign country, primarily for te financing of account recei+a*les and in+entory" #lso,
te operation of a sales su*sidiary entails a num*er of general administrati+e e,penses
tat are essentially fi,ed in nature" #s a result, a commitment to a sales su*sidiary sould
not *e made /itout careful e+aluation of all te costs in+ol+ed"
Fo$ei2n P$od&c#ion 5 n En#$y S#$#e2y(
Many companies reali-e tat to open a ne/ mar.et and ser+e local customers
*etter, e,porting into tat mar.et is not a sufficiently strong commitment to reali-e strong
local presence" #s a result, tese companies loo. for /ays to strengten teir *ase *y
entering into one of se+eral /ays to manufacture"
Licensing: Aicensing is similar to contract manufacturing, as te foreign licensee
recei+es specifications for producing products locally, *ut te licensor generally recei+es
a set fee or royalty rater tan finised products" Aicensing may offer te foreign firm
access to *rands, trademar.s, trade secrets or patents associated /it products
manufactured" %nder licensing, a company assigns te rigt to a patent 6/ic protects a
product, tecnology or process7 or a trademar. 6/ic protects a product name7 to
anoter company for a fee or royalty" %sing licensing as a metod of mar.et entry, a
company can gain mar.et presence /itout an e1uity 6capital7 in+estment" )e foreign
company, or licensee gains te rigt to commercially e,ploit te patent or trademar. on
eiter an e,clusi+e 6te e,clusi+e rigt to a certain geograpic region7 or an unrestricted
*asis" !ue to ad+antages of lo/ ris. and lo/ in+estment, licensing is a particularly
attracti+e mode for small and medium-si-ed firms" Aicensing also is an effecti+e mode
for testing te future +ia*ility of more acti+e in+ol+ement /it a foreign partner"
Aicenses are signed for a +ariety of time periods" !epending on te in+estment
needed to enter te mar.et, te foreign licensee may insist on a longer licensing period to
pay off te initial in+estment" )ypically, te licensee /ill ma.e all necessary capital
in+estments 6macinery, in+entory and so fort7 and mar.et te products in te assigned
sales territories, /ic may consist of one or se+eral countries" Aicensing agreements are
su*?ect to negotiation and tend to +ary considera*ly from company to company and from
industry to industry" $ompanies use licensing for a num*er of reasons" 2or one, a
company may not a+e te .no/ledge or te time to engage more acti+ely in
international mar.eting" )e mar.et potential of te target country may also *e too small
to support a manufacturing operation" # licensee as te ad+antage of adding te licensed
product@s +olume to an ongoing operation tere*y reducing te need for a large
in+estment in ne/ fi,ed assets" # company /it limited resources can gain ad+antage *y
a+ing a foreign partner mar.et its products *y signing a licensing contract" Aicensing not
only sa+es capital *ecause no additional in+estment is necessary *ut also allo/s scarce
managerial resources to *e concentrated on more lucrati+e mar.ets" #lso, some smaller
companies /it a product in ig demand may not *e a*le to satisfy demand unless
licenses are granted to oter companies /it sufficient manufacturing capacity"
In some countries /ere te political or economic situation appears uncertain, a
licensing agreement /ill a+oid te potential ris. associated /it in+estments in fi,ed
facilities" Representing an e,port of tecnology rater tan goods 6as in e,porting7 or
capital, licensing is an attracti+e mode in mar.ets /ere political and economic
uncertainties ma.e a greater in+ol+ement ris.y" 5ot commercial and political ris.s are
a*sor*ed *y te licensee" In oter countries go+ernments fa+or te granting of licenses to
independent local manufacturers as a means of *uilding up an independent local industry"
In suc cases, a foreign manufacturer may prefer to team up /it capa*le licensee despite
a large mar.et si-e, *ecause oter forms of entry may not *e possi*le"
# ma?or disad+antage of licensing is te company@s su*stantial dependence on te
local licensee to produce re+enues and tus royalties usually paid as a percentage on sale
+olume only" 3nce a license is granted, royalties are paid only if te licensee is capa*le
of performing an effecti+e mar.eting ?o*" Since te local company@s mar.eting s.ills
may *e less de+eloped, re+enues from licensing may suffer accordingly" #noter
disad+antage is te resulting uncertainty of product 1uality" # foreign company@s image
may suffer if a local licensee mar.ets a product of su*standard 1uality" Ensuring a
uniform 1uality re1uires additional resources from te licenser tat may reduce te
profita*ility of te licensing acti+ity" )us, te producer loses some control in certain
situations" )e ris. of losing control of intellectual property and4or tecnological
ad+antages can also *e mentioned as anoter disad+antage of licensing"
#noter potential pro*lem is tat te licensee may adapt te licensed product and
compete ead on /it te licensor" )e possi*ility of nurturing a potential competitor is
+ie/ed *y many companies as a disad+antage of licensing" ;it licenses usually limited
to a specific time period, a company as to guard against te situation in /ic te
licensee /ill use te same tecnology independently after te license as e,pired and
terefore turn into a competitor" #ltoug tere is a great +ariation according to industry,
licensing fees in general are su*stantially lo/er tan te profits tat can *e made *y
e,porting or local manufacturing" !epending on te product, licensing fees may range
any/ere *et/een 1 percent and 2' percent of sales, /it 3 to B percent *eing more
typical for industrial products" $onceptually, licensing sould *e pursued as an entry
strategy if te amount of te licensing fees e,ceeds te incremental re+enues of any oter
entry strategy suc as e,porting or local manufacturing" # toroug in+estigation of te
mar.et potential is re1uired to estimate potential re+enues from any one of te entry
strategies under consideration"
Franchising: 2rancising is a special form of licensing in /ic te franciser
ma.es a total mar.eting program a+aila*le including te *rand name, logo, products and
metod of operation" %sually te francise agreement is more compreensi+e tan a
regular licensing agreement in as muc as te total operation of te francisee is
prescri*ed" It differs from licensing principally in te dept and scope of 1uality controls
placed on all pases of te francisee@s operation" )e francise concept is e,panding
rapidly *eyond its traditional *usinesses 6suc as ser+ice stations, restaurants and real-
estate *ro.ers7 to include less traditional formats suc as tra+el agencies, used car
dealers, te +ideo industry and professional and ealt impro+ement ser+ices" #*out C'
percent of all Mc!onald@s restaurants are francised and as of 1DDD te firm operated
a*out 2(,B'' stores in 11E countries"
Local Manufacturing: # common and /idely practiced form of mar.et entry is
te local manufacturing of a company@s products" Many companies find it to teir
ad+antage to manufacture locally instead of supplying te particular mar.et /it products
made else/ere" >umerous factors suc as local costs, mar.et si-e, tariffs, la/s and
political considerations may affect a coice to manufacture locally" )e actual type of
local production depends on te arrangements made: it may *e contract manufacturing,
assem*ly or fully integrated production" Since local production represents a greater
commitment to a mar.et tan oter entry strategies, it deser+es considera*le attention
*efore a final decision is made"
%nder contract manufacturing, a company arranges to a+e its products
manufactured *y an independent local company on a contractual *asis" )is is an entry
mode in /ic a firm contracts /it a foreign firm to manufacture parts or finised
products or to assem*le parts into finised products" )e manufacturer@s responsi*ility is
restricted to production" #fter/ard, products are turned o+er to te international company
/ic usually assumes te mar.eting responsi*ilities for sales, promotion and
distri*ution" In a /ay, te international company rents te production capacity of te
local firm to a+oid esta*lising its o/n plant or to circum+ent *arriers set up to pre+ent
te import of its products" $ontract manufacturing differs from licensing /it respect to
te legal relationsip of te firms in+ol+ed" )e local producer manufactures *ased on
orders from te international firm *ut te international firm gi+es +irtually no
commitment *eyond te placement of orders" )ypically, te contracting firm supplies
complete product specifications to te foreign firm, sets production +olume and
guarantees purcase" Ao/er la*or costs a*road are te ma?or incenti+e for using tis entry
mode" )ypically, contract manufacturing is cosen for countries /it a lo/-+olume
mar.et potential com*ined /it ig tariff protection" In suc situations, local production
appears ad+antageous to a+oid te ig tariffs, *ut te local mar.et does not support te
+olume necessary to ?ustify te *uilding of a single plant" )ese conditions tend to e,ist
in te smaller countries in $entral #merica, #frica and #sia" 3f course, /eter an
international company a+ails itself of tis metod of entry also depends on its products"
%sually, contract manufacturing is employed /ere te production tecnology in+ol+ed
is /idely a+aila*le and /ere te mar.eting effort is of crucial importance in te success
of te product"
5y mo+ing to an assem*ly operation, te international firm locates a portion of
te manufacturing process in te foreign country" )ypically, assem*ly consists only of
te last stages of manufacturing and depends on te ready supply of components or
manufactured parts to *e sipped in from anoter country" #ssem*ly usually in+ol+es
ea+y use of la*or rater tan e,tensi+e in+estment in capital outlays or e1uipment"
Motor +eicle manufacturers and electronics industries a+e made e,tensi+e use of
assem*ly operations in numerous countries"
3ften, companies /ant to ta.e ad+antage of lo/er /age costs *y sifting te la*or
intensi+e operation to te foreign mar.et: tis results in a lo/er final price of te
products" In many cases, o/e+er, te local go+ernment forces te setting up of assem*ly
operations eiter *y *anning te import of fully assem*led products or *y carging
e,cessi+e tariffs on imports" #s a defensi+e mo+e, foreign companies *egin assem*ly
operations to protect teir mar.ets"
=o/e+er, successful assem*ly operations re1uire dependa*le access to imported
parts" )is is often not guaranteed and in countries /it cronic foreign e,cange
pro*lems, supply interruptions can occur" )o esta*lis a fully integrated local production
unit represents te greatest commitment a company can ma.e for a foreign mar.et" Since
*uilding a plant in+ol+es a su*stantial outlay in capital, companies only do so /ere
demand appears assured" International companies may a+e any num*er of reasons for
esta*lising factories in foreign countries" 3ften, te primary reason is to ta.e ad+antage
of lo/er costs in a country, tus pro+iding a *etter *asis for competing /it local firms or
oter foreign companies already present" #lso, ig transportation costs and tariffs may
ma.e imported goods uncompetiti+e" Some companies /ant to *uild a plant to gain ne/
*usiness and customers" Suc an aggressi+e strategy is *ased on te fact tat local
production represents a strong commitment and is often te only /ay to con+ince clients
to s/itc suppliers"
Aocal production is of particular importance in industrial mar.ets /ere ser+ice
and relia*ility of supply are main factors in te coice of product or supplier" Many
times, companies esta*lis production a*road not to enter ne/ mar.ets *ut to protect
/at tey a+e already gained troug e,porting" $anging economic or political factors
may ma.e suc a mo+e necessary" )e Fapanese car manufacturers, /o ad *een su*?ect
to an import limitation of assem*led cars imported from Fapan, *egan to *uild factories in
%nited States in te 1DC's to protect teir mar.et sare" #s mentioned a*o+e, Fapanese
manufacturers@ reasons for te local production /ere partly political as te %nited States
imposed import targets for se+eral years" #lso, /it te +alue of te yen increasing to one
undred yen per %S dollar, e,ports from Fapan *ecame uneconomical compared /it
local production" )us, to defend mar.et positions, Fapanese car companies instituted a
longer-term strategy of ma.ing cars in te region /ere tey are sold" Mo+ing /it an
esta*lised customer can also *e a reason for setting up plants a*road" In many industries,
important suppliers /ant to .eep a relationsip *y esta*lising plants near customer
locations: /en customers *uild ne/ plants else/ere, suppliers mo+e too" #noter
reason can also *e sifting production a*road to sa+e costs"
CHAPTER II
6*0 G!o3! 5!e5 5#$#e2ie5 8 p!nnin2 nd !&nc'in2
9oing glo*al - tis is a term tat /as nearly uneard of a fe/ decades ago" )oday,
you can meet t/o am*itious entrepreneurial college students, de+eloping *usiness plans
tat a+e yet to *e e,ecuted, and tey are already tal.ing a*out going glo*al"
# common *elief underlying today8s *usiness society is tat, in order to *e
successful in te long term, you a+e to a+e a glo*al strategy" )e fact is tat it ta.es a
tremendous amount of coordination, effort, and sa++y to launc a glo*al sales strategy"
>ot to mention /at it ta.es to e,ecute a glo*al strategy"
)ere are, o/e+er, a num*er of proacti+e measures and steps tat early-stage,
entrepreneurial companies sould consider if a .ey part of teir strategy and future
success is tied to entering te glo*al mar.ets"
5efore e+er considering a glo*al sales strategy, ensure tat you can *e successful in a
similar mar.et tat is, in all li.eliood, muc easier to penetrate tan a glo*al mar.et"
;e8+e seen countless companies tat tried to Ggo glo*alH prior to e,ecuting in teir o/n
*ac.yards" >ot only is tis strategy ris.y, it can *e fatal to an emerging company tat as
significant capital needs and limited resources"
If you a+e successfully e,ecuted on your core sales competency domestically,
ensure tat you a+e te appropriate e,perience to e,plore a glo*al mar.et" Ieep in
mind, almost e+ery glo*al mar.et is different in terms of culture, *usiness acumen,
language and e,pectations of te sta.eolders" It is a*solutely critical to identify and ire
e,perienced indi+iduals /o a+e a istory of *eing successful in glo*al mar.ets"
It /ill typically ta.e longer to penetrate a glo*al mar.et and attain results tat are
satisfactory tan it does in local and domestic mar.ets" 3ften times, a company /ill need
to de+elop a ne/ set of measurement metrics related to glo*al initiati+es as /ell as
compensation strategies" 9i+en te significant cultural differences *et/een te %"S" and
oter countries, it is +ery easy to under estimate te impact of +arious degrees of success
/itin a glo*al mar.et" )a.e sufficient time to ensure tat te measurement metrics you
put in place ma.e sense in ligt of a ne/, untapped mar.et"
#d+ances in tecnology o+er te last decade a+e clearly made doing *usiness
glo*ally easier and more efficient" >o dou*t, te ne,t 1' years /ill result in e+en more
inno+ations tat /ill allo/ domestic companies to operate glo*ally /it e+en furter
limited resources on te ground o+erseas" ;or.ing closely /it your information
tecnology team and coordinating tese efforts /it glo*al representati+es and customers
is a tremendous ad+antage to going glo*al tat companies did not a+e 1' years ago"
Ma.e sure you ta.e ad+antage of tis"
#s /e all .no/, not e+ery *usiness endea+or is a success" E,panding glo*ally as
e+en lo/er odds of success and, as a result, a company needs to define clearly /at
success /ill *e" If tat measure is not acie+ed, you a+e to .no/ /en to cut *ac. and,
potentially, e,it te glo*al mar.ets" Many successful domestic companies a+e *een
fore+er damaged *y /aiting too long to e,it a failing glo*al strategy"
3nce your company as successfully entered a glo*al mar.et, ensure tat you are
financially and resource-ready to enter additional mar.ets" )e learning cur+e of
operating glo*ally is uge and companies /ill a+e significant opportunities to le+erage
success" 5e cautious as you loo. at oter mar.ets, and understand tat no t/o glo*al
*usiness communities are te same" Eac /ill ta.e different s.ill sets and e,pertise"
)e glo*al *usiness en+ironment is an e,citing one" Many glo*al mar.ets outside te
%"S" are gro/ing significantly faster tan our mar.et" 2or e,ample, /e8re seeing a
num*er of ig-potential companies tat are considering glo*al strategies in 1uic.ly
emerging countries suc as $ina" >o dou*t, te truly successful companies of today, and
especially tomorro/, /ill a+e to e,pertly e,ecute a glo*al strategy" )e J1 million
1uestion today is /eter you /ill a+e te discipline and e,pertise to ta.e ad+antage of
tis opportunity" Aet8s ope so"
6*6 S#$#e2ic 5!e5 p!n 8 4ey co%ponen#5
Yo& ':e #o ':e 2ood 5#$#e2ic 5!e5 p!n #o 2e# ny;'e$e* Success in sales
management starts /it planning" )ere is a need to de+elop a plan tat pro+ides your
sales team /it te strategy and tactics to lead tem to success" )ere are fi+e .ey
components to de+eloping a successful sales plan"
I* De1ine #'e ide! c&5#o%e$5*
)e first step, in a sales plan, is to formulate a strategy for ac1uiring ne/ clients
and maintaining your e,isting ones" ;at does your ideal client loo. li.eK )e *est /ay
to determine tis is to loo. at your current clients and study tem" ;o are your ig
margin clientsK ;at industry are tey inK If te ma?ority is in te same type of *usiness,
may*e you sould target tat industry" =o/ /as te lead de+elopedK ;at /as te sales
cycleK =o/ did tey payK #ns/ering tese 1uestions can elp to find your ideal
customer" Fust as important as finding your ideal customer is identifying te types of
customers you don8t /ant" ;ic of your current customers represent te lo/ margin
*usinessK ;o as te igest cancellation rateK ;ic are te slo/ paysK !e+elop a list
of te good and te *ad and loo. at targeting tose tat represent te *est in your mar.et
and de+eloping a sales plan strategy to get tem"

II* .no; #'e USP*
# strategic plan sould descri*e not ?ust your products and ser+ices, *ut your
uni1ue selling proposition" Lour %SP is te ting tat sets you apart from your
competition" Lour company may offer te same set of products and ser+ices as your
competitor, so /y sould customers coose youK )e ans/er sould *e more tan you
a+e te lo/est price" Ma.e sure you understand your %SP and if you aren8t sure /at it
is, as. around"

III* An!y"e #'e #e$$i#o$y*
;at8s te mar.et or territory your sales efforts /ill co+erK In your sales plan,
you sould define your mar.et geograpically to start /it" If your company ser+ices te
$icago mar.et, tat /ould ma.e up your geograpic territory" 5ut you don8t sell to
e+eryone in te $icago mar.et do youK If you determined in step one tat your *est
customers /ere property management companies, ten tat8s te segment of te mar.et
you8re interested in" =o/ *ig is tis mar.etK Is it gro/ing or srin.ingK ;at oter
mar.et segments loo. li.e te property management segmentK $ould you attac. tose as
/ellK =o/ many of tose ideal customers are in your mar.etK If tere aren8t enoug to
reac your target, you8ll need to loo. at additional factors to ma.e up te difference"

IV* W'o i5 #'e co%pe#i#ion<
In your sales plan, it is e,tremely important tat you .no/ and understand your
competition" %nless you a+e a mar.et all to yourself, understanding o/ te
competition operates and functions is .ey to your success and te success of eac of your
salespeople" 3ne o/ner4manager I /or.ed /it told me e .ne/ e+eryting a*out te
competition, *ut /en I as.ed if e ad documented it, e said no" ;en I as.ed im
o/ e trained is salespeople to deal /it te competition, e stared at me li.e it /as
someting e ad ne+er considered" ;rite it do/n" Sare it" E+ery ma?or organi-ation I
a+e /or.ed /it ad /rite-ups on +arious competitors and made sure eac of te
salespeople .ne/ /o tey /ere, /at tey sold, o/ muc tey sold it for & and most
importantly, /y customers /ould *e *etter ser+ed *y teir company tan te
competition"

V* S!e5 E=pec##ion5*
Most of tis information sould *e in your *usiness plan" If not, you sould
de+elop a forecast of your sales and e,penses *y mont, 1uarter and year" !o tis for
your entire team and eac of your territories" Include in tis forecast sales eadcount,
units sold, re+enue and anticipated margin" It8s important to remem*er tat sales
e,pectations, ?ust li.e te rest of your strategic sales plan, is a dynamic document you8ll
constantly re+isit and ad?ust as you go for/ard" ;en you prepare your sales
e,pectations, *e realistic" !on8t ma.e te sales targets unreaca*le, *ut don8t ma.e tem
so lo/ tat /en you reac te target, you find you8re out of *usiness"
)e sales plan and your sales strategy is an e,ceedingly important document tat
deser+es lots of time and energy to de+elop" It sould *e ad?usted as your company
e+ol+es, ne/ products or ser+ices are introduced or te mar.et canges" )e .ey is to get
input from all te sta.eolders, including your customers, .ey employees from +arious
departments in your organi-ation, mar.et data and your salespeople"
So, to de+elop your strategic sales plan, ma.e sure to: 17 !efine your ideal
customer, 27 !e+elop your %SP, 37 #naly-e your territory design, (7 Ino/ your
competition, and B7 =a+e solid sales e,pectations"
6*+C5e 5#&dy
El.ay Manufacturing $ompany, founded in 1D2', is an international designer,
mar.eter, producer, and distri*utor of sin.s, faucets, pressuri-ed /ater coolers, and
.itcen ca*inets" )ese products are sold troug plum*ing /olesalers, mass mer-
cants, and ard/are stores" El.ay, /ic is pri+ately eld, employs a*out (,'''
people /orld/ide and is ead1uartered in $icago, Illinois" )is presentation focuses
on te El.ay !i+ision, /ic supplies sin.s, faucets, and coolers from si, domestic
and t/o international locations" El.ay8s /ide range of products is suita*le for e+ery
application from te top-line gourmet .itcen to te /ee.end do-it-yourself
remodeler"
El.ay8s manufacturing strategy is largely ma.e-to-stoc., *ut as a considera*le
amount of ma.e-to-order GspecialsH on a daily *asis" Principles of FI) and lean
manufacturing implemented o+er te past fi+e years a+e resulted in factory flo/
lines for final assem*ly, /ic are supplied /it fa*ricated components *y feeder
departments" #ll facilities are /or.ing on implementing point-of-use storage, +isual
.an*an pull systems, +arious 1uality initiati+es, setup reduction, and rate-*ased due-
date-dri+en production planning" )e o*?ecti+e is to syncroni-e daily production to
customer demand as muc as possi*le, /ile maintaining lo/ cost and ig deli+ery
performance"
)e primary performance measures are safety, 1uality, cost, deli+ery, and
in+entory" Eac of tese as supporting performance measures tat address specific
operating o*?ecti+es" )ese are reported *y te plants daily, and re+ie/ed /it te
+ice president of operations /ee.ly"
In 2''', El.ay Manufacturing recogni-ed a need to furter impro+e competiti+e
performance in terms of on-time deli+ery, fill rate, cycle time, and in+entory turns"
#n ena*ling o*?ecti+e /as to lin. top management planning to te day-to-day
production line capacity and priority, and to purcase material" )e management
team deter-mined tat sales and operations planning /as a .ey strategy in acie+ing
tese o*?ecti+es *y *alancing demand and supply on a regular *asis troug tis ig-
performance top management communication process" )e +ision /as tat S<3P
/ould pro+ide a Gone-plan processH for syncroni-ing sales, finance, manufacturing,
materials, uman resources, and engineering" It also /ould pro+ide te foundation
arcitecture for using ERP to dri+e seamless planning troug te organi-ation"
)e presentation descri*es /y S<3P /as implemented, o/ it /or.s, and o/
tey did it" In te presentation, specific formats, reports, and related information /ill
*e presented tat are not pu*lised in tis paper"
Sales and operations planning 6S<3P7 is a pro+en top management metod for
ma.ing timely proacti+e resourcing decisions for la*or, fi,ed cost, capital, .ey
materials, and core *ased on demand and supply *alancing" Many manufacturers a+e
disco+ered te po/er of tis practice and are successfully applying it to lo/er cost,
pro+ide te *est ser+ice, and minimi-e in+estment"
S<3P is a montly formal *alancing of sup-ply and demand troug a E-to-12-
mont planning ori-on *y aggregate product families" It generally includes incoming
orders, *ac.log, sipment, finised goods in+entory, production, and capacity
pro?ections in montly time *uc.ets" It is con-ducted in a muc prescri*ed format *y
te top management team" )is is a critical point: top management" #ny company
tat em*races tis process must engage te president and direct reports" 3ter/ise,
tere /ill *e a disconnect *et/een teir /ises and te information on te formal
S<3P document"
)e ma?or o*?ecti+e of S<3P is to pro+ide a Gone-plan processH tat connects all
functional areas of te *usiness from top management to te sop floor on a regular
*asis" In its a*sence, eac functional area is li.ely to a+e plans tat are disconnected
at *est, and in a*solute conflict at /orst" It is tis o*?ecti+e tat ma.es S<3P te tool
tat connects top management planning seamlessly /it day-to-day factory
e,ecution" )is is a uge *enefitM ;itout tis connecti+ity, te factory /ill often run
to a set of assumptions tat are e,tremely disconnected from te top management
team" Purcasing /ill commit money and manufacturing /ill position people and
e1uipment in a /ay tat can easily *e /ay out of sync /it demand, in+entory, and
*ac.log o*?ecti+es"
Acco&n#5 Gene$!
Recei:3!e Sales, Production, & Led2e$
Finished Goods
Inventory Planning
Distribution
Sales Order & Inventory
Information Information
Order Promis-
ing and Material Man-
Scheduling agement
Product and
Manufacturing ngineering
Information Information
Sho! Floor Su!!lier
"alue-#dd Partnershi!
$ecution $ecution
Acco&n#5
Co5#in2 Repo$#5 Py3!e
Fi2&$e 6*+*0 8 E=pnded S>OP 3&5ine55 %ode!
In a recent meeting, te +ice president of sales /as eard saying, G;e couldn8t a+e
done tese t/o years ago"H )is comment /as in reference to a +ery focused discussion
in te S<3P meeting regarding o/ to *est plan production and in+entory to satisfy
increasing demand o+er te ne,t fe/ periods" In late 2''', El.ay reali-ed tat in order to
lo/er te cost of production /ile impro+ing customer ser+ice, te formal *alance of
supply and demand ad to *e addressed"
#t tat time, sales produced a forecast tat /as used in a +ariety of disconnected
/ays *y te +arious manufacturing groups" 2inised goods in+entory /as a result of te
disconnect, not strategically planned" )e Gdemand sidersH and te Gsupply-sidersH did
not a+e a meaningful4formal Gand-sa.eH and agreement on te sales, production, and
in+entory plan" It /as te recognition of tis fundamental need tat dro+e El.ay to use
S<3P as te G*est practiceH to *alance supply and demand"
5ut tere /as more" In addition to tis traditional definition of S<3P, El.ay cose to
e,pand te *oundaries to include a systemic lin. to de-tailed sceduling and material
planning, and ten drill it rigt do/n to sop floor e,ecution and purcasing" Fi2&$e
6*+*0 so/s te e,panded S<3P *usiness model used *y El.ay"
)raditional S<3P is in te top middle *o," )is is /ere te top management
demand and supply *alance ta.es place" )e ne,t t/o *o,es, order promising and
sceduling, and material management, include all of te detailed planning deri+ed from
te top-le+el S<3P" )e *ottom t/o *o,es, sop floor and supplier e,ecution, carry out
te planning acti+ity +ia system dri+en scedules and +arious +isual .an*an tecni1ues"
)is e,panded S<3P model ensures tat te El.ay planning process is lin.ed
seamlessly from top management to day -to-day operations e,ecution" )is approac and
scope is relati+ely uni1ue for te entire su*?ect of S<3P, and /ill continue to e,pand te
process *enefit"
3perationally, 2'13 /as an outstanding year for te El.ay !i+ision" )e results
so/n *elo/ are due largely to te S<3P process 6as /ell as oter initiati+es7, /ic
allo/ed te management team to ma.e fact-*ased decision 1uic.ly and regularly as a
unified organi-ation"
Pe$1o$%nce
Me5&$e C'n2e 1$o% 6?06 #o 6?0+
)otal in+entory
dollars 32N reduction
)otal in+entory
turns 3BN increase
3n-time sipments 2BN impro+ement to D1N
5ac.orders 3BN reduction
$ycle time (CN reduction to O"O days
T3!e 6*+*0 8 Pe$1o$%nce %e5&$e
)e si, steps descri*ed in te follo/ing paragraps summari-e te El.ay S<3P
process" )ese are a com*ination of recogni-ed S<3P *est practices tailored to suit
El.ay8s operating caracteristics: position, canging te num*er of production days *y
production line, and canging te split *et/een plants" 3nce te S<3P coordinator as
done tis preliminary analysis, te pre-S<3P meeting can *e eld" Step 3 is
accomplised *et/een 2riday and Monday"
S#ep 0( Co!!ec# #'e Pe$iod End Ac#&!
)e accounting calendar is *ased on four-/ee. and fi+e-/ee. periods 6not
monts7 in a ( -(-B 1uarterly rotation" )e period al/ays ends on 2ri-day, /ic
allo/s a consistent calendar in terms of te S<3P process steps" Period actual are re-
ported from te *usiness system at C:'' a"m" on te Monday follo/ing te end of te
period" 5y plant and *usiness total, tese include sipments in units and dollars *y
product family, finised goods in+entory in units and cost *y product family, and
production in units and ours *y producing line" It is important to capture in+entory at
a specific point in time since it is a constantly canging num*er" )e S<3P
coordinator captures tese actual"
S#ep 6( Upd#e #'e S!e5 Fo$ec5#
)e mar.eting manager collects input from te internal sales organi-ation,
outside reps, mar.eting data sources, and oter El.ay people during te first fe/ days
of te period" 5ased on all of te mar.et intelligence, re+isions to te forecast are
made in units and dollars *y sales *usiness unit, commodity, and product family"
)ere are four sales *usiness units 6El.ay, =alsey )aylor, Re+ere, and International7,
tree commodities 6sin.s, fountains4coolers, and faucets7, and EE product families"
)e sales manager /itin eac *usiness unit is accounta*ility for te sales forecast,
and te El.ay mar.eting manager is accounta*le for aggregating te data" )is step is
accomplised *y te fourt day of te period"
S#ep +( Pe$1o$% P$e!i%in$y -!ncin2 o1 De%nd nd S&pp!y*
)e S<3P coordinator recei+es te updated fore-cast from te mar.eting
manager, and *egins de+eloping te production plan using finised goods in+entory
as te decouple" )ere are fi+e primary finised goods in+entory locations, and te
supply cain manager specifies stoc. items and in+entory positions *y location" )e
S<3P coordinator ten specifies te production rates *y family to accomplis tese
in+entory positions" >e,t, a capacity plan is created in terms of earned ours *y
production line across all plants as a function of te production rates *y family" )e
o*?ecti+e is to le+el or ramp te lines /ile maintaining te finised goods in+entory
position" )is is an iterati+e process tat includes altering te in+entory"
S#ep5 @( Cond&c# P$e,S>OP ;i#' #'e P!n# Mn2e$5*
>o/ is /en te fun starts" )e S<3P $oordinator scedules a one-our
meeting /it eac plant manager to re+ie/ te preliminary supply and demand
*alance" )e di+ision supply cain manager, te plant materials manager, te plant
production manager, and oters may attend tis meeting" )e o*?ecti+e is to re+ie/
te line run rates and finised goods in+entory position relati+e to te sales forecast"
%sually, tere is a considera*le amount of discussion around sort-term capacity
issues" #d?ustments are made until all are in agreement, is-sues for te S<3P meeting
are identified, and decisions are noted" #t times, te capacity plan /ill *e completely
rerun, a process tat ta.es a*out 3' minutes" Step ( is done on )uesday, te se+ent
day of te period"
S#ep /( Cond&c# #'e S>OP Mee#in2*
)e meeting is eld montly on te second )ursday, and lasts a*out t/o ours"
)e PP of operations, PP of sales, PP of finance, plant man-agers, mar.eting
managers, supply cain manager, te S<3P coordinator and oter people as needed
attend it" #ttendance is nearly perfectQte date is on te calendar for te year and
doesn8t cangeM )is ensures participation"
)e agenda is rougly 2B percent re+ie/ing past period8s actual performance to
plan in terms of sales in units and dollars *y product commodity, finised goods
in+entory in units and dollars *y product commodity *y plant, and production in
earned ours *y production line *y plant" Key metrics *y plant are also re+ie/ed to
so/ impro+ement trends in terms of order fill rate, cycle time, in+entory turns, and
deli+ery performance" Eac person /o is accounta*le for performance spea.s to is
or er num*ersQtis is critically important for te process to succeed"
)e oter OB percent of te agenda is re+ie/ing te outloo. for te ne,t se+eral
periods" Sales pro?ections, finised goods in+entory le+els, and production line rates
are discussed" #ny issues needing attention are noted and action items assigned"
)ese actions are re+ie/ed at te ne,t meeting" 9enerally, tere is 1uite a *it of
discussion, /ic ensures tat all te players are on te same page" )e outloo.
concludes /it a summary of te en-tire El.ay !i+ision and a re+ie/ of te action"
S#ep 9( Di5#$i3&#e #'e In1o$%#ion nd D$i!! I# Do;n T'$o&2' #'e P!nnin2
P$oce55*
#fter te S<3P meeting, te total document is electronically distri*uted to te
meeting attendees" It is teir ?o* to distri*ute te information appropriately" Part of
tis distri*ution is a Gdrill do/nH to te scedulers and te line super+isors" 2or
e,ample, at te El.ay !i+ision, eac production line as a /ite *oard tat so/s te
num*er of units and earned ours to *e accomplised eac day" )ese num*ers are
ta.en directly from te S<3P document" #s te period progresses, actual +s" plan
performance is measured daily"
In >o+em*er 2'12, El.ay top management decided to mo+e for/ard /it a
formal S<3P process" )e pro?ect /as endorsed *y te company president and co-
campioned *y te +ice president of operations and te +ice president of sales" 2rom
.ic.off to te first meeting /as a*out tree monts" #noter four monts /as
re1uired to mature te process" Implementation steps tat a+e *een ta.en as of tis
/riting 6May 2'1(7 are as follo/s:
1" )e pro?ect campions 6PP operations and PP sales7 eld a .ic.off meeting /it
senior management to re+ie/ te pro?ect o*?ecti+es, deli+era*les, and
metodology" 6>o+em*er 2'127
2" )e S<3P coordinator position /as defined and filled" 6!ecem*er 2'127
3" )e pro?ect team /as formed including, plant manager 6co-cair7, mar.eting
manager 6co-cair7, S<3P coordinator, MIS, supply cain manager, production
manager, and )$# consultant" 6!ecem*er 2'127
(" # t/o-day S<3P education session /as elp for te campions, pro?ect team, and
2B oter .ey operating managers" 6Fanuary 2'137
B" )e detailed pro?ect plan /as de+eloped" 6Fanuary 2'137
E" )e first cut of te S<3P process /as de-signed including data sources for actual,
S<3P formats, performance measures, calendar, and meeting agenda" 6Fanuary&
Marc 2'137
O" )e first S<3P meeting /as eld" 6Marc 2'137
C" S<3P refinements and re+ision /ere made including data purification,
preparation, format impro+ement, and data assem*ly automation" 6#pril 2''1&
#ugust 2'137"
D" )e process reaced a le+el /ere it could effecti+ely *e used to manage te
*usiness" 6#ugust 2'137
1'" )e S<3P process lin.age to detailed planning *egan, and continues to e+ol+e"
6Fuly 2'13&!ecem*er 2'1(7"
11" )e process /as mo+ed from essentially a spreadseet application to a totally
ERP contained solution 6PeopleSoft7" 6>o+em*er 2'13&May 2'1(7
#s of tis /riting, te effort to lin. S<3P to te sceduling and materials
planning functions are /ell under/ay, *ut are not yet completed" )e intent is to
scedule production lines to te daily run rates specified in te S<3P process, and to
procure materials to support tese scedules"
3ne important *rea.troug feature is to a+e a daily scedule *y production line
tat comes directly from te ERP system in a fit-for-use condition, and is used *y
super+isors on a daily *asis to run te production lines" In tis /ay, S<3P is lin.ed to
te sop floor" )e scedule /ill *e e,ecuted *y a com*ination of .an*an pull signals
and ta.e-action reports for stoc. items, and ta.e-action reports for direct non-stoc.
customer demand"
Material planning +ia traditional MRP logic /ill *e lin.ed to te output of S<3P
+ia a planning 53M metodology" #ctual replenisment /ill *e triggered +ia MRP
ta.e-action reports, .an*an signals, and PMI 6+endor managed in+entory7"
#ll of tese actions /ill *e accomplised in 2'1("
Successfully implementing S<3P in your company depends on a fe/, *ut +ery
important, principles"
1" )op management must *e on *oard and lead te effort" )is doesn8t mean tey do
all te /or." 5ut it does mean tat tey 617 so/ up at te meetings /en tey are
supposed to, 627 ma.e it clear in e+eryone8s mind tat tis is not an optional
acti+ity, 637 pro+ide te re-sources to get it done 6S<3P coordinator, MIS
support, S<3P e,perts7"
2" )op management and operating management must use te S<3P process to run
te *usiness as a one-plan process" )is is simple" ;en someone as.s, G;at are
te pro?ected sipments for ne,t periodKH te ans/er comes from te S<3P
document, not from anoter spreadseet" ;en someone as.s, G;at is te daily
run rate for line (1'KH te ans/er comes from te S<3P document, not from
anoter spreadseet" Lou get te idea" )e S<3P document is a true statement of
/at /e intend to do" If any oter document is used, a multi-plan process e,ists
/ic usually renders S<3P meaningless"
3" So/ up" D' percent of success is so/ing up" )e rigt people must
accomplis te specified process steps on time, and attend te sceduled
meetings /itout fail" It is unaccepta*le to send su*stitutes, *e late, or not at-
tend" Successful companies pu*lis an annual scedule of S<3P e+ents and
get it on e+ery player8s personal calendar" )is /ay, e+eryone .no/s /at is
going on, /en it is going on, and /o is in+ol+ed" 3ter acti+ities can ten
*e sceduled around S<3P"
(" =a+e fla/less data presented in a fit-for-use condition" )is applies especially
to te actual from te pre+ious period" )ere is only one ans/er to G;at did
/e sipKH >aturally, fore-casted sales, production, and in+entory /ill *e *est
estimates, *ut sould *e understanda*le and formatted for easy use"
El.ay Manufacturing ad a need to impro+e competiti+e performance in terms of
on-time deli+ery, fill rate, cycle time, and in+entory turns" Sales and operations
planning /as a .ey strategy in acie+ing tese o*?ecti+es *y *alancing demand and
supply on a regular *asis troug tis ig-performance, top management
communication process" In addition, S<3P *ecame te foundation for using ERP to
dri+e seamless planning troug te organi-ation" )raditional S<3P /as
accomplised in se+en monts, and e,panded S<3P is in process as of tis /riting"
)e pro?ect /as top management led and designed *y a middle management pro?ect
team" )o find out more, /e encourage you to con-tact one of te autors"
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