S&OP IE EVENT January 2011
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The document discusses Integrated Business Planning (IBP) and Sales and Operations Planning (S&OP) as processes that improve organizational alignment and financial performance. It emphasizes the evolution of planning goals over the years and stresses the importance of effective supply chain management amidst changing market dynamics. The document also highlights the need for collaboration across various functions of an organization to achieve successful planning outcomes.
S&OP IE EVENT January 2011
- 1. S&OP: Letter Perfect. Practice Imperfect1Lora Cecere, PartnerApril 2011
- 2. Leaders sensed Market Changes 5X Faster2
- 3. 3What’s in a name?A rose by any other name would smell as sweet.William Shapespeare
- 4. Integrated business planning (IBP) refers to the technologies, applications and processes of connecting the planning function across the enterprise to improve organizational alignment and financial performance. IBP accurately represents a holistic model of the companyin order to link strategic planning, and operational planning, with financial planning. By deploying a single model across the enterprise and leveraging the organization’s information assets, corporate executives, business unit heads and planning managers use IBP to evaluate plans and activities based on the true economic impact of each consideration.Sales and operations planning (S&OP) is an integrated business management process through which the executive/leadership team continually achieves focus, alignment and synchronization among all functions of the organization. The S&OP plan includes an updated sales plan, production plan, inventory plan, customer lead time (backlog) plan, new product development plan, strategic initiative plan and resulting financial plan. Plan frequency and planning horizon depend on the specifics of the industry. Short product life cycles and high demand volatility require a tighter S&OP planning as steadily consumed products. Done well, the S&OP process also enables effective supply chain management.What is in a name?4
- 6. What is the goal?What does good look like?How do we align incentives to maximize the outcome?How do we effectively tie the plan to action?The Right Questions6
- 7. The Changing Goal71985: Deliver a Feasible Plan for Operations1995: Match Demand with Supply2005: Demand Driven2011: Market Driven to Drive Value-based OutcomesIncreasing value…..
- 8. To Drive More Value…..Demand Orchestration8
- 9. Who has the Best Supply Chain?9
- 10. Building Value NetworksSupply chain strategyBusiness strategyWhat are the right things to do to increase company value?Value-network strategyWhat are the right ways to support the business strategy?What are the right trade-offs between value drivers for each value network?Right productplatformsDesign the supply responseBuild organizational systems and manage talentAlign supply relationshipsAlign demandrelationshipsEffective Supply NetworksExecution of buy-side strategiesDesign NetworksInnovation MethodologiesContinuous ImprovementCapabilities RequiredDemand NetworksJoint Value Creation StrategiesSupply Chain Network DesignBusiness ProcessHow do I do the right things right?
- 11. What drives Variability?Value: Price, trade incentives, new products, services, freshness, responsivenessVariety: Configurations, items, platforms, components, brands, processing technologiesVelocity: Lead-times, order to delivery, inventory turns, time to marketVolatility: Demand, inventory, schedules, reliability, yieldsVolume: Plants, warehouses, distribution centers/points, product flow
- 12. What is the goal?What does good look like?How do we align to maximize the outcome?How do we effectively tie the plan to action?The Right Questions12
- 13. 13
- 15. Getting to Letter Perfect….15
- 16. The Need for Balance16&Goal
- 17. What is the goal?What does good look like?How do we align to maximize the outcome?How do we effectively tie the plan to action?The Right Questions17
- 18. Demand-side ViewsSupply-side ViewsGlobalGlobalWarehousesPlantsShip-from LocationsProduction LinesManufacturing View (Units)Sales View ($)Marketing View ($, Units)Logistics View (Units, Cases)Account-LevelAVMI CSupplierSupplierSupplierSupplierDownstream DataDistributionNetworkDistributionNetworkDistributionNetworkTranslating demand: Demand hierachies
- 19. Demand-side ViewsSupply-side ViewsAdaptiveTranslationGlobalGlobalGlobalGlobalProduct CategoriesCountriesWarehousesPlantsAccounts (Ship-to locationsShip-from LocationsProduction LinesBrandsManufacturing View (Units)Sales View ($)Marketing View ($, Units)Logistics View (Units, Cases)Account-LevelAVMI C Supplier SupplierSupplierSupplierDownstream DataDistributionNetworkDistributionNetworkDistributionNetwork
- 20. Goal: Make the financial budget. Tops-down Focus. Desires control and wants predictability of operations.Forecast definition: The budgetFinanceGoal: Maximize revenue & market share, wants guaranteed product availabilityForecast definition: Sales planOperationsSales and MarketingGoal: Factory optimization, improve costs and minimize demand uncertaintyForecast definition: Manufacturing PlanDemand-sideSupply-sideSupply ChainGoal: A feasible plan. Bottom-up focus. Wants to minimize risk and disruptionForecast definition: The demand planStart with a Common Goal
- 21. Goal: Make the financial budget. Tops-down Focus. Desires control and wants predictability of operations.Forecast definition: The budgetFinanceGoal: Maximize revenue & market share, wants guaranteed product availabilityForecast definition: Sales planOperationsSales and MarketingGoal: Factory optimization, improve costs and minimize demand uncertaintyForecast definition: Manufacturing PlanDemand-sideSupply-sideSupply ChainGoal: A feasible plan. Bottom-up focus. Wants to minimize risk and disruptionForecast definition: The demand planStart with a Common Goal
- 22. What is the goal?What does good look like?How do we align to maximize the outcome?How do we effectively tie the plan to action?The Right Questions22
- 23. Forecasting: Trading Places23
- 24. CyclesMeasure and communicate the planMeasure and communicate the planPublish the constrained planPublish the constrained planOperational Review 1Executive plan review Executive plan review What if by supply for Trade-offsWhat if by supply for Trade-offsOperational Review 2Constrained plan by SupplyConstrained pan by SupplyDemand consensus refinementOperational Review 3Demand consensus refinementWhat if for DemandWhat if for DemandDevelop a demand planOperational Review 4Develop a demand planCollect sales and marketWeek DWeek 2Week 3Week 4Week AWeek BWeek CCollect sales and marketWeek 1
- 25. Peter Murray, Dupont at IBF conference:“The hardest change was changing to focus on market driversOur work on S&OP reversed a 12 year slide in margin.The downturn made us believers in strong horizontal processes at the executive level”25
- 26. SummaryIn tough economic times, horizontal excellence is paramount.S&OP: Letter perfect. Practice imperfect.Focus on the AND with the End in Mind.26
- 27. 27About UsAltimeter Group is a research insights group providing companies with a pragmatic approach to understanding disruptive technologies. We have four areas of focus: Leadership and Management, Customer Strategy, Enterprise Strategy, and Innovation and Design.Visit us at http://www.altimetergroup.com or contact info@altimetergroup.com.
- 28. 28Thank youLora Cecerelora@altimetergroup.comBlog: www.supplychainshaman.comTwitter: lcecereLinkedin: linkedin.com/pub/lora-cecere/0/196/573
Editor's Notes
- #3: The rate of new product innovation in theCPG industry has increased fairly steadily]innovation activityclearly reinforcesthe notion thatcompetition forconsumer attentionand spending isikl l tiofferings, today s are increasingly working to develop highlytargeted products aimed at a very finitesegment of the population. This trend islikely to drive the number of productintroductions up, while tempering the overallsales potential of any single product release.Beyond this “micro-targeting” trend, though,ithi t td l t Siover the past seven years, with food andbeverage introductions climbing nearly 3%annually and non-food introductionsgrowing at an average annual rate of justunder 9%.New UPCs have grown from 7% to over15% of all moving UPCs in IRI’s CPGquickly escalating.] t d t b M t f th is another important development. Since2004, the number of unique UPCs pershopper per year has declined 9% to 361. Intoday’s transforming economy, this numberis expected to continue to fall below the 350mark before the end of 2009.Retailers are working to streamline theirshelves and simplify the consumer shoppingcategory database. Most of these areflavor/form extensions or novelty/seasonalitems brought to market in hopes ofstimulating short-term incrementalpurchases. Only a small fraction of thesenew UPCs represent new brands or majorinnovations