apics – trends shaping evolution of s&op; integrated business planning final

Stephen P. CraneStephen Crane Consulting, LLCSupply Chain Risk ConsortiumNovember 19, 2015

APICS-SV Chapter Meeting

Trends Shaping the Evolution of S&OP & Integrated Business Planning

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Principal & Founder – Stephen Crane Consulting, LLC B.S. Chemical Engineering - University of New Hampshire APICS CSCP – Certified Supply Chain Professional Board Member – Supply Chain Council & APICS Member of The Supply Chain Risk Consortium 30+ years industry experience from Air Products, Wacker-Chemie and Firmenich Implemented Sales & Operations Planning in 12 businesses, 3 companies, 4 countries Implemented best-in-class supply chain organizations and planning processes Practitioner focused on sustainability of benefits

Background

Stephen Crane/APICS-SV/November 19, 2015

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S&OP vs. Integrated Business Planning

Greatest Challenges to Improving S&OP

Six Trends Shaping the Evolution of S&OP & IBP

Key Takeaways

Questions?

Agenda


4Stephen Crane/APICS-SV/November 19, 2015

S&OP vs. Integrated Business Planning


S&OP & IBP: Decades of Evolution


Evolution of S&OP

The S&OP process develops tactical plans that provide management the ability to strategically direct its businesses to achieve competitive advantage on a continuous basis by integrating customer-focused marketing plans for new and existing products with the management of the supply chain. The process brings together all the plans for the business (sales, marketing, development, manufacturing, sourcing, and financial) into one integrated set of plans. (APICS Dictionary, 14th edition)

In the past, S&OP is most often identified as a Supply Chain based process and has been too singularly focused to engage and provide value across functions to provide true business optimization.


Evolution of S&OP

“Traditional Sales and Operations Planning (S&OP) processes and supporting technologies are no longer sufficient in today’s business environment. Sales and Operations Planning has evolved to become Integrated Business Planning. It is a truly cross-functional, multi-dimensional process that includes all elements of demand, supply, and the financial analysis in relation to the business goals and strategy.”

“The broader strategic mandate for S&OP is key to superior returns. S&OP leaders are aggressively converting S&OP from an operations level demand and supply balancing process to the mechanism of choice for integrated business planning and strategy deployment.”


Evolution of S&OP

Every company needs to decide on how they want to use S&OP in their business. Best-In-Class companies use S&OP as a way of running the business supporting a company’s growth strategy by routinely reviewing customer demands, anticipating shifts in business patterns, and aligning an extended enterprise of resources, suppliers and service providers to deliver on expectations in a dynamic and evolving global marketplace.

Management’s handle on the business…

All P&L impacts integrated into process…

Is an Executive decision making process…

A set of decision making processes…

Provides "long range vision“ to issues before they become a crisis…


Month-End Close Drives Price/Volume Variance Analysis and Monthly Outlook


Companies That Have implemented S&OP See Benefits Across Many Areas - Performance Benefits (% Improvement)


Always under promise and over deliver

Never submit your real budget the first time

Always inflate your budget, as it will likely be cut

Always make your budget, it’s what really matters

Avoid specific measures, especially if you can’t control them

Get the most people reporting to you and protect your budget

Unwritten Rules Causing Profit Leakage


Cost Reduction (Conference Board)

─ 90% of organizations that launch cost reduction programs fail to sustain results for > 3 years

Execution (McKinsey)

─ Organizations realize only 63% of the value of their strategies

Complexity (AT Kearney)

─ Complexity costs organizations 3-5% of sales

Lost Business Value


Lack of Executive support, commitment, and engagement

o Leadership team needs to be committed to a new style of running the business

o Organizations need to comprehend the true scale of what the process can achieve for the business

o The sizable challenge of overcoming the traditional thinking of operating in functional silos and mis-aligned incentives

o Integrating all the key areas of the business (Sales, Product Management, Manufacturing, Purchasing, Finance, R&D) into a single integrated business planning process

o There is no one owner of the management process

Greatest Single Challenge to Improving S&OP


Six Trends Shaping the Evolution of S&OP & Integrated Business Planning

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1. Speed of Business Continues to Accelerate

2. Complexity, Volatility, Lack of Value Based Planning

3. One Size Does Not Fit All

4. Develop Planning Talent

5. Global is More Than a Template

6. Software is Not a Silver Bullet

Six Trends Shaping the Evolution of S&OP & Integrated Business Planning



Speed of Business Continues to Accelerate

1The need for organizational alignment is more critical than ever. The speed of business continues to accelerate driven by the consumer now dictating the channels, any confusion about priorities or delays in orders can result in increased costs, inventory or even loss of business.

Need to capture timing and volume shifts is critical to maintaining customer service and fulfill orders profitably

The need for strategic focus on Sales Forecasting has never been greater

S&OP is the perfect process mechanism to recognize, evaluate, and determine the impact of these changes

Effectively communicate changes and align the organization to “one plan”


Companies need to better manage complexity and volatility which are squeezing margins and decreasing profitability. By focusing on value based planning, companies can maximize their profitability.

Increasing complexity of products and length of global supply chains

Increased product proliferation and shorter lifecycles

Demand volatility is increasing while customers require increased responsiveness and better service

Value based planning not integrated into S&OP

Complexity, Volatility, & Lack of Value Based Planning Squeezing Margins

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Companies should leverage segmentation techniques in planning to target performance improvement opportunities and capitalize on those opportunities. By combining portfolio and planning techniques, organizations can drive segmented strategies to achieve maximum business profitability.

The 80/20 rule (Pareto)

Measure and manage complexity

Focus on synergy areas: procurement, product design, manufacturing, planning and order fulfillment.

One Size Does Not Fit All

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With recognized talent gap in the marketplace, companies should establish talent management programs and career paths that attract and retain planning talent. Career paths need to include opportunities to move into other functional areas in the organization to broaden planners’ experience and establish context for better decision making.

New generation of the workforce expects to be mentored

Universities are not providing the necessary planning skills, so companies should expect to develop these skills

Culture and capability differences makes it difficult to plug-and-play new talent from other companies

Develop Planning Talent

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Area 1. PF 2. PPR 3. MPP 4. PP 5. DP 6. SP 7. IM 8. S&OP Total

ZEU 76% 75% 77% 78% 88% 65% 74% 63% 76%ZNA 74% 63% 66% 73% 80% 58% 74% 66% 70%ZCN 80% 73% 82% 75% 91% 59% 83% 70% 78%ZLA 88% 82% 86% 75% 89% 85% 76% 81% 83%ZSEA 81% 72% 74% 74% 86% 74% 69% 82% 77%WW 81% 83% 73% 76% 94% 80% 90% 85% 83%ZIMEA 82% 67% 69% 78% 74% 74% 80% 46% 73%ZJPN 65% 67% 64% 52% 79% 62% 61% 79% 67%Total 78% 72% 75% 74% 86% 68% 75% 71% 76%


As companies look to expand S&OP globally, standardized process templates can help efficiently establish a common understanding of desired process. However differences exist in data, skills, and market structure that can significantly impact planning capabilities regionally. So companies should review go-to-market strategies and align their global S&OP process with regional considerations to optimize business capabilities and performance.

Globalization is core to most growth strategies

Templates are a good start, but not enough

Global vs. regional vs. local, regional considerations to increase alignment and engagement

Global is More Than a Template

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Gather and update data

Supply Network Planning

Demand Planning

Guidance on BU Priorities

Vetted Supply Options

Correct Sales

History

Validate Sales Agent

Forecast

Make Stat/Market Intell Forecast Adjustme

nts

Historical Sales vs.

Prev. Sales Plan

Pre-Demand Changes Complet

ed

Update and Add

New CVCs

Upload/Enter

Customer

ForecastsGenerate

24 Month

Unconstrained

Forecast

Conduct Pre-

Supply Review w/Plant

s

KPIs DP Released to CO for Financial Forecast

Review Supply Metrics

Review &

Confirm

Available

Inventory

Create Statistic

al Forecast

Update Resourc

e Capaciti

es & Assump

tions

Refresh Inactiv

e Version

/ Release DP to SNP

Review Financial Projections vs. AOP

& Gap Closure

Measures

Review Major Supply Chain

Risks and Top Issues

Review KPIs,

Revenue, Cost

Projections, &

Gaps to AOP

Lock & Deploy S&OP

Plans for Executio

n Pre-Alignment

Executive Sign-off

Publish Minutes, Decisions

, and Action Items

Review Supply Options

Financial Implicati

ons

Review Business Strategy

& Objectives

Review Demand & Supply

Plans

Review Major

Business Issues

Review Capital & Resource Requests

Summarize

Supply Option

Proposals

Make Changes

to Constrain Final

Forecast

Run Heuristics for

24 Month Supply

Plan

Communicate

Decisions & Actions

to Organizat

ion

Competitive/Market

Intelligence

1.0 2.0

3.0

4.0

5.0

Upload Sales History to

APO

Add New Customer

Items to R3

Review Demand Metrics

Publish Assumpti

ons, Minutes, Decision

s, and Action Items

Validate Changes to Sales Plan and Update Months 1 and 2

Identify Supply Imbalan

ces / Review Supply AlertsSubmit

Supply Options to BU

for Approva

l

Financial

Impact of

Supply Options

Finalize Supply Options

& Assump

tions

Conduct Supply Review

Publish Minutes

, Decisions, and Action Items

Publish 24

Month Raw

Material Forecas

t

Update Networ

k Source Change

s

Preferred

Sources

Assigned to

Demand

Summarize Key

Decisions & Top Issues

Still Outstandi

ng

Iteration loop

Demand Review Approve Unconstrained

Forecast

Finalize 3-month

Sales Plan

Order Book (Sales

Backlog)

Conduct Pre-

Demand Reviews

Stat Forecast Copied to BW

Provide Supply Constraints to

DP

Review Supply Options

to Balance Demand

Summarize top

issues/actions &

decisions expected

ESO

Adjust SNP

Supply Plannin

g Constra

ints


Software is Not a Silver Bullet

6Companies continue to invest money, time, and resources into buying and implementing software, typically ignoring segmentation, analytics, and skill development critical to maximizing their return on these investments. To generate real improvements in S&OP, companies should refocus their efforts on building planning competencies and capabilities to ensure real and sustainable benefits on investments.

Use segmentation to apply software automation appropriately (ABC Pareto)

Remember, software does not solve business problems

Focus on defining the questions that need to be answered first, then build the capabilities to provide those answers

Competency development starts with teaching people how to think, followed by teaching them how to click – not the other way around

http://1.bp.blogspot.com/-xCTVVivR8kc/UUsFp0d8QhI/AAAAAAAAATE/Pv8rcAuGT3c/s1600/Volume+Variability.bmp


Key Takeaways


New dynamics are creating complexities that require enhanced integrated planning capabilities to drive efficiency and effectiveness – people, process, technology

A renewed focus on Planning For Growth provides a platform for collaboration, internally with Commercial Teams and externally with trading partners

One size does not fit all – leverage segmentation to apply appropriate focus and capability to specific situations

Building an effective Planning organization requires development of portfolio and planning competencies

Executives have to lead the changes

Key Takeaways


Thank you!

Stephen P. CraneStephen Crane Consulting, LLCSupply Chain Risk [email protected]