beyond the basics: leveraging s&op to deliver results, newell rubbermaid

Beyond the Basics:

Leveraging S&OP to Deliver Results

January 27, 2011

Andrew Downard and Bill Norman

2

Agenda

Background An overview of Newell Rubbermaid.

StrategyWhy we are working to improve S&OP. How our strategy for

S&OP fits in to the goals and objectives of the business.

People Who is involved, and how.

ProcessHow we do S&OP. How we have structured our S&OP

improvement initiative. Executing the basics well.

Measures How do we know we are having an impact?

What’s next? Moving beyond the basics.

Forecasting Value Added X-ray vision for the forecasting process.

Facing the CustomerIntegrating S&OP and Customer Demand. Signals within

Forecasting.

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Agenda











Forecasting.

Newell Rubbermaid: Groups and GBUs

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5

Agenda





ProcessExecuting the basics well. How we have structured our S&OP

improvement initiative.





Forecasting.

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Falling Short on Measures of S&OP Performance:

» Fitch Ratings: Measures of S&OP

Performance

▪ Inventory growth

▪ Turns

▪ Working Capital

» External Benchmarks: Forecast accuracy

▪ NWL 2008 forecast accuracy was significantly below best-in-class,

presumed to be 80% (60 day based on units)

The Opportunity - 2008

Source: Cash Conversion Cycle for Household Products and

Personal Care, Fitch Ratings, July 2, 2007

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Agenda











Forecasting.

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Newell

Rubbermaid

Tools,

Hardware, and

Commercial

Products

Office

Products

Home and

Family

Decor CLB&PE B&SRFH MHA EDW FW&L Tech IP&S RCP CT&A HW

GBU

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Example: Entities

GBU X

“owns” the

global

S&OP

Process

S&OP is

executed in

each of 5

distinct entities.

Each entity has

its own supply

and demand.

Some

entities

belong to

larger

regional

units.

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Newell

Rubbermaid

Tools,

Hardware, and

Commercial

Products

Office

Products

Home and

Family

Decor CLB&PE B&SRFH MHA EDW FW&L Tech IP&S RCP CT&A HW

GBUEntity

(business)

Entity

(region)

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Agenda











Forecasting.

12

S&OP Workstreams (APQC Webcast)

Area People Process Tech. Past/Present

Steering

Team

Define the process by mapping Wallace and Stahl to Newell Rubbermaid. First

drive compliance to the process, then drive effectiveness of the process.

Community of

Practice

Build cohesion and consistency of purpose in the community. Get everyone on

the same page. Leverage the community we have built to drive business

results.

Training Make sure everyone involved with the process has a solid understanding of

the basics, fundamental S&OP roles, good meeting behavior, etc

Global Scope First focus on the S&OP process within each entity. Then focus on building

global coordination between entities at the GBU and group level.

Assessments

First focus 85% focus on compliance, 15% on results and effectiveness. Then

shift the emphasis and structure. 15% focus on compliance, 85% on results

and effectiveness.

Process

Manual

Apply the generic Wallace and Stahl 5-step meeting cadence to the Newell

Rubbermaid environment. Standardize metrics and reports. Then expand

manual to cover key “effectiveness” areas such as inventory optimization,

forecasting, etc.

Forecasting Focus on parent S&OP process first. Then build out and deploy as a key

capability within the S&OP framework.

Inventory

Optimization

Focus on parent S&OP process first. Then build out and deploy as a key

capability within the S&OP framework.

Global

Reporting

Optimize and harmonize existing local solutions first (mostly Excel). In parallel

build out an SAP-based reporting solution with data from all regions.

Harmonize new reporting solution with process manual, training, and

assessment paths.

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The Newell Rubbermaid S&OP Process

» The Newell Rubbermaid S&OP Manual can be thought of as “Wallace and Stahl as

applied at Newell Rubbermaid”.

» Annual S&OP assessments measure how closely the process as defined in the

manual is being followed.

+ =

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Assessments to Actions

Complexity

Cri

tic

ali

ty

3

Location GBUOrigination

Date

Priority

S&OP Process

Section Gap Driver Action Responsible

Date to

complete StatusFundamentals

Data Close/ Update

Demand Planning

Supply Planning

Integration

Executive Review

S&OP WORKOUT ACTION PLAN Lastest Update Date

2

GAPS

Absence or systemic

breakdown as shown

through multiple lapses or

continual underperformance.

OBSERVATIONS

Minor lapses or trending

unfavorable.

1

S&OP Process Ownership

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16

Agenda











Forecasting.

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2008-2009 Year-over-Year Results

YOY

Total inventory (raw + FG + WIP)

Total E&O dollars

E&O percentage

Turns

Days on Hand

Forecast Accuracy (60 day lag)

Perfect Order

SKUs

S&OP Assessment Score

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GBU X Results

» While assessment scores went up, business results improved

dramatically:

Metric: 2008 2009

Gross Inventory 32%

E&O Inventory 43%

Line Fill 5.2%

Forecast Accuracy 38%

SKU Count 15%

Inventory & Line Fill for GBU X

$30

$40

$50

$60

$70

Jun-08

Jul-0

8

Aug

-08

Sep

-08

Oct-08

Nov

-08

Dec

-08

Jan-09

Feb

-09

Mar

-09

Apr-09

May

-09

Jun-09

Jul-0

9

Aug

-09

Sep

-09

Do

llars

90.0%

91.0%

92.0%

93.0%

94.0%

95.0%

96.0%

97.0%

98.0%

99.0%

100.0%

Lin

e F

ill

%

Inventory Line Fill

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Agenda











Forecasting.

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S&OP: Compliance and Effectiveness

Compliance Effectiveness

Compliance Assessment

What To Do

Current S&OP Compliance

Low <80%

Are we doing this?

How well are we doing this?

Is it translating into business results?

How can we do it better?

Do we hold a demand agreement

meeting?

Is a waterfall report run every

month?

Do we monitor the required

metrics?

Does our demand agreement process result in better

forecasts? Higher service levels? Lower inventory?

Do we have the data and reports we need to make

better decisions?

How do our customers measure us, and how do we

score on those metrics?

new

Compliance

Effectiveness Workshop

How To Do It

High >80%

Effectiveness

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Agenda











Forecasting.

222222

Forecast Value-added Analysis

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» Where do we add value during the forecasting process?

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Stat

Forecast

65%

Naïve

Forecast

60%

Consensus Demand

Forecast

62%

Simplest forecast: “tomorrow will be like

today”

Generated using tools like SAP APO and Demand Solutions

Adjustments that incorporate additional

market/economic information

Forecast Accuracy

FVA% = FA%(CD) - FA%(Stat #3)

232323

FVA: “Background” Stat vs.

Consensus Demand

2323

FVA>0: 353 SKUs (41.0%)

CD more accurate than Stat

FVA<0: 332 SKUs (38.5%)

Stat more accurate than CD

FVA=0: 177 SKUs (20.5%)

Technical Notes:

• Stat #3 chooses the best model (Croston or Seasonal Linear Regression) based

on whatever SOH data is available at the time of forecast

• The spikes at FVA=0 and FVA=-100% occur n cases where SOH=0

Notes:

• US and Canada Status 25 products only

• The Analysis does not include SKUs where CD=0 and

SOH=0. They are assumed to be discontinued

GBU #7

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Agenda











Forecasting.

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Sales & S&OP – Forecasting Evolution

Sales & S&OP Crossroads: Overview

Leveraging Customer Partnerships: Next Generation CPFR

Sales & S&OP Summary: Forecasting Essentials

Salesperson’s View of S&OP“What about my Customer??!!”

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KPIs?

Service?

Inventory?

Common GoalsGravitation to Forecasting Excellence

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Global S&OP Inventory Optimization Sales Excellence

Organizational Development

Reduce Working Capital E&O Reduction Reduce the Cost to Serve

Improve Customer Service Maximize Turns Improve Customer Service

Optimize Processes Improve Customer Service Market Share Gain – Brand

Expansion

Standardization – One Language Reporting

Sales Development - Evolve

Visibility – Reporting

Forecasting Methods

Customer Planning

Forecasting Improvements

Improved Customer

Collaboration S&OP - Forecasting

Improve Customer Service Improve Customer Service

Forecasting Improvements

Forecasting Methods

Improved Customer

Collaboration S&OP Forecasting

Improve Customer Service

Customer Planning

Sales Excellence & S&OP CrossroadsHealthy Tension – Understanding What Works

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Socialize Best Practices GBU Best Practices

Demand Signals - Forecasting Fcst Technology & Process

SocializationCustomer/Strategic Planning

Forecast Improvement Activities

Forecasting/Planning & Process Improvement

Sales Excellence S&OP

40 Major Demand IndicatorsSales Excellence Case Study

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Current Forecasting Process & RigorStrategic Customer Base

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Are Customers Willing

& Capable to Engage

This Process?

Customer Data

Evaluation Sub-

Processes

If So, What Feedback

is Necessary to Make

an Impact?

POS

POS

POS Forecasting Case StudiesForecast Accuracy Benchmarking

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Bus 1 Bus 2 Bus 3 Bus 4 Bus 5

All developed similar processes, templates and methods

All felt like POS & customer data was a necessity

All have very mature S&OP processes

Primarily working with strategic customers

All felt that customer data improved forecast accuracy &

had PROOF

All had relatively similar forecastability & customer profiles

All directed to improve rigor surrounding CUSTOMER &

CONSUMER demand triggers

Forecast Accuracy Case StudyNext Generation CPFR: Strategic Customer Buy Planning

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-40%

-20%

0%

20%

40%

60%

80%

100%

333333

Forecast Value-added AnalysisS&OP Forecasting - Leading the Charge

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» Where do we add value during the forecasting process?

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Forecast Accuracy

Stat

Forecast

65%

Naïve

Forecast

60%

Consensus Demand

Forecast

62%

Simplest forecast: “tomorrow will be like

today”

Generated using tools like SAP APO and Demand Solutions

Adjustments that incorporate additional

market/economic information

34

Socialize Best Practices GBU Best Practices

Demand Signals - Forecasting Fcst Technology & Process

SocializationCustomer/Strategic Planning

Forecast Improvement Activities

Forecasting/Planning & Process Improvement

Sales Excellence S&OP

Healthy Tension to “Open Book”A Collision of Effective Processes

SALES EXCELLENCE S&OP

S&OP & Sales Excellence MarriageHow We Work Together

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Next Generation CPFR:

Customer Planning & Demand

Signals Review. Provide Item

Level Input and Engage the

Judgment Forecast. Evaluate

Bottoms up Vs. Tops Down &

Lead Demand Planning to

Improved Reporting Platforms

Next Step S&OP:

Verify Judgment Forecast

Accuracy and Benchmark

Performance. Begin the “Shift” to

the Most Effective Fcst. Model.

Illustrate the ROI. If the Existing

Model works, Explore Detail.

S&OP & Sales Excellence MarriageLow Hanging Fruit

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The Future: Dynamic Forecast Management Approach – Leveraging

Statistical Models within FVA to Solve for a Forecasting Utopia. The Results will Decide the Forecasting Landscape

Significant short term gains in FA are possible through a rigorous evaluation of

customer data. Even more is possible through a “Re-Invention” of CPFR …..Even if the

rigor only occurs at a strategic level with your customers. “Pull vs. Push”

FVA can liberate the forecasting process within S&OP….but it takes time

A reenergized customer planning focus is necessary for S&OP maturity. Lead your

sales team to water and illustrate the power of their decisions.

Competition drives involvement! Incent and socialize forecasting best practices

Additional levels of consensus are born with S&OP forecasting maturity – That

intelligence is key to a proper long term forecasting strategy

Re-Invest in demand planning – Consider tenacity and the ability to collaborate

regarding the DP profile. The most statistically advanced planner is ideal but consider

evaluating the Customer’s Profile when aligning a planner to a customer.

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About Us

Andrew Downard

Director, Supply Chain

Newell Rubbermaid

3 Glenlake Parkway

Atlanta, GA 30328

p: 770-418-7550

f: 770-677-8550

[email protected]

Bill Norman

Manager, Supply Chain

Newell Rubbermaid

1000 SW 14th St

Bentonville, AR 72712

p: 479-254-7900

f: 479-254-7910

[email protected]

Andrew’s current roles focuses on global Supply Chain,

Operational Excellence, and Management Development. He is an

experienced global Director with a strong background in Sales

and Operations Planning (S&OP), Continuous Improvement

(Lean, Six Sigma, etc), Research and Development, New Product

Development, and Talent Development.

Andrew’s previous experience includes Operations Director,

Continuous Improvement Director, Deployment Leader, and Six

Sigma practitioner positions in consumer products, the chemical

industry, and healthcare/medical services. He is a certified Black

Belt and Master Black Belt and holds a B.Sc. and Ph.D. in

chemistry from the University of Calgary, Canada.

Bill’s core responsibilities include customer facing Supply Chain,

Sales & Operations Planning, POS Forecasting, Global Customer

Logistics & Compliance and Merchandising support. He is an

experienced Supply Chain Manager with a strong background in

Retail Inventory Management, Replenishment, Demand Planning,

Orders to Cash, and Customer Logistics.

Bill’s previous experience includes Supply Chain Manager,

Channel Marketing Manager and Sales Manager in the household

pesticide industry supporting the world’s top retailers. He holds a

B.Sc. in Organizational Management and sits on various

customer and supplier operational councils.

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