Is S&OP Delivering Value For You - APICS SOP Delivering Value for You.pdf · Most Companies Not...

1 © 2014 Steelwedge Software, Inc. Confidential.

Single Line of Sight: Plan, Perform, Profit

Is S&OP Delivering Value for You?


“The successful business executive is a forecaster

first, everything else follows”

Peter Bernstein Against the Gods: The

Remarkable Story of Risk’


How Far Can you Forecast?

70%

19%

11%

1 Quarter or less

2 Quarters

3 Quarters or More

70% Cannot Forecast

Beyond One Quarter

http://www.cfo.com/


“Expectation Lead Time” & the Bullwhip Effect

Operations

Wrong products

are deployed

Excess inventory;

Stock outs

Financials

Wrong numbers

promised to street;

Missed results

Loss of credibility;

Share price impacts

Customers

Customers don’t

receive orders

Lost sales;

Lost customers Miss on revenue, product,

customer, or timing

Placing a Bet

on the Future

Stock market reactions when

“supply chain” glitches reported:

• Ramp-up/roll-out issues: -11%

• Delays in prod. dev.: -10%

• Production problems: -10%

• Quality problems: -9%

• Parts shortage in mfg.: -7.5%

Source: Dr. Vinod Singhal, Georgia Institute of Technology

Expectation Lead Time:

“customers don’t want to wait”

vs.

Supply Chain Lead Time:

“it takes time to supply”


“ My logisticians are a humorless lot; they know if my

campaign fails they are the first ones I will slay ”

--Alexander the Great (356-323 BC)


A Brief History & Review of S&OP

• S&OP: “a better way to run your business”

• Evolved out of early work in Material and Production

Planning in the 1970s (by thoughts leaders like Oliver

Wight, TF Wallace, others)

• Expanded to include Sales, other groups in 1980s

• Continually evolving - latest version rebranded as

“Integrated Business Planning” (IBP) in 2000s

• Integrates Finance, R&D

• Executive value (i.e. risk mitigation; “what if” simulations)

• Extended to external processes


S&OP (and IBP): Decades of Evolution Led by Oliver Wight International & TF Wallace & Company


“Class A” Best Practices & Behaviors

Industry recognized best practices for:

1. Strategy deployment

2. Leading people

3. Driving business improvement

4. Integrated Business Planning (Sales & Operations Planning)

5. Product management

6. Demand management

7. Managing the supply chain

8. Managing internal supply

9. Managing external sourcing

Major companies – such as Abbott, Boeing, Caterpillar, DuPont, Merck, Procter & Gamble and Weyerhaeuser – are using the

Oliver Wight Class A Checklist as their internal standard for excellence


IBP Resolves Competing/Conflicting Objectives

Manufacturing: “Maximize output”

Finance: “Minimize costs”

Marketing/Sales: “Increase Sales”

Translation

Alignment

Collaboration

R&D:“Increase speed to market”

Distribution: “Maximize on-time delivery”


Integrating Business Planning Is:

• A process, led by senior management that, on a monthly basis, evaluates and

revises, time-phased projections for demand, supply, product management,

strategic projects and the resulting financial plans

• Typically a rolling 24-36 month horizon

• A decision-making process that realigns the tactical & operational plans for all

business functions within an accountable business entity, in support of the

business goals and targets

• Driving consensus on a single operating plan, to which executives hold

themselves accountable

• Allocates the critical resources - people, equipment, inventory, materials, time

and money - to most effectively satisfy customers in a profitable way

The Rolling Business Management Process


How CEO Sees the Business


How Supply Chain Sees the Business


ES&OP/IBP Bridges the Gap between Strategic and Operational Decisions

Strategic Goals

Operations

Financial Plans

Integrated Business

Planning


S&OP or IBP?

Supply Chain

Sales

Supply Chain

R&D

Finance

Customers

Suppliers

Executives


S&OP vs. IBP – what are the differences? Oliver Wight version

• Greater financial Integration

• Inclusion of strategic initiatives and activities

• Improved simulation and modeling

• Easier translation between detail and aggregate

• Improved decision-making

• Improved trust within the management team


S&OP: Process Led by and Primarily for Executive Mgt.

MANAGEMENT

BUSINESS

REVIEW

Integrated Business Planning Process Model

Supply Point

Management

Supplier

Management

SUPPLY REVIEW

Supply Chain

Management

Procurement Management

Market

Management

Demand

Management

Sales

Management

DEMAND REVIEW

Portfolio

Management

Project

Management

Resource

Management

PRODUCT MANAGEMENT

REVIEW

STRATEGY BUSINESS PLAN PERFORMANCE

“Aggregate” Planning

“Detailed” Planning

& Execution


S&OP to IBP – the “Planning” Disconnect: Which Plan?


The essence of planning from a leader’s perspective

“I want you to bring me the answers

before I ask the questions”

Al Pacino as Willy Bank in Ocean’s Thirteen

8 Months? 8 Months?


Common Business Management Problem

8 Months? End of Current

Fiscal Year

0

BUDGET REVENUE

BUDGET PROFIT

GAP

GAP

NO ROBUST LATEST VIEW?

PANIC! HOW DO WE CUT COSTS TO ACHIEVE BUDGET PROFIT?

HOPE & STATEMENTS OF REASSURANCE


Making the Gap Visible Top Down ↔ Bottom Up

Strategy 5 Year Horizon

Business Plan 3 Years

Top

Down Process

Bottom

Up

Process 24 Month Horizon

Aligning Planning Horizons and Capabilities … (It's Not the Same as Integrating!)

Time Horizon

Res

olu

tio

n

Execution

Operational Planning

S&OP Stage 4 or 5

Strategic Plan/Goals

4 wks 12 mths 2 yrs 5 yrs >5yrs

Current Op. Model

Future/Alternative Op. Model

Resp

on

d O

pti

miz

e

Desig

n

Financial Budget/AOP

S&OP Stage 3


Value Potential From Integrated Process

Increased Forecast Accuracy

Increased Sales Revenue

Increased On-Time Delivery

Inventory Reduction

Safety Stock Reduction

Increased Productivity

18-25%

10-15%

10-50%

18-46%

11-45%

30-45%

Results from Oliver Wight Clients


S&OP Accelerates Performance “What kind of benefits is S&OP delivering?”

0% 10% 20% 30% 40% 50%

Forecast Accuracy

Customer Satisfaction

Asset Utilization

Inventory Value

Order Fill Rate

Revenue

Working Capital

Perfect Order

Return on Assets

Gross Margin

Inventory Turns

Substantial Overwelming

Sales and Operations Planning Research Study 2006: Ventana Research


S&OP Accelerates Performance “What kind of benefits is S&OP delivering?”

0% 20% 40% 60% 80% 100%

Forecast Accuracy

Customer Satisfaction

Asset Utilization

Inventory Value

Order Fill Rate

Revenue

Working Capital

Perfect Order

Return on Assets

Gross Margin

Inventory Turns

Substantial Overwelming

Sales and Operations Planning Research Study 2006: Ventana Research

?


Great Results when Executives are Fully Engaged “How involved is your executive team?”

Closing the Gaps in S&OP Study 2013: CSCO Insights


Reality: Most Execs Not Engaged in S&OP Process “Does your executive team own the S&OP process?”



Most Efforts Not Supporting Executive Needs “Rate your S&OP capabilities”

16.7%

25.4%

29.4%

35.1%

45.0%

57.4%

55.7%

57.3%

54.2%

46.1%

25.9%

18.9%

13.4%

10.7%

8.9%

Integrated Supply/Demand

Integrated Financial Plans

Strategy Deployment

Strategic Initiatives

Scenario Planning

Low Medium High



Missing Big Opportunities “Describe your S&OP approach”

12.5% 70.8% 16.7%

Focus

Backward Results In-Between Forward Planning

29.5% 65.2% 5.3%

Strategic Perspective

Short Term Problem Solving In-Between Exploiting Opportunities

18.9% 67.8% 13.3%

Approach to Results

Passive In-Between Actionable



34.2%

25.7%

28.4%

46.7% 44.4%

50.2%

Hit Financial Targets Synch Operating Strategies Ensure Execution of Strategies

Current Benefits Future Desired

Executives Want More “Rate your current vs. desired capabilities”



Gap between Best Practices & Current Situation “Rate your S&OP process” (maturity)


32.2%

14.7%

8.4%

1.7%

Below Average

Only Adequate

Excellent

World Class


Downturn Exposed a Problem: Poor Process During Good Times Led to Issues Later

1.0

1.1

1.2

1.3

1.4

1.5

1.6

1.7

2004

2005

2006

2007

2008

De

c-0

8

Ja

n-0

9

Fe

b-0

9

Ma

r-0

9

Ap

r-0

9

Ma

y-0

9

Monthly Yearly

Business Inventories / Sales Ratio

Manufacturing Sector (Period Average)

Source: U.S. Economic Statistics, Jun-09


Most Companies Not Doing “Best Practices” S&OP

Percent of respondents running S&OP process

without input from the following departments

Percent of respondents conducting periodic

S&OP process without the following steps

Source: “Recession Survival Kit; cross-industry survey conducted for Supply Chain Management Review, on behalf of Oracle and IBM, by Reed Business Information; February, 2009. Response to question: “Which factors will enable your organization to achieve your primary business goal?” n = 537 responses.

36%

47%

48%

Sales

Finance

Manufacturing

44%

45%

47%

66%

66%

DemandPlanning

InventoryPlanning

Supply Planning

Supply / DemandMatch

PerformanceReview

JLR’s Journey Towards IBP

People

MANAGEMENT

BUSINESS

REVIEW

Software Industry Support for S&OP

Supply Point

Management

Supplier

Management

SUPPLY REVIEW

Supply Chain

Management

Procurement Management

Market

Management

Demand

Management

Sales

Management

DEMAND REVIEW

Portfolio

Management

Project

Management

Resource

Management

PRODUCT MANAGEMENT

REVIEW

STRATEGY BUSINESS PLAN PERFORMANCE

“Aggregate” Planning

“Detailed” Planning

& Execution

Mature: Transaction Systems for

Functional Silos SAP Oracle Infor Custom

Mature: Operational Planning Systems

for Functional Silos

JDA

Oracle

SAP

Kinaxis

JDA

Oracle

SAP

Logility

Agile

MatrixOne

…

Disconnected: Decision Support for

Executives

Missing: Collaborative Systems for Cross Functional Discussions

SAP

IBM

Oracle


Blocking S&OP Results: Gaps with Existing Systems “How satisfied are you with your current systems capabilities?”

Source: Executive Sales & Operations Planning: Process & Technology Strategies. Survey of 380 companies. Aberdeen Group 2007+

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Demand Supply Matching (entry level)

What if Analysis (exec)

S&OP Plan Quality & Metrics (exec)

Role Based (x-functional collab)

Alerts & Exceptions (make it easy)

Fully Meets Needs Doesn't Fully Meet Needs

3%

5%

5%

8%

10%

13%

12%

15%

22%

3%

6%

5%

5%

6%

7%

10%

9%

12%

8%

14%

16%

3%

7%

7%

6%

8%

10%

11%

6%

12%

14%

13%

Other

Lack of external cross-functionalcollaboration

Managing relationships + processeswith outsourcing partners

Cost volatility

Logistics constraints,performance, or costs

Supplier performance/variability

Lack of visibility across supply chain

Supply chain talent

Lack of internal cross-functionalcollaboration

Supply chain network complexity

Difficulty or inability to coordinate andsynchronize end-to-end SC processes

Forecast accuracy + demand variability

Ranked First Ranked Second Ranked Third

Sum = 51%

42%

30%

29%

32%

31%

20%

17%

11%

16%

Q07. What do you consider to be the top three obstacles to achieving your organization's supply chain goals and objectives?

n=249

14%

6%

... and it

has been

this way for

years!

Despite Spending All That Money on Planning …


Best Practice S&OP Aligns People, Process & Systems

“We continue to look at S&OP as an aspect

of business that needs terrific improvement…

It’s hard to argue that this shouldn’t be a

central piece of management software”

–Rob Kugel, Ventana Research


Tom Wallace – Guru of S&OP

“ Sometimes people ask me about the S&OP

module from their ERP provider.

I respond that the next really good S&OP

software package that comes from a main

line ERP vendor … will be the first. We

have yet to see that happen.

You need to look and best-of-breed. And the

best of the best-of-breed is Steelwedge ”.

Tom Wallace,

Founder, T. F. Wallace & Co

Watch the video: http://www.youtube.com/watch?v=SVWaNiBC4Jo&index=4&list=PLF5EAC415A68DC43B

Integrated Business Planning for S&OP – Master Class with Tom Wallace: http://www.youtube.com/playlist?list=PLF5EAC415A68DC43B

http://www.tfwallace.com/

http://www.youtube.com/watch?v=SVWaNiBC4Jo&index=4&list=PLF5EAC415A68DC43B

http://www.youtube.com/watch?v=SVWaNiBC4Jo&index=4&list=PLF5EAC415A68DC43B

http://www.youtube.com/playlist?list=PLF5EAC415A68DC43B




Time Horizon

Res

olu

tio

n

Execution


S&OP Stage 4 or 5



Current Op. Model


Resp

on

d O

pti

miz

e

Desig

n


S&OP Stage 3

far out enough, everything

is variable: executive

decisions have most impact

easier to understand ,

but too late – most

decisions already made


Gap between Best Practices & Current Situation “What tools do you use for S&OP?”


functional tools for experts:

(demand planning,

supply planning)

focused on near-term

flexible tool (MS Excel) to

connect the functions,

extend into future

JLR’s Journey Towards IBP

IBP Challenges – Growth v Control


Pre-ESOP

Ground Reality: Trying It With Spreadsheets

Demand Planning, SCM/APS Systems

ERP, Financial, & Transactional Systems SAP, Oracle, etc.

Industry

Data

Consolidation, Review, Overrides

Data Collection, Reconciliation

Consensus Process ESOP

Operations

Marketing

Sales

Finance

Manual

Complex

Security Risk

Not Scalable

Does this Give Executives

an Agile & Predictable

Decision Making Process?

Systems Landscape


How Long Does it Take?

18+ days

27%

9%

18%

12-17 days

6-11 days

3-5 days

Time Required for Exec S&OP Preparation %

AMR Research/Gartner

S&OP Benchmarking Report


Somebody Had to Have Seen it Coming!


Change Your Reality Drive & Sustain S&OP Adoption & Values

Time

L1

L2

L3

L4

Q1 Q2 Q3

Step Change

Maturity &

Performance

Avoid Process

Failure

Q4

Val

ue

Accelerated

Time to Value

“Companies can have a hard time getting past basic levels of S&OP without

technologies like Steelwedge to support the process”

-Tim Payne

VP Supply Chain Analysis, Gartner


What Users Really Want in S&OP/IBP Software

Source: Ventana Research, Sales and Operations Planning Study 2006


Steelwedge: The S&OP Platform Single Cross-Functional Platform for Planning & Analytics

APS Systems

ERP, Financial, & Transactional Systems SAP, Oracle, etc.

Industry

Data

Product / Sub-Family Customer Revenue

Product / Family Territory / Region Revenue

Product / Family Promotions Revenue

Product / Family Region Units & Revenue

Product Stock Locations Units and Inventory

Family / Series Territory / Region Revenue, Margin & Cash

Family / Series / BU Geo Revenue, Margin & Cash

Product Production Site Units and Capacity



Planning Views Stakeholders

Account Managers

Sales Managers

Marketing

Demand Planners

Supply Planners

Production Planners

Finance

Executives

Customers

Suppliers

Cross-functional Planning Environment

Systems Landscape

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&uact=8&docid=fscc-YRDegWdeM&tbnid=iYbCa-CVOVyTJM:&ved=0CAUQjRw&url=http://www.aofas.org/medical-community/resident-fellow-opportunities/Pages/Resident-Scholarship.aspx&ei=2760U92bBIHyoATwp4LoBg&bvm=bv.70138588,d.cGU&psig=AFQjCNEXieK8npA5co1pDCyf5JOE1sxAog&ust=1404440656758822

http://en.wikipedia.org/wiki/File:Warner_Bros_logo.svg

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&uact=8&docid=6Yyw-CHzHSBkpM&tbnid=midefT58ZHafUM:&ved=0CAUQjRw&url=http://www.kk-asc.com/Network/network_j1.html&ei=KEFZU-fFOMSQyAT0-4KoCA&bvm=bv.65397613,d.aWw&psig=AFQjCNG8zp2-QMTAEb7krPkYbWi_Y8o8ng&ust=1398444700807508


Time Horizon

Res

olu

tio

n

Execution


S&OP Stage 4 or 5



Current Op. Model


Resp

on

d

Op

tim

ize

Desig

n


S&OP Stage 3

what you really need for S&OP…

• make it easy & inclusive

• facilitate cross-functional

collaboration

• empower the executives


Case for Change


What You Need to Be Successful

• Make gathering and translating the information quick and easy

• Facilitate the collaborative vetting process for management

• Drive enterprise planning improvement


How important are humans in your S&OP process?


Why the continued evolution of S&OP/IBP? Increasing Volatility and Magnitude of Change …

“The problem today is you just can’t plan anymore.

Everything is constantly changing. It used to be

easy … develop the plan and execute the plan …

not anymore.”

– Executive at Fortune 10


Uncertainty will always be part

of the taking charge process.

Harold S. Geneen


We Have a Plan Until We Change It

“Plans are nothing; planning is everything.”

– Dwight D. Eisenhower


Thank You

Questions?

[email protected]

mailto:[email protected]?subject=APCIS%20Chicago%20November%2020%202014%20Presentation

Is S&OP Delivering Value For You - APICS SOP Delivering Value for You.pdf · Most Companies Not...

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