Presentation given at the Demand Solutions Conference on Sales and Operations Planning

Building an Effective S&OP Process

Lora Cecere

September 2013

Supply Chain Insights LLC Copyright © 2013, p. 3

Cereal


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advice for supply chain leaders. A company dedicated to research,

turn to us when you want the latest insights on supply chain trends, technologies to know

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This is the new bible for all supply chain executives. It provides an insider’s perspective that will prove incredibly valuable to even the most grizzled supply chain veteran. This is the next must-have business book.

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18 Reports in 2012


2014 Publication


8

Current State


Current State


A Supply Chain

is a Complex System

with Complex Processes

with Increasing Complexity


The Supply Chain Effective Frontier:


Mining 20 Years of Financial Data


Industry Progress


Source: Supply Chain Insights 2012

Average Days of Inventory by Year

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Consumer Packaged Goods

59 57 62 64 67 67 68 70 70 64 64 67

Chemical

71.5 71.9 78.2 75.1 62 70.3 68.1 64.3 64.3 78.6 72.9 72.8

Pharma

122.236691097

869

133.699100562

175

190.147616165

968

170.986522478

989

184.342617399

859

175.550260476

877

167.799951139

247

149.815153981

283

154.915781882

591

198.663134119

976

154.313480863

244

131.819794240

294

High Tech

93.1 57.6 46.5 48.5 35.9 37.3 43.8 36.8 34.6 41.3 34.8 30.4

Average

86.4591727744

674

80.0497751405

437

94.2119040414

919

89.6466306197

472

87.3106543499

647

87.5375651192

192

86.9249877848

117

80.2287884953

207

80.9539454706

477

95.6407835299

941

81.5033702158

11

75.5049485600

736

25.0

75.0

125.0

175.0

225.0

Da

ys

o

f In

ve

nto

ry


What Is Supply Chain Excellence?

• Perform better than peer group

• Improve year-over-year results

• Align internally on metrics

• Deliver against the business strategy

• Demonstrate consistency in results

• Use innovation in supply chain processes

• Balance. Be leaders in managing trade-offs


Productivity in Manufacturing


Productivity in Retail


Progress(2000-2012)


Impact of A Recession


Value Network Strategy

Supply chain strategy

Business StrategyWhat are the right things to do to increase company value?

Value-network Supply Chain StrategyWhat are the right ways to support the business strategy?

What are the right trade-offs between value drivers for each value network?

Right productplatforms

Design the supply

response

Build organizational systems and

manage talent

Align supply relationships

Align demandrelationships

Effective Supply Networks

Execution of buy-side strategies

Continuous Improvement

Capabilities RequiredSupply Chain

Network Design

Design Networks

Innovation Methodologies

Demand Networks

Joint Value Creation Strategies

Business ProcessHow do I do the right things right?

Source: Supply Chain Insights, LLC


Agility


SHARED VISION

+ SKILLS + INCENTIVE + RESOURCES + PLAN + LEADERSHIP = CHANGE

SKILLS + INCENTIVE + RESOURCES + PLAN = CONFUSION

SHARED VISION

+ INCENTIVE + RESOURCES + PLAN + LEADERSHIP = ANXIETY

SHARED VISION

+ SKILLS + INCENTIVE + RESOURCES + LEADERSHIP =FALSE

STARTS

SHARED VISION

+ SKILLS + INCENTIVE + PLAN + LEADERSHIP = FRUSTRATION

SHARED VISION

+ SKILLS + RESOURCES + PLAN + LEADERSHIP =GRADUAL CHANGE

Source: J.P. Kotter

Collaboration: The Right Stuff


Commodity Price Increases and Volatility


Ease of Getting Total Supply Chain Costs

___________________________________________________________Source: Supply Chain Insights LLC, Transportation (Aug-Oct 2012)Base: Transportation Users (Manufacturers, Retailers and Distributors) (n=34)Q18. How easy is it for your company to get total supply chain costs for your operations?

Users 12% 12% 24% 24% 29%

USERS: Ease of Getting Total Supply Chain Costs

Extremely/very easy 5 Neutral 3 Extremely/very difficult

24% EASY 53% DIFFICULT


26

Driving Value through S&OP


CostVolumeGrowth

CEO

Chief Customer Officer

Chief Marketing Officer Sales

Account Teams

COO

VP of Supply Chain

Customer Service Procurement Logistics

CFO

CIO

VP of Manufacturing

Quality

Typical Organization


Sales and Operations Planning



Alignment


Finance


Information Technology


S&OP ProcessExistence, Goals & Processes


S&OP Balance

What-if Analysis


Common Practice Market-driven Focus

S Ask salesFocus on market drivers:How do we best shape demand?

& Direct integration to supplyDesign of the value chain to optimize trade-offs, minimize risk, balance cycles, and orchestrate demand

OP Manufacturing planTrade-offs between make, source and deliver

Getting to Letter Perfect

39

S&OP Evolution

Manufacturing-Driven

Deliver a Feasible Plan for Operations

Match Demand with Supply

Sales Driven

Match Demandwith Supply

Business-planning Driven

Maximize Profitability

Demand Driven

Maximize Opportunity Sense and

Shape Demand

Market Driven

Maximize Opportunity and Mitigate Risk. Orchestrate

DemandMarket to Market

Greater Benefit• Growth• Resilience• Efficiency



S&OP ProcessPlan Execution


Benefits Received from S&OP Processes

Source: Supply Chain Insights, 2012What benefits have you received from your work with S&OP processes?

Increasing revenue

Improving forecast accuracy

Reduction of inventory

Improving asset utilization

Determining outsourced manufacturing

Determining procurement requirements

Improving new product launch

Transportation and warehouse management

Capital planning and asset management

Improvements in the perfect order

59%

57%

50%

42%

38%

36%

34%

32%

32%

30%

▲ 2%

▲ 5-7%

▲ 3-7%

▲ 3-6%

▲ 3-6%

▼ 10-15%

▼ 2-8%


Case Study


Days of Inventory (2000-2012)


Growth (2007-2012)


47

The Role of Forecasting


A forecast is not a forecast is not a forecast.


Business Planning

Forecasting

Constrained Forecast

Increasing levels of granularity

Increasing need for value network strategy alignment

A Forecast is not a Forecast is not a Forecast


One Number Forecasting is a HOAX.


Manufacturing View (

Units)

Sales View ($) Marketing View

($, U

nits)

Logistics View

(Units, Cases)

Ship-from Locations

Warehouses

Global

Production L

inesPlants

Global

Supply-side Views

Downstream Data

Account-LevelA

VMI C

DistributionNetwork

Supplier Supplier Supplier Supplier

DistributionNetwork

DistributionNetwork

Demand-side Views

Hole in Enterprise Architectures


Manufacturing View (

Units)

Channel View ($)

Accounts (Ship-to

locations

Countries

Global

Marketing View

($, U

nits)

Brands

Produ

ct

Catego

ries

Global

Logistics View

(Units, Cases)

Ship-from Locations

Warehouses

Global

Production L

inesPlants

Global

Supply-side Views

DemandTranslation

Downstream Data

Account-LevelA

VMI C

DistributionNetwork

Supplier Supplier Supplier Supplier

DistributionNetwork

DistributionNetwork

Demand-side Views


Talent Shortage


Gap by Position


• S&OP has grown in importance.• The trade-offs of the supply chain cannot be

effectively modeled using a spreadsheet.• Focus on continuous improvement and

serving the business.

Wrap-up


Questions?

Continue the Conversation?www.supplychaininsightscommunity.com


Who is Lora?

• Founder of Supply Chain Insights

• Partner at Altimeter Group (leader in open research)

• 7 years of Management Experience leading Analyst Teams at Gartner and AMR Research

• 8 years Experience in Marketing and Selling Supply Chain Software at Descartes Systems Group and Manugistics (now JDA)

• 15 Years Leading teams in Manufacturing and Distribution operations for Clorox, Kraft/General Foods, Nestle/Dreyers Grand Ice Cream and Procter & Gamble.


Where Do You Find Lora?

Contact Information: [email protected]

Blog: www.supplychainshaman.com (5000 pageviews/month)

Twitter: lcecere 5200 followers.

LinkedIn: linkedin.com/pub/lora-cecere/0/196/573 (5200 in the network)

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