The SOFP Planning Meeting – SOFP Series Blog #5

The SOFP Planning Meeting

SOFP Series Blog #5

We are now at the third step in the SOFP process. The forecasts of customer demand for each value stream are available from sales & marketing, and the value stream operations people have entered their forecasts of production capacity each month for the next 18 months. It’s now time to identify the problems and resolve them.

The SOFP Planning meeting should take about 90 minutes, and has a very clear agenda. The people attending the SOFP Planning Meeting are the same people who developed the information on the planning sheet. This will include people from Sales & Marketing, Operations, New Product Development, Purchasing, Logistics, and Finance. Companies with many value streams may set up separate meetings for each value stream. Smaller organization will have a single meeting for all value streams.

This meeting is not for general discussion. It is a tightly agenda’d process where every aspect of the value stream plan is systematically addressed. The primary input to the meeting is the SOFP Planning Sheet.

The purpose of the meeting is balance the production plan with the customer demand, and also maintain appropriate levels of inventory or production backlog. The SOFP Planning Sheet will show where there are significant gaps because demand is higher than production capacity, and vice versa. The team work together and make decisions. Companies with significant seasonality often need to establish when they will build additional inventory to tide them over the high season.

Companies with a New Product Development value stream will also have a SOFP Planning Meeting. The purpose of this meeting is to decide how the development engineers time will be assigned across the various design and support projects. The time horizon for SOFP for New Product Development is often longer than 18 months.

The decisions are split into short term and longer term. Short term is generally about 3 months and longer term is the remaining 4-18 months.

The longer term decisions build up over time. The purpose of the longer term SOFP planning is to identify well in advance when significant changes will be needed. This enables the organization to make these changes in an orderly manner because they are reviewed as a part of the regular monthly SOFP. One company has a rule that no capital projects or staff increases can be suggested without the need being identified on the SOFP for 6 months in a row. Their experience is that many of these “needs” are eliminated because the team finds other ways to solve the problem.

The output of the SOFP Planning Meeting is:

  • An integrated plan for each value stream for sales, operations, new product launch, and continuous improvement.
  • Solutions to the problems causing a lack of balance between demand and capacity; short term and long term.
  • Documentation of any assumptions that underlie the plan.
  • Short term month-end financial estimates.
  • Changes to kanban quantities in finished goods, production, and raw materials/purchased components.
  • Supplier forecasts of expect demand for our company each month for the next 12-18 months.
  • Agenda for the Executive SOFP Meeting.

The kanban calculations and the supplier forecast are often done after the meeting, but based on decisions made in the meeting.

Now that there’s a plan in place to address both the short term issues and the longer term needs, the financial forecast can be created. This will be addressed in our next blog.