How to Keep S&OP From Getting "Stuck", Oliver Wight, JDA
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This document discusses how to keep Sales & Operations Planning (S&OP) processes from getting "stuck" at an immature level. It finds that S&OP processes often do not involve senior management or fully integrate financial planning. As a result, companies miss out on benefits. The document recommends taking S&OP to an Integrated Business Planning (IBP) level with more robust financial integration and inclusion of strategic plans. It provides examples of companies that advanced their S&OP processes from supply chain-led to executive-led and integrated full business planning.
How to Keep S&OP From Getting "Stuck", Oliver Wight, JDA
- 1. How to Keep S&OP From Getting “Stuck” Coco Crum, Oliver Wight Danny Halim, JDA
- 2. Copyright 2010 JDA Software Group, Inc. - CONFIDENTIAL Agenda Why S&OP Processes Get “Stuck” Common Company Situations How to Get Un-Stuck Shelf-Connected S&OP
- 3. Copyright 2010 JDA Software Group, Inc. - CONFIDENTIAL Agenda Why S&OP Processes Get “Stuck” Common Company Situations How to Get Un-Stuck Shelf-Connected S&OP
- 4. Copyright 2010 JDA Software Group, Inc. - CONFIDENTIAL Key observation / perspective that will be shared S&OP has been evolving on a macro, industry level journey following a typical innovation adoption model, but key elements of the process are often missing in company implementations. S&OP implementations go through transitional stages at a micro, individual company level… Companies that follow-through move to an Integrated Business Planning (IBP) process. Supply Chain organizations can use IBP to strengthen their role in supporting “the Essence of the business.”
- 5. Copyright 2010 JDA Software Group, Inc. - CONFIDENTIAL S&OP and IBP: Decades of Evolution – The Macro Evolution 70s early 80s mid 80s late 80s late 90s early 2000s 2000 to present Production Planning Balancing Supply & Demand and Inventory Control Financial Integration Product and Portfolio Management Integration Supply Chain Collaboration Scenario Planning and Strategic Deployment Sales & Operations Planning
- 6. Copyright 2010 JDA Software Group, Inc. - CONFIDENTIAL S&OP Is a Common Sense Process for Aligning Company Plans Every Month
- 7. Copyright 2010 JDA Software Group, Inc. - CONFIDENTIAL IBP Is a Monthly Process for Managing the Business Enterprise
- 8. Copyright 2010 JDA Software Group, Inc. - CONFIDENTIAL Sales & Operations Planning and Integrated Business Planning A process led by senior management that evaluates and revises time-phased projections for demand, supply, new product development, strategic projects and the resulting financial plans. This is done on a monthly basis, on a planned 24-month rolling horizon. It is a decision-making process that realigns the tactical plans for all business functions in all geographies to support the company’s strategy, business goals and targets. A primary objective of S&OP/IBP is to reach consensus on a single operating plan, to which executives of the management team hold themselves accountable, and allocates the critical resources of people, equipment, inventory, materials, time and money to most effectively satisfy customers in a profitable way.
- 9. Copyright 2010 JDA Software Group, Inc. - CONFIDENTIAL Most Companies Have Elements of S&OP in Place, But Are Not Truly Doing S&OP / IBP (No Management Business Review and little executive involvement.) © Oliver Wight International 2009 Why is that? 70-80% of companies surveyed do not do S&OP at the executive level Therefore, they are not really doing S&OP/IBP at all!
- 10. Copyright 2010 JDA Software Group, Inc. - CONFIDENTIAL S&OP IBP – the Issue Is… S&OP/IBP is often treated as: – Supply Chain only – Demand – Supply – Inventory Balancing … near term IBP should be the primary management process to run the business. Companies get results … but they miss out on the benefits of truly doing it well. EAME 1014
- 11. Copyright 2010 JDA Software Group, Inc. - CONFIDENTIAL What We See: S&OP Goes Through Four Stages of Maturity…
- 12. Copyright 2010 JDA Software Group, Inc. - CONFIDENTIAL …But Companies Do Not Fully Mature
- 13. Copyright 2010 JDA Software Group, Inc. - CONFIDENTIAL Case Example – Supply Chain Initiated S&OP Implementation • A leading wine producer and distributor • Difficult to achieve consensus demand • S&OP process led and owned by supply chain • Emphasis on improving forecast accuracies and alignment to finance/budget • No management business review • Will gradually evolve to integrated business planning
- 14. Copyright 2010 JDA Software Group, Inc. - CONFIDENTIAL Here’s Why Maturity Typically Stops Middle Management Only Company Leadership Stuck Production Planning Balancing Supply & Demand and Inventory Control Sales & Operations Planning Financial Integration Product and Portfolio Management Integration Supply Chain Collaboration Scenario Planning and Strategic Deployment
- 15. Copyright 2010 JDA Software Group, Inc. - CONFIDENTIAL Here’s What Companies Miss When S&OP Is Not Fully Mature! 4 Stages
- 16. Copyright 2010 JDA Software Group, Inc. - CONFIDENTIAL Food for Thought … Are supply chain organizations truly connected with the essence of the business? Operational Excellence or Operational Competence? Operational Excellence Product Leadership Customer Intimacy What is your business focus?
- 17. Copyright 2010 JDA Software Group, Inc. - CONFIDENTIAL S&OP & IBP – What is the Difference? More Robust Financial Integration Inclusion of Strategic Plans, Initiatives, and Activities More Robust Product & Portfolio Review Improved Simulation, Modeling, and Scenarios Improved Operational Risk Visibility and Management Gap Identification, Improved Decision-Making Easy, Effective Translation – Aggregate and Detail Improved Trust Across the Entire Management Team
- 18. Copyright 2010 JDA Software Group, Inc. - CONFIDENTIAL Oliver Wight and JDA Partnership • Recognized Innovator and thought leader • Recognized standard for S&OP/IBP education and implementation • ClassA Certification • World class S&OP/IBP requires process and behavior changes and executive leadership • Recognized Market Leader for SCM & Collaboration • Broadest integrated functional coverage for S&OP and CPFR • World Class business processes efficiently deployed with technology
- 19. Copyright 2010 JDA Software Group, Inc. - CONFIDENTIAL JDA’s S&OP / IBP Solution Approach Demand Planning • Demand • Enterprise Planning • Promotions • Demand Classification • Collaborate Supply Planning • Fulfillment • Sequencing • Supply • Master Planning • Strategy/IPO • Collaborate Trans Planning • Logistics Sourcing • Transportation Planning • Inbound freight mgmt • Collaborate Profitability Simulation Analytic Dashboard Executive Mgmt Graphical Review Demand/Promotion Review Supply Review Financial Appraisal Management Business Review Process Workflow & Task Management Integrated Reconciliation Product Review Document Assumptions, Risks, Opportunities Scalable Hierarchy Meeting Management & Task Assignment “What-If” Scenario Modeling Publish Plan Process – Archive Inputs to Plan
- 20. Copyright 2010 JDA Software Group, Inc. - CONFIDENTIAL Agenda Why S&OP Processes Get “Stuck” Common Company Situations How to Get “Un-Stuck” Shelf-Connected S&OP
- 21. Copyright 2010 JDA Software Group, Inc. - CONFIDENTIAL Case Example • Healthcare Industry • Spinoff • Supply Chain Orientation • Initially Struggled to Get Executive Involvement • Now Executive-led S&OP • Executives View – Process Didn’t Address Their Business Issues – Information Presented Was Not in the Way They Viewed the Business
- 22. Copyright 2010 JDA Software Group, Inc. - CONFIDENTIAL Determine Value Leader Education Determine Plan Appoint Teams Leadership Phase Diagnostic Design Team Education Management Business Review Strategic Review Product & Portfolio Review Demand Review Supply Review Financial Appraisal Integration Reconciliation ProcessDesignandEducation Development Phase Quick Start Solution Setup Cycle 0 Tactical Strategic Decision Making Implement the Process Performance Measures Assess Progress Assess Progress Document Results ..... Aggregate to Detail Planning Problem Prevention Problem Solving Improve Communications Ownership Phase Aggregate to Detail Synchronization Design Cycle 1-3 Cycle 4-6 Cycle 7-8 Cycle 9 Executive Briefing Technology/InformatonScopting Diagnostic Assessment Business Data Mapping Elements Install Software and Train Oliver Wight JDA Joint Client Proven Path Fast Track Program Approach Executive Led and “Owned” Process… In 3 Months and Continuing to Improve Business Focus Financial Integration Product Innovation Inclusion
- 23. Copyright 2010 JDA Software Group, Inc. - CONFIDENTIAL Agenda Why S&OP Processes Get “Stuck” Common Company Situations Oliver Wight/JDA Fast Track Shelf-Connected S&OP
- 24. Copyright 2010 JDA Software Group, Inc. - CONFIDENTIAL Case Example Business Challenges • How do we best support each customer at every purchase? • How do we optimize shelf space in a highly cost-competitive economy? • Can we improve satisfaction, reduce stock-outs and increase revenue simultaneously? • Are our customers fully engaged in "the Sony experience"?
- 25. Copyright 2010 JDA Software Group, Inc. - CONFIDENTIAL Sony incorporated a focus from Sell-In to Sell Out • Localized assortments • Optimized shelf spaces and in- store displays • Promotion/bundling • Capture store-level KPIs and exceptions • Store/merchandising actions • Leveraging POS for forecasting is not good enough • Executing collaboration that includes store-clustering based on preferences and demographics and predicting out-of-stocks to trigger store-level actions Sell-outSell-in
- 26. Copyright 2010 JDA Software Group, Inc. - CONFIDENTIAL Shelf-Connected S&OP Strategically align to the business plan Supplier Factory Manufacturer DC Retail DC Manufacturing Supply Chain Retail Supply Chain Store S&OP Production Planning & Scheduling Raw Material Planning Demand Planning Fulfillment Planning Category Management Store & DC Replenishment Store Forecasting Promotional Planning Shelf Analytics Network, Sourcing and Inventory Optimization Order Promising, Inventory Deployment & Logistics ShipmentsProduction Orders Procurement Orders Assortments POS Sales DC Withdrawals Customer Orders Collaborative Planning
- 27. Copyright 2010 JDA Software Group, Inc. - CONFIDENTIAL “Americas’ favorite CE Brand” with industry leading positions in audio, video, information and communications equipment, semiconductors, components and other products Proven Results From Shelf Connected Journey Breakthrough results In-stocks at store level +18% Lowered weeks of supply by 27% Improved forecast accuracy by 40% Named Walmart Supplier of the Year* * Source: Gartner Case Study: Sony Electronics' Customer Focus and Channel Collaboration Result in Wal-Mart Supplier of the Year Award, November 2010 • “We felt our end users weren't fully engaged in the Sony experience, and that if we could better understand their needs, we could better support them. • We also knew we had to improve our already good relationships with retailers. I wanted to be able to tell them that if you carry X inventory and take Y actions, we can have a Z desired level of profitability.”* • - C.J. Wehlage, vice president of supply chain solutions
- 28. How to Keep S&OP From Getting “Stuck”