Integrated business planning

Integrated Business PlanningDemand and supply analysis to simulate the impact of volatility and support risk-optimized planning of finance, sales, marketing and supply chain

Gianni GiacomelliSenior Vice President, Genpact

Gaurav AgrawalAssistant Vice President, Genpact

PROCESS • ANALYTICS • TECHNOLOGY 2© 2014 Copyright Genpact. All Rights Reserved.

A Global Business Process Services Leader: Process Transformation and Outsourcing, Analytics, Technology

We help leaders of some of the largest enterprises transform and run their processes and operations, including the very complex and industry-specific

What we do

Unbiased, agile combination of process science, related technology and analytics limits upfront costs and enhances future adaptability

Right critical mass:

• we are large (64,000+ global staff) but our solutions appropriately flexible

• our top management is directly involved in our client partnerships

How we do it

Our impact

We help enterprises to be more competitive by becoming more intelligent: adaptive, innovative, globally effective and connected…

…by enabling tighter management of costs, risks, regulations, and supporting growth

The results: US$22B* of impact for 800+ global clients


THE CHALLENGE


Complexity, volatility, and lack of value-based integrated business planning (IBP) squeeze margins

Increasing complexity of products and of the global supply chains

Gaps in people’s capabilities prevent companies to capitalize on their investments

Value based planning is not integrated into the S&OP process

Rising raw material costs and regulatory issues

Poor demand planning; increasing volatility of demand while customers require agile response and better service

Shorter product lifecycles require faster introduction of the new products

Vertical integration; business/product line restructuring due to merger and acquisitions

Missed market opportunities due to the lack of capabilities to assess opportunities

Cumbersome tools; poor visibility of data and poor end-to-end synchronization of SC across different planning levels

Business responsiveness becomes paramount in this customer-focused culture


Challenges for effective IBP process fundamentally lie in the way organizations have been operating

Divergent functional agendas

• Different objective legitimate functional goals for sales and marketing, supply-chain, and finance

• Teams chasing ‘optimal KPIs at functional level’

Mis-aligned incentives

• Behavioral pressures aggravate divergent behaviors

• E.g. sales provides conservative sales and promotional uplift forecast, over-target performance is rewarded regardless of incremental costs and difficulties in supply-chain

Silo-based planning processes

• Functional planning exists almost as a discrete activity; integration, if any, is only an afterthought

• More iterations in forecasts; almost guaranteed sub-optimal outcome at overall level

Inadequate data and systems

• Lack of data readiness increases workload significantly

• Extended time to iterate and coordinate different perspectives makes S&OP less agile; quality of analysis likely to be compromised due to time pressures

Non-transparent financial reporting

Geographical complexities, intra-company trading, FOREX adjustments etc. often obfuscate relative performance measurement, impairing effective IBP


Limits of traditional mid-range planning in the “new normal”

Typical process Implications in the “new normal”

• Lean cross-functional teams

• ERP systems of records with no detailed scenario planning capabilities

• Standard cost (product accounting) in ERP from past data only

• Aggregate (S&OP) and ad-hoc forecast input from sourcing and other cost owners (e.g. logistics), in excel

• Reallocation of marketing resources happens nationally

• Imprecise forecasts for brand P&L and category roll-ups for next 6-9 months

• Future cost volatility isn’t fully used to optimize product P&L by neither Sales & Marketing nor Finance

• Potentially suboptimal marketing mix optimization and spend allocation, and optimization sought only at local – not regional – level

• Re-pricing analysis not granular enough - marketing asked to “raise price” across the board


THE SOLUTIONS


IBP integrates planning activities and scenario modeling for profitability into the end-to-end decision-making process

A

C

DDemand Analytics Support

• Product/Geo/ Channel Mix change scenarios

• Demand and inventory forecast/ scenarios

• Price/ promoscenarios

Business Planning• Sales revenue goals• Margin/profit goals• Geographic strategy

Marketing Planning• Brand/channel position and pricing• Brand/channel events/promotionscalendar

Category Planning• Product mix/placement/pricing• Product lifecycle plan• Product sales forecasts

Demand Forecasting• Statistical demand forecast• Historical demand

Supply Analytics Support

• Supply Chain finance

• Sourcing analytics

• Logistics analytics

Operations Planning• Order fulfillment• Merchandising

Supply Planning• Supply forecast• Replenishment plans• Lead time variability• Manufacturing throughout

Distribution Planning• Inventory development• Capacity constraints• Transport costs

ProbabilisticScenario Modeling

• Profitability scenarios

• Pricing scenarios

• Product/channel/ geo mix scenarios

• Capacity/ manufacturing scenarios

• Inventory cost

• Root cause of plan to actuals

• Demand shapingopportunities

Prepare

Collect and analyzeScenario results

Conduct preliminary S&OP

activities

Develop agenda & distribute plans

Review performance and root cause

Discuss IBP optimal scenarios

Agree on demand, supply, marketing and pricing plans

Conduct

IBP

Execute

Modify plan

Communicate plan

Execute plan

Measure performance and profitability

C

IBP Process Support

Demand analytics and planning

B Supply analytics and planning

Areas for industrialized support for IBP process


Demand analytics support

Product/Geography/Channel mix modelling scenarios

• Category, brand, and SKU level revenue scenarios by geography and/or channels leveraging historical and projected data on volume, price, promotion, and other marketing spend sensitivities

• Tactical competitive moves can be modeled on need basis depending on data availability

Demand and inventory forecasting

• Aggregated and stratified forecast modeling at product/category/PPG level for fast-moving, slow-moving, non-moving items

• Advanced algorithms factoring demand volatility, qualitative market inputs, industry nuances for improved forecast accuracy

Pricing and trade promotion scenarios

• Analyses of historical volume, region, price, and promotional spend and mix data to discover associations; understanding profitability profile of demand

• Scenarios for projected volumes at different levels and mix of promotion/pricing combination

A


Supply Chain Analytics

Sourcing

• Sourcing strategy support

• Supplier selection support

• Commercials support

• Sample product development

• Supplier performance management

Logistics

• Network optimization*

• Carrier sourcing analytics*

• Freight lane analytics*

Supply Chain Finance

• BOM/ Material master management

• Forecasting, budgeting and standard product costing

• Factory accounting, period close and reconciliation

• Reporting and analysis

B


IBP Probabilistic scenario modeling

Prioritization for “at-risk” products; profit maximization decisions

• Prioritization of ‘at-risk’ products/SKUs based on relative scales of ‘value at risk’ and ‘impact on profit pool’ and client inputs

• Refining marketing decisions for prioritized ‘at-risk’ product/SKU categories to maximize profits

Analytics support to individual S&OP module probabilistic scenarios

• Implications of scenarios at module/functional levels

• Building hypothesis on ‘optimal consensus zones/ranges’ for key metrics. E.g. what are the ranges of inventory levels, service-level, manufacturing capacity utilization, etc. – for maximum profit

Scenario based category/SKU level profit projections

• Profitability scenarios; pricing scenarios; product/channel/geographic mix scenarios; capacity/manufacturing/sourcing scenarios; inventory cost scenarios

• Root cause analysis for scenario trends

C


Industrialized analytics can provide help to prepare for, conduct, and execute the IBP process

Preparing for IBP sessions

• Collect and analyze scenario results

• Analytics support to upstream preliminary S&OP activities such as demand planning and supply planning

• Develop agenda with the IBP owner informed by overall analyses (e.g. crucial conflicting/diverging metrics), and distribute plans to functional stakeholders

Conducting of IBP sessions

• Performance review and root cause reports

• Develop overall optimized profit scenarios (at enterprise level) to facilitate objective discussions

• Quantitative reports on ‘implications of overall profit optimization’ at module/function level

Execution and monitoring of IBP

• Monitor and report IBP execution progress, variance reporting to ensure alignment with IBP goals

• Measure performance and profitability periodically and publish executive dash-boards; recommendations on corrective actions, target metric modification

D


CONTACT GENPACT TO EXPLORE THE “ART OF THE POSSIBLE”


About Genpact

Genpact Limited (NYSE: G) is a global leader in transforming and running business processes and operations, including those that are complex and industry-specific. Our mission is to help clients become more competitive by making their enterprises more intelligent through becoming more adaptive, innovative, globally effective and connected to their own clients.

Genpact stands for Generating Impact – visible in tighter cost management as well as better management of risk, regulations and growth for hundreds of long-term clients including more than 100 of the Fortune Global 500. Our approach is distinctive – we offer an unbiased, agile combination of smarter processes, crystallized in our Smart Enterprise Processes (SEPSM) proprietary framework, along with analytics and technology, which limits upfront investments and enhances future adaptability.

We have global critical mass – 62,000+ employees in 24 countries with key management and corporate offices in New York City – while remaining flexible and collaborative, and a management team that drives client partnerships personally.

Our history is unique – behind our single-minded passion for process and operational excellence is the Lean and Six Sigma heritage of a former General Electric division that has served GE businesses for more than 15 years.

For more information, visit www.genpact.com. Follow Genpact on Twitter, Facebook, and LinkedIn.

http://www.genpact.com/

http://twitter.com/

http://www.facebook.com/pages/Genpact/105635026136729

http://www.linkedin.com/company/210064?trk=tyah

Thank You

Gianni.giacomelli[at]genpact.com

Gaurav.agrawal1[at]genpact.com

www.genpact.com/home/industries/consumer-goods

http://www.genpact.com/home/industries/consumer-goods

Integrated business planning

Business

Transcript of Integrated business planning