ie conference september142011

S&OP: The Top Ten

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Lora Cecere, PartnerSeptember 2011

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Let’s start with 9

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#9: What do I avoid?

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One number forecasting

You don’t need a technology.

80% is good enough.

Standardize: One solution provider is all you need.

Supply chains are moving so fast they don’t have time to plan.

Real-time S&OP is needed.

A COOKIE-CUTTER approach can work.

The Market Myths6

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#8: How do I get started?

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What is the goal? How do you achieve the right

balance between demand and supply?

How do you make decisions? How does your organization

measure success? How do you tie S&OP planning to

execution?

The Right Questions8

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Goal Evolution9

1985: Deliver a Feasible Plan for Operations

1995: Match Demand with Supply

2005: Demand Driven

2011: Market Driven

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Lots of Options10

Enterprise Resource Planning

Expansionists

Advanced Planning System

Traditionalists

Business Intelligence Reformers

Enrichment Vendors

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#7: What are the barriers? Pitfalls?

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Supply chain strategy

Business 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 productplatforms

Design the supply response

Build organizational systems and manage talent

Align supply relationships

Building Value Networks

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 Process

How do I do the right things right?

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2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 201035

45

55

65

75

85

95

Days of Working Capital

Household Products ChemicalPharma Average

Data Source: CFO Magazine

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2004 2005 2006 2007 2008 2009 20100

10

20

30

40

50

60

70

Days of Working Capital Across the Food Manufacturing Value Chain

Grocery Retailers Food ManufacturersPackaging and Containers

Data Source: CFO Magazine

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#6: What is the ROI?

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Benefits received from S&OP processesWhat benefits have you received from your work with S&OP processes?

57%

32%

50%

34%

36%

32%

Improving forecast accuracy

Transportation and warehouse management

Reduction of inventory

30%Improvements in the perfect order

59%Increasing revenue

Improving new product launch

42%Improving asset utilization

38%Determining outsourced manufacturing

Determining procurement requirements

Capital planning and asset management

10-15%

2%

5-7%

2-8%

3-7%

3-6%

3-6%

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Stage 1:Goal: A

Feasible Plan

ROI: 9-12 Months

Late Adopter Deployments

Stage 2:Goal: Match Demand with

Supply

ROI: 6-9 MonthsMajority of Current

Deployments

Stage 3: Goal: Drive the Most Profitable

Response

ROI: 3-6 monthsLess than 20% of

Deployments

Stage 4:Demand-

Driven Supply Chains

ROI: Less than 3 Months

Less than 5% of Deployments

Stage 5: Goal: Market-Driven Value

Networks

ROI: Within the Month

Less than 2% of Deployments

Increasing ROI

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The Reason: Commodity Price Pressure

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Jan-

97

Jan-

98

Jan-

99

Jan-

00

Jan-

01

Jan-

02

Jan-

03

Jan-

04

Jan-

05

Jan-

06

Jan-

07

Jan-

08

Jan-

09

Jan-

10

Jan-

110.00

50.00

100.00

150.00

200.00

250.00

300.00

350.00

400.00

Corn (metric Ton)Wheat (metric Ton)Coffee, Robusta (Pound)Sugar (Pound)Beef (Pound)Crude Oil (Barrel)

Source: Index Mundi

$/LB

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#5: What is the right frequency, duration and granularity of planning?

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Value: Price, trade incentives, new products, services, freshness, responsiveness

Variety: Configurations, items, platforms, components, brands, processing technologies

Velocity: Lead-times, order to delivery, inventory turns, time to market

Volatility: Demand, inventory, schedules, reliability, yields

Volume: Plants, warehouses, distribution centers/points, product flow

What drives Variability?

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Focus22

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#4: What is the Best Reporting Structure?

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CostVolumeGrowth

Alignment of metrics: Typical organization

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CEO

Chief Customer

Officer

Chief Marketing

OfficerSales

Account Teams

COO

VP of Supply Chain

Customer Service

Procurement Logistics

CFO

CIO

VP of Manufacturi

ng

Quality

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Managing Bias and Error25

Reports to Sales

Reports to Marketing

Reports to Manufacturing

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#3: Do I need a Technology?

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Goal

A feasible plan • Model the network• Recognize and respect

constraints• Gain plan visibility

Match demand with supply

• What-if analysis• Multi-tier inventory analysis• Network design

Deliver the most profitable Plan

• Demand translation• Supply orchestration• Optimize financial drivers

Demand-driven • Sense channel demand• Shape demand• Drive the most profitable

response

Market-driven • Sense buy and sell-side market conditions

• Bi-directionally orchestrate demand

The Stages27

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#2: Who does it Best?

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Leaders sensed Market Changes 5X Faster

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Leaders (6%)

Sensed Market

Changes 2 Months

Corrected Supply

Chain in 3 Months

Followers

(47%)

Sensed Market

Changes in 4 Months

Corrected Supply

Chain by 6 Months

Laggards

(47%)

Sensed Market

Changes in 6 Months

Corrected Supply

Chain in 15 Months

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#1: What does Good Look Like?

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Aligning for balance31

S: Go-to-Market

Strategies

OP: Demand Orchestratio

n

Commodity Strategies

Network Strategies:

Make/Source & Deliver

Inventory: Form & Function

Competition

Market Drivers

&

Goal

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Definitions

Letter

Common Practice

Optimal Practice

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

& Direct integration to supply

Design of the value chain to optimize trade-offs, minimize risk, balance cycles, and orchestrate demand

OP Manufacturing plan Trade-offs between make, source and deliver

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Value Planning

Focus on continuous improvement

• Forecast-Value Add Analysis

• True North

Focus on what is important in YOUR business

Move horizontal and outside-in

What is the roadmap?33

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About Us

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Altimeter 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.

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Lora Cecerelora@altimetergroup.com

Blog:www. supplychainshaman.com

Twitter: lcecere

Linkedin: linkedin.com/pub/lora-

cecere/0/196/573

Thank you

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