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S U P P LY C H A I N M AN AG EMEN T

Global Supply Chain PlanningStudy 2009

Orchestrate Your Supply Chain by Taking Planning to the Next Level

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Introduction 1

Executive Summary 2

About the Study 3Objectives 3Methodology 3

The Operating Environment 4Current Business Focus and Competitive Advantage 4Major Trends in a Challenging Environment 4Global Sources, Global Markets, Global Supply Chains 5

The Fine Art of Supply Chain Planning 6Supply Chain Planning - Maturity, Challenges and Opportunities 6Planning Organization and Processes 9Planning Tools: Limited Deployment and Utilization of Technology 10Collaboration Is Still the Key 11Metrics and Benchmarks 11

S&OP: Strong Adoption but Challenges Remain 14Data Issues Remain an Impediment 14Consolidated Global S&OP Is the Exception, Not the Rule 15S&OP Participation Has Not Extended Beyond the Four Walls 15

Additional Perspectives 16Incorporating Risk Factors Into the Planning Process 16Supply Chain Planning Outsourcing 17

Taking Planning to the Next Level 20Engaging the End-to-End 20Leveraging the Tools 21Getting to Next 21

Appendix 22Glossary 22

Capgemini Consulting and Supply Chain Management 24


We trust that you will find this reportuseful as you continue on yourjourney in pursuit of Supply ChainManagement excellence within yourorganization, especially in the area ofplanning.

Steve LambertGlobal Leader, Supply Chain PlanningCapgemini Consulting

Capgemini Consulting is pleased topresent this report drawing from theresults of our survey on Supply ChainPlanning within companies across theworld.

This report is a result of Capgemini’sconstant focus on innovation, trendsand issues in the business market. Asone of the top full-service consultingcompanies, Capgemini is at theforefront of thought leadership andSupply Chain Management leadingpractices.

The Supply Chain Planning functioncontinues to face the challenges ofnegotiating the complexities of theever-changing environment in whichsupply chains operate. In this context,our study captures a wide spectrum ofperspectives, ideas and practiceknowledge on this topic fromseasoned executives representing awide range of industries. We formallythank all the executives whocontributed their valuable time andinsights for this study.

Introduction

1

Authors:Abhijith MukundaMarcel MeijerBelinda Griffin-Cryan

Contributors:Mark SmithJan Henning LueersRoel DelnoozMichelle GallagherMatteo BarbazzaKevin Anselme

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and the previously mentionedintegration with suppliers were othermajor shortcomings experienced.Adoption of specialized S&OP tools isnot evident as most organizations usespreadsheet analysis and non-specialized reporting from their ERPsystems.

Most organizations do not factor inmany of the risks associated withthe dynamic environment in whichthey operate. While risk associatedwith commodity-price fluctuation andavailability are well recognized andincorporated in the planning process,exchange-rate fluctuations andproduct risks from low-cost countrysourcing are not. Also, a significantmajority of organizations do notconsider energy use, reverseflows/returns, carbon footprint andlogistical delays due to natural andgeo-political factors critical to theirplanning.

Supply chain executivesoverwhelmingly responded thatplanning is a core process in theirorganization and could not beoutsourced. However, over half theparticipants mentioned that theircompetitors might consider oralready are outsourcing someplanning processes.

While this top-line review provides asummary of key findings from thestudy, the sections that follow offermore in-depth data and analysis. Weurge you to read the full report andrecommendations to evaluate whatactions you may need to take now toensure that your company is ready forupcoming Supply Chain Planningchallenges and opportunities.

In the current deteriorating globaleconomic conditions, the pressure onthe supply chain has only increased.Operating in an environment drivenby unprecedented global competition,rapidly changing consumerpreferences leading to increasedvolatility, variability and servicerequirements, globalization ofsourcing and often dealing with a lackof visibility, the supply chain functionis now more than ever heavilychallenged to seek cost reductions.

By surveying supply chain executivesfrom across the globe, this study aimsto capture the latest thinking andperceptions regarding the current andfuture trends, challenges andopportunities for Supply ChainManagement (SCM), especially from aplanning perspective. The studyuncovered a number of key findings:

Although viewed positively as asource of competitive advantage bysome organizations, Supply ChainPlanning is not yet universally seenas a strategic, critical decision-making activity. The majority ofrespondents perceived Supply ChainPlanning as a support function/back-office execution process and manyseek strategic direction and long-termplans from their global organizations.

Only a few of the participatingexecutives classify theirorganizations as innovators or best-in-class; the majority are looking toadopt industry leading practices. Mostcompanies have the basic processeswith formalized support systems inplace to support planning, but are stillchallenged with high levels ofinventory and adjustments and have alimited ability to respond quickly to

changes in supply or demand.Therefore it is not surprising thatfurther process improvements/enhancements were noted as the mostlikely changes to be made to improveperformance.

While collaboration and informationsharing is seen as a key to success,this is still largely accomplished in anon-formalized way with little or nostructured processes or tools to enablethem. Accomplishing end-to-endsupply chain integration (internallyand externally) still seems to be adream. Though most respondentsintend to improve collaboration withtheir suppliers and/or customers,many have not defined thecollaboration mechanism and very feworganizations share criticalinformation like actual stock levels,gross demand or production planswith their upstream and downstreamsupply chain partners.

A significant majority of theorganizations still rely on homegrownapplications like spreadsheets for theirplanning processes while sophisticatedand fully integrated tools are notwidely adopted. Though theperception is that the core planningprocesses are well supported by theexisting planning systems, more thanhalf the respondents missed advancedplanning and optimizationfunctionality in their current systems.Most organizations do not haveprocesses to ensure that they are fullyexploiting the capabilities of theircurrent systems.

Sales and Operations Planning(S&OP) is widely adopted but theeffectiveness of the process islimited. Lack of S&OP functionality

Executive Summary

2 Global Supply Chain Planning Study 2009


The views of leading Supply ChainManagement practitioners provide thebest understanding of the currentstate of the art as well as insights intothe future.

This study, conducted by Capgemini’sPlanning Center of Excellence, tapsthe extensive experience andperspectives of supply chainexecutives of major enterprises fromall over the world.

ObjectivesThe objective of this study is to drawexecutive attention to currentchallenges, emerging trends andimprovement opportunities relating tothe Supply Chain Planning areathrough the analysis of perspectivesobtained from interviews andparticipants of a web-based survey onthe following overarching questions:

•What are the current challenges,future trends and opportunities forimprovement in the Supply ChainPlanning area?

•What are the leading planningpractices, planning capabilities andprocess maturity globally?

The scope of this study is limited tosupply planning, demand planning,inventory planning, productionplanning and S&OP and covers thefollowing aspects:

•Current business conditions andchallenges

•Supply Chain Planning processes,tools and performance indicators

•Sales and Operations Planning(S&OP)

•Emerging trends and opportunitiesfor improvement

MethodologyThe input for this study was gatheredduring fall 2008 through face-to-faceinterviews and a web-based surveythat collected responses from 120supply chain executives, withrepresentation from all the majoreconomic regions in the world.Participants were carefully chosen toensure that they were all responsiblefor or actively involved with SupplyChain Planning activities in theirorganizations.

Survey participants were spread acrossthe following four major industries:

•Consumer Products and Retail

•Discrete Manufacturing

•Process Manufacturing

•Life Sciences and other industries

Participants from companies based inover 21 countries responded to thesurvey, with a respondent distributionof 37% from companies in WesternEurope, 24% from Central andEastern Europe, 19% from theAmericas, 13% from the Nordics and7% from the Asia Pacific region.Significant participation came fromsenior executives (44% were

Directors, VPs or CXOs in theirorganization). A large majority (88%)of the respondents identified thescope of their company’s operations asglobal or multi-national.

About the Study

3

“The purpose ofplanning is not topredict the futurewith propheticcertainty, but toensure long-termsuccess.”

Industry representation

Other 7%

ConsumerProducts 38%

DiscreteManufacturing 30%

ProcessManufacturing 14%

Life Sciences6%

Retail 5%

Scope of operations

Local 1%

Global 52%

Multi-national 36%

National9%

Regional 2%


Major Trends in a ChallengingEnvironmentContinued pressure to reduce costsremains the top challenge for thesupply chain function. The othermajor challenges include managingvolatility and variability, lack ofvisibility, high levels of workingcapital requirement and unsatisfactorydelivery performance.

Some interesting differences amongindustry sectors were observed. Whilecost pressures were paramount toconsumer products companies,discrete manufacturing industriesreported lack of visibility as thebiggest challenge. Similarly,globalization and poor cash flowfigured in the top challenges for bothdiscrete and process manufacturingindustries while they did not in theconsumer products industry. In addition, managing volatility andvariability appears to be a topchallenge for consumer productsbusinesses but is not so important tomanufacturing industries.

Innovation, customer intimacy andoperational excellence are necessaryfor survival and growth. Productinnovation was reported as the sourceof competitive advantage for nearlyhalf the participating organizations.Operational excellence and customerintimacy each received a quarter ofthe votes for competitive advantage.

Very few supply chain executivesconsider their organizations to be“innovators” in Supply ChainManagement. The majority oforganizations classified themselves as“seekers,” looking to adopt industryleading practices. Nearly a quarter ofthe participants consider themselvesto be “strivers,” those focused onreaching industry averages in terms ofSupply Chain Managementperformance.

The macro environment in whichorganizations and their supply chainsoperate in today’s world is fraughtwith major challenges. Some aretraditional ones like pressure tosupport demanding business goals byreducing costs, aiding growth andproviding better service, as well asincreasing agility. Others are newchallenges due to the constantlychanging economic and geo-politicalscenario. These conditions createvolatility and variability in demand,supplies and lead times, as well asincreased complexity. Tax structures,regulations, and fluctuating exchangerates, fuel and commodity prices areadding new constraints to an alreadycomplex supply chain equation.

Current Business Focus andCompetitive AdvantageIt is important to keep in mind thatthe research was conducted during asustained period of deterioratingglobal economic conditions.Therefore, some of the focus areasidentified in the survey may havegained even more importance of late.Many organizations would shift thefocus back to innovation and growthonce economic conditions stabilize.

Many organizations (44%) reportedthat their main business focus wasgrowth and achieving increasedprofitability. Some (25%) were seekingefficiencies or were distracted by post-merger/acquisition integrationchallenges. Only a very small numberof respondents revealed that they werein a downsizing, cost-cutting andsurvival mode. Some of thesepriorities might have changed over therecent months.

The Operating Environment

Main source of competitive advantage

ProductInnovation 44%

OperationalExcellence 26%

CustomerIntimacy 26%

Other4%

Very few innovators in Supply ChainManagement

18%INNOVATORS

58%LEADING PRACTICE

SEEKERS

24%STRIVERS



Top trends discerned by the surveyinclude increased requirements interms of customer service, greatercollaboration and transparency,increased focus on logisticsimprovement and expandingglobalization of sourcing.

While there is a recognition of thechallenges and need for solutions atthe executive level, misalignmentbetween IT and business groups iscreating obstacles for implementingeffective solutions.

Global Sources, Global Markets,Global Supply ChainsGlobalization of supply chains is anirreversible trend. Global sourcing isnow mainstream, with anoverwhelming majority (81%)confirming that they source at least10% of their supplies from outsidetheir borders. Relatively speaking,sourcing from emerging economies inAsia (China, India and others) as wellas Eastern Europe and Latin Americais still quite small. Interestingly,emerging markets are gainingimportance, with one in fourrespondents reporting that at least10% of their final product deliverieswere to these regions.

The biggest challenges in SupplyChain Management can be directlytraced to globalization of supplies andmarkets. These include the increase inlead times and supply chaincomplexity, variability of demand andsupplies owing to a host of externalfactors, challenges in visibility andcoordination, and balancing costswith the need for flexibility.

What are the top two supply chain trends observed in your markets?

Increased service requirements

Increased collaboration andtransparency

Increased focus on logisticsimprovements

Globalization of sourcing

Growth in emerging markets(global sales)

Globalization of productionfacilities

Other

Increased competition from“new” countries

51%

40%

31%

31%

16%

14%

8%

7%

What are the top three challenges within your supply chain?

Continued pressure to reduce supply chain costsManaging volatility and variability

Lack of visibility into the supply chainDelivery performance does not meet customer requirements

Too much working capital (poor cash flow)Global economic conditions

Globalization of Supply Chain ManagementBusiness, IT and SCM strategy out of sync

Long lead timesExtended and complex supply chains

Unreliability of supply baseAvailibility of suitable people to carry out SCM activities

Product introduction/exitComplexity of regulations and compliance

Contract manufacturing - capacity contraintsExpanding/operating in emerging markets

OtherSustainability

39%

28%27%

26%26%

20%17%16%

14%14%

11%11%11%

10%8%8%

5%

4%

5


Supply Chain Planning -Maturity, Challenges andOpportunitiesSupply Chain Planning is viewedpositively as a source of competitiveadvantage (16%) and a criticaldecision-making function (29%) bysome of the organizations surveyedfor this study. However, more thanhalf the respondents perceived SupplyChain Planning as an importantsupport function or a back-officeexecution process. Nearly 20% of therespondents from the manufacturingindustry felt that planning wasperceived as a back-office executionprocess.

Very few organizations considerthemselves to be innovators. Only 5%of participants considered theirSupply Chain Planning processes andorganization to be innovators andbest-in-class.

More than three-quarters of therespondents reported having demandand supply planning processes andtechnology in place with at least aformalized support system available.

The top challenges faced in supplyand demand planning include limitedability to respond quickly to changesin supply and/or demand, and limitedability to perform consensusforecasting. Other top challenges areproblems in accurately calculatingavailable-to-promise quantities (ATP),executing promotions planning, aswell as maintaining high levels ofinventory and a large number ofadjustments. Important differenceswere found between the consumer

The Fine Art of Supply Chain Planning

How is Supply Chain Planningperceived in your organization?

41%14%

16%

29%

Source of competitive advantage

An important support function that can help drive efficiencies in the supply chain

Back-office execution process

Crititcal decision-making function influencingfinancial results

How would you rate your company’splanning process and organization?

21%

44%

31%

5%

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products and manufacturing sectors interms of challenges faced. Whileineffective or limited promotionsplanning, lack of supply networkflexibility and level of integration wereconsidered among top planningchallenges in consumer products,manufacturing companies reported adifferent set. Limited ability toperform consensus forecasting, highlevels of inventory and adjustmentsand challenges with globalcoordination and control wereconsidered major hurdles in discreteand process manufacturing industries.

“Our planningsystems delivered all the benefits thatwe expected, after 10 years of use.”

Manager, Demand and Supply Planning,Global Fortune 500 ManufacturingCompany

What are your top three Supply Chain Planning challenges?

Limited ability to respond quickly tochanges in supply and/or demand

Limited ability to perform consensus forecasting

High levels of inventory and adjustments

Limited ability to perform quick andaccurate “available to promise”

Promotions planning is ineffective or limited

Level of integration is a majorissue (several competing goals)

Supply chain network is rigidwith no/limited flexibility

Challenges with global coordination and control

Planning frequency is not sufficient

Limited credibility of plans due tochurn, poor data or lack of discipline

Challenges with downstream collaboration

Frequent stock-outs despitehigh inventory levels

Production plants make what they want

45%

37%

36%

33%

29%

28%

24%

24%

18%

17%

16%

14%

11%

What do you consider to be the biggest improvement opportunities for Supply ChainPlanning in your company?

Forecasting/demand planning

Inventory/replenishment planning and optimization

Sales and Operations Planning

Production planning and detailed scheduling

Collaborative planning with customers (CPFR)

Integration across processes

Promotions planning

Collaborative planning with suppliers (CPFR)

Network optimization

Demand sensing and demand shaping

Logistics planning

Supply planning

Other areas

Merchandise planning (applicable to retailers)

52%

38%

34%

24%

23%

23%

21%

18%

17%

16%

15%

13%

4%

1%



Which of these best describes your demand and supply planning processes?

There is no organized planning process in place

Planning process in place with limited information and systems support (non-formalized and unconstrained)

Planning process in place with limited information and systems support (formalized with

MRP focus but unconstrained)

Planning process in place with bolt-on constraint-based demand-supply system in place

Planning processes are in place that address and handle all aspects of the supply chain (forecasting demand/supply chain and master volume/factory

and fulfilment scheduling/replenishment-allocation-inventory planning/capable and available to promise)

Other

Supply Planning Demand Planning

2% 10%

19%

29%

24%

21%

3%

16%

36%

27%

23%

2%

Note: Totals exceed 100% due to multiple responses.

To what extent would the following changes in the planning area improve the supplychain performance?

Changes in processes

Changes in culture

Changes in IT support

Changes in the APS application/functionality

Hiring better educated people with supply chain knowledge

Changes in KPIs/governance structure

Changes in the organizational structure

Hiring more people

Other

0 10 20 30 40 50 60 70 80 90

Most Likely Likely Not Likely Least Likely

9

Forecasting and demand planningfollowed by inventory planning andoptimization and S&OP offer thegreatest opportunities to improvecurrent Supply Chain Planningpractices.

The majority (67%) of participantsindicated that changes in planningprocesses were key to improving thesupply chain performance, followedby the more difficult-to-implementchanges in culture and somewhateasier changes in IT support.

Planning Organization andProcessesSupply Chain Planning is largelymanaged locally or regionally in amajority of the organizations (80%)though many (30%) seek strategicdirection and long-term plans fromthe global organization.



Planning and forecasting,production/manufacturing andsales/account management executivesare the key players in thedemand/supply planning process in amajority of organizations.Interestingly, 19% of respondentsfrom discrete and processmanufacturing industries say theplanning and forecasting functionplays only a small part in the planningprocess. This is also true of 39% ofrespondents from manufacturingregarding the involvement of thesales/account management team.

Few organizations involved customersand suppliers in the demand/supplyplanning process.

Organizations use a variety of methodsto match supply with demand. One inthree participants revealed that thoughdemand is considered for supplyplanning, the final production mixdecisions, in case of capacityconstraints, are somewhat arbitrary.

Planning Tools: LimitedDeployment and Utilization ofTechnologyMost respondents rated theirorganization’s use of the installedplanning systems as reasonable andtheir core planning processessupported by the existing systems.The use of sophisticated technology isnot widespread and most did not haveprocesses to ensure that they are fullyexploiting the capabilities of theircurrent systems.

A survey of the planning technologylandscape revealed that a majority(54%) still relied on homegrownapplications, including spreadsheets,for their planning processes whileenterprise-wide ERP systems came ina distant second. Less than 15%reported use of Advanced PlanningSystems (APS) or best-of-breedplanning solutions with ERP.

Based on the above facts, it isn’tsurprising that more than half therespondents felt the need foradvanced planning and optimizationfunctionality in their current systems.

Where is planning managed?

15%

15%

25%

25%

20%

Globally (centrally)

Regionally within a geographical area/business unit

Locally within the business area

Global direction and local decision making

Strategic/long-term planning done globally andoperational/short-term planning done locally

How would you rate your organization’suse of installed planning systems?

73%

Fair – our core planning processes are supported by our systems, but we don’t have a process to ensurewe are fully exploiting our technology

Excellent – use all of the available functionality to support our changing business

Poor – our current planning systems do not support our requirements and we are manually working around the shortcomings, thereby increasing business risk

12%

15%

What planning functionality are you missing today?

Advanced planning functionality(e.g., that enables optimization)

Sales and Operations Planning (S&OP)

System integration with suppliers

Integration between production executionsystem and planning system

Network optimization

Promotional forecasting

System integration with customers (e.g., POS data)

Track and trace functionality

Standard planning functionality through ERP system

Other

55%

37%

33%

32%

26%

24%

24%

22%

18%

5%

“Our ERP is quitestrict!”

Logistics and Production Director, Global Consumer Products Company


In addition, the study highlighted thefact that collaboration andinformation sharing is still largelyaccomplished in a non-formalizedway with little or no structuredprocesses or tools to enable it. Mostcompanies rely on fax, mail, phoneand e-mail to share information, withvery few companies reporting aseamless integration of IT systemswith the upstream and downstreamsupply chain partners. Though mostrespondents intend to improvecollaboration with their suppliers,many have not defined themechanism to enhance collaboration.

In addition, S&OP functionality andintegration with suppliers were othermajor shortcomings cited.

Potential SCM-related IT investmentsare expected to address these gaps,with 96% of the surveyed companiesplanning investments in the nearfuture. Collaboration, optimizationand scheduling tools topped the list ofsuch investments.

A key fact to be noted is that severalrespondents felt that they were goodat demand and supply planningwithout the use of sophisticated tools.This is interesting because mostexecutives recognize the complexityand volatility of the operatingenvironment and their organization’sinability to quickly and effectivelyrespond. Advanced tools are essentialto effectively analyze information,collaborate with supply chain partnersand execute planning activities. Thebest-in-class organizations andinnovators recognize this need foradvanced tools and robust processes.

Collaboration Is Still the Key In the context of globalization,collaboration is probably one of themost important factors in effectiveSupply Chain Management, especiallyin the planning space. However, feworganizations currently involvecustomers (less than 30%) andsuppliers (less than 20%) in theirdemand/supply planning process.

Finally, very few organizations aresharing critical information like actualstock levels and gross demand orproduction plans with their suppliers,relying instead on forecasts andpurchase orders to do the job.

Metrics and BenchmarksFew executives were willing to shareinformation about their keyperformance indicators (KPIs),especially the hard numbers.However, the study did reveal thatorganizations are utilizing a widevariety of metrics/KPIs to monitortheir supply chain performance, withvery little uniformity even withinbroad industry sectors.

Almost 90% of consumer productscompanies reported that they usedcustomer service level (CSL) as ametric, compared with an average74% across all industries.Interestingly, only 45% of discretemanufacturers are using CSL as aplanning metric. Instead the mostpopular metric was inventory turns.Process industries displayed apreference for on time in full (OTIF)and days of supply with 80% of thesurveyed executives from this industrysegment mentioning them.

11

What information do you share with your suppliers?

Forecasted demand

Purchase orders

Calculated actual net demand (delivery plans)

Actual stock levels and/or days of supply

Actual gross demand (production plans)

Other

66%

54%

41%

30%

16%

7%

Please indicate the different technologies used to share planning information withyour customers and suppliers

None - Manually conducted via fax, mail and phone

Files are shared via e-mail

Files are shared via EDI

Through websites

Individual applications are directlyconnected via communication links

Our IT systems are seamlessly integrated andpartners have direct access to pertinent

Supply Chain Planning information

Common applications are run jointly

48%53%

55%51%

40%41%

19%23%

14%20%

4%6%

6%5%

CustomersSuppliers


Metrics used in Supply Chain Planning

19%

Customer service level (time based)

Forecast accuracy – actual vs.planned demand and variance

Inventory turns

Days of supply

Excess and obsolete inventory write-offs

Number of back orders

Planning cycle time

74%

68%

66%

53%

50%

30%

Popular Metrics

Consumer ProductsCustomer Service LevelForecast AccuracyOn Time In Full (OTIF)Inventory Coverage

Discrete ManufacturingInventory Turns On Time In Full (OTIF)Inventory Coverage

Process ManufacturingOn Time In Full (OTIF)Days of SupplyInventory Turns



Forecast accuracy is an importantmetric used by most of the consumerproducts companies to evaluate theirforecasting and demand planningprocess. This metric was not popularamong discrete manufacturingcompanies. The reason could be theincreasing adoption of made-to-orderor assemble-to-order strategies in thediscrete manufacturing industry.Interestingly, across industry sectors,the best-in-class (top 20 percentile ofrespondents) had a median forecastaccuracy* of around 90%.

The average inventory turns* amongthe best-in-class (top 20 percentile ofresponses) across industry sectors wasmore than three times the averageturns across the responses. Thesuperior inventory turnoverperformance of the top 20 percentilewas especially true in the consumerproducts industry sector.

As a testament to growing planningcomplexity, more than half therespondents reported dealing withmore than 1,000 SKUs on the supply,as well as demand side. Discretemanufacturing firms dealt with arelatively larger number of SKUs onthe supply side than on the demandside, whereas the consumer productsfirms reported more or less similarSKU numbers for both sides ofplanning.

While a proliferation in the number ofSKUs was reported, mostorganizations (81%) considered 100or fewer product families forplanning. This included companies ofall sizes and geographic scope, as wellas across industries. In fact, asignificant majority (approximately73%) reported that 50 or fewerproduct families were considered forplanning.

Number of SKUs used in planning

60%

50%

40%

30%

20%

10%

0%<1,000

Manf – supply side Manf – demand side CP – supply side CP – demand side

1,001 – 10,000 10,001 – 50,000 50,000 – 100,000 >100,000

Forecast AccuracyLevels

Cross-Industry ConsumerProducts

DiscreteManufacturing

ProcessManufacturing

Median 70% 70% 75% 50%

Best-in-class (Top 20 percentile)

90% 90% 90% 90%

Inventory Turns Cross- Industry

ConsumerProducts

Discrete Manuf.

ProcessManuf.

Retail LifeSciences

Average 15.1 23.5 7.8 8.2 16.6 2.8

Best-in-class (Top 20 percentile)

49.8 82.6 18.6 16.0 NA NA

13

Product Families Cross-Industry ConsumerProducts

DiscreteManufacturing

ProcessManufacturing

100 or fewerfamilies used inplanning (%respondents)

81% 85% 85% 88%

50 or fewer familiesused in planning (%respondents)

73% 79% 69% 88%

* A significant number of participants provided information on forecast accuracy and inventory turns to draw reasonable conclusions.


in the availability of required data.These shortcomings result fromtechnical difficulties in extracting theright data from enterprise applicationsand the lack of a consistently definedhierarchy across the organization.

A major contributor to these dataissues appears to be a lack of adequateIT functionality to support the S&OPprocess. Most notably 35% ofrespondents indicated that they weremissing S&OP functionality in theircurrent planning systems. This is nota surprise, however, when one looksat the sources of information thatorganizations are relying on tosupport their S&OP processes. Thevast majority of companies still relyon ERP reporting capabilities orspreadsheet analysis to meet theirS&OP data reporting needs. Contrast

The results of the Global SupplyChain Planning Study tell two storieswhen it comes to Sales andOperations Planning. On one hand,there is a high rate of adoption in theorganizations represented in the study.Specifically, 75% of surveyrespondents indicated that theirorganization has a regularly occurringS&OP process in place. On the otherhand, the results make clear thatchallenges remain in implementing arobust S&OP process. Processes thathave the right data, scope and level ofparticipation to ensure that theprocess yields the maximum benefitpossible are not yet in place in manyorganizations.

Data Issues Remain anImpedimentData availability and accuracy hasbeen an issue since the introductionof S&OP as a fundamental planningprocess. While volumes of data aretypically available, the data exists atdifferent levels of aggregation, is notmeasured or reported consistentlyacross functions, or is not in a readilyavailable format. For example, manyof us have probably experienced theparadoxical scenario wherebyparticipants come to an S&OPmeeting armed with tens or evenhundreds of pages of reports but thenfind the assembled group unable todrive to a decision because of a “lackof data.” This usually occurs becausethe necessary data can’t be readilylocated, is not consistent from reportto report or exists only in fragmentsbut not in a single, consistentlyaggregated, easy-to-interpret manner.

When asked about the availability ofdata to support their process, 40% ofrespondents indicated shortcomings

S&OP: Strong Adoption but Challenges Remain

Which of the following best describesyour data availability that clearlysupports the S&OP process?

Data is available for all brands, geographical regions or legal entities at the required S&OP hierarchical level

In order to sustain a regional, divisional or global S&OP process, major technical modifications must be made to ERP systems

None of the regions or brands have a clearly defined classification hierarchy that supports the S&OP process

Only some regions or brands have a clearly defined classification hierarchy that supports the S&OP process

Other

60%

10%

8%

12%

10%


In a world where focuson cash and capital isparamount, S&OP is asurvival strategy.When cash is king, sois S&OP.


this with the fact that less than 20%of respondents report that they have atrue collaborative planning toolavailable to support their S&OPprocess, and it is easy to see why somany respondents reportdissatisfaction with the capabilities oftheir current planning systems relativeto S&OP.

Consolidated Global S&OP Is theException, Not the RuleAs business continues to becomeincreasingly global and the trendtowards offshoring means moresupply resources are being sharedacross enterprises than ever before,being able to run an inter-divisional,global S&OP process is becomingincreasingly important. The surveyresults indicate, however, that a singleglobal S&OP process is not widelyadopted. Less than one-third of therespondents in the study indicatedthat they utilized a single, globalS&OP process that spanned allregions and all divisions. Mostorganizations are still saddled withregional S&OP processes that in somecases are further segmented by brandor division.

S&OP Participation Has NotExtended Beyond the Four WallsAn additional challenge that manycompanies face with regard to theirS&OP process is that participation inthe process remains mostly limited tointernal players. Even among theinternal executives, manyorganizations do not attractparticipation from Finance executives(>50%) and Executive Leadership(>60%) necessary for effective S&OP.While involvement in the process byinternal functions such as DemandPlanning and Forecasting, Sales andMarketing, Finance andManufacturing remains high,participation by either key customersor key suppliers sits in the single-digitrange.

This is interesting given the emphasison external collaboration that hasaccompanied the increasedoutsourcing of critical businessfunctions. It is difficult to see howorganizations will be able to sustaineffective S&OP processes in theirorganizations without enabling keycustomers and suppliers to participatemore directly in the S&OP process.

What tools are you using to specificallysupport your S&OP process?

Collaborative planning tool

Reporting capabilities from an ERP system

Spreadsheet analysis

Other

18%

45% 29%

8%

Which of the following best describesthe scope of your S&OP process?

Global but with a separate process for each brand or divisionGlobal with one process that runs across all brands and divisionsRegional but with one process that runs across all brands and divisions in a given region

Regional with a separate process for each brand or division

8%

33%

29%

30%

15

S&OP participants

Demand planning and forecasting

Logistics/SCM

Sales and marketing

Regional operations management

CEO/executive leadership

Finance

Other

Manufacturing

Procurement

Engineering/R&D

Customers

External suppliers

Participates in S&OPOwns S&OP process

32%48%

15%

12%69%

11%32%

9%

7%39%

5%8%

4%44%

3%34%

1%11%

0%7%

0%9%

27%

46%


Of particular interest are the externaltrends that have affected planningactivities in the recent past. The well-known aspects like changingcustomer preferences, higher serviceexpectations, fluctuating commodityand fuel prices, globalization ofsupplies and markets as well asexchange rates significantly affectedplanning decisions, according to theparticipants.

Nearly one in three also reportedpost-merger integration ordisentanglement challenges andoutsourcing of production andlogistics as being significant factors inthe recent past or expected to befactors in the near future.

Changing regulations, the need forreductions in carbon emissions andgeo-political uncertainty were cited ashaving little or no impact onplanning.

Incorporating Risk Factors Intothe Planning ProcessIn addition to the previouslydiscussed challenges, the globaloperating environment presents aunique set of potential supply chainrisks that must be managed.Unfortunately, planning processes inmost organizations do not yet factorin these risks. Some key findingswere:

•Risk associated with commodity-price fluctuations and availability arewell recognized and incorporated inthe planning process.

•However, just one in fourorganizations surveyed incorporatesexchange-rate fluctuations and onlyone in five considers product risksfrom low-cost country sourcing intheir planning process.

•Planning in a majority oforganizations does not considerenergy use, reverse flows/returns,carbon footprint and logistical delaysdue to nature’s vagaries andgeo-political factors.

Additional Perspectives

Which of these potential risk factors have you incorporated in your planning processesto minimize risks?

Commodity price fluctuation and availability

Exchange rate fluctuations

Product risks arising from low-cost country sourcing

Energy use

Reverse flow/returns

Logistical delays due to geo-political factors andnature’s vagaries in remote areas

Carbon footprint

None of the above

43%

26%

20%

19%

14%

13%

11%

30%



Supply Chain PlanningOutsourcing Would you consider outsourcing yourSupply Chain Planning processes?

In response to this question, themajority of respondents (83%) statedthat planning would not beoutsourced or could not beoutsourced because of certainconstraints. Most executives (66%)feel that planning is a core processand thus is not an appropriateoutsourcing candidate. Some (7%)expressed reservations that it was notfeasible to outsource due to theconfidential nature of planninginformation or they were not aware ofcapable partners that could take onthis crucial process. A further 10%did not perceive tangible value fromoutsourcing the planning processes. Asmall group of executives recognizedsome value in outsourcing andreported that they were alreadyoutsourcing or consideringoutsourcing planning processes ifsuitable partners demonstrate value totheir businesses.

Have the following external trends affected your planning process in the recent past or are likely to affect it in the near future?

Post-merger integration/disentanglement challenges

Outsourcing of manufacturing and logistics activities

Changing customer preferences andneed for greater service levels

Extending supply lines due to sourcing from low-cost regions

Exchange rate fluctuations

Increasing need to reduce the environmental footprint

Expansion in emerging markets

Geo-political uncertainty

Volatility in metal and commodity prices

Fluctuation in fuel prices

Changing regulations that affect our operations

Very significant impact Large impact Some impact Negligible impact No impact/Not applicable

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

17

Would you consider outsourcing yourSupply Chain Planning processes?

No, because we do not see capable partnersthat can perform this function

No, planning is a core process

No, as this will require sharing significantinformation about our operations, which is notpossible

No, we don’t see any value and our industry is not ready for this transition

Yes, we do see some value in engaging a specialistpartner for tactical and operational planningprocesses

Yes, we are already outsourcing/consideringoutsourcing some of our planning functions

We are not sure; however we are open to the idea if a suitable partner can demonstrate value to our business

66%3%

4%

10%

4%

3%10%

“However, our competitorsmight.”

54% of the respondents believedthat their competitors mightoutsource or already areoutsourcing some of their planningprocesses.

“No, planning is a coreprocess!”

83% of the global supply chainexecutives surveyed by Capgeminifelt that planning should not be orcould not be outsourced because ofcertain constraints.

17% felt there was value inoutsourcing or were open to theidea if a clear business case can bedemonstrated by capable partners.


Candidates for PlanningOutsourcing

Organizations might be willing tooutsource planning processesassociated with finished goodsdistribution and internationalshipments, among others,especially if the products are “lowrisk,” with stable demand/lowfluctuations in demand, as well asfor non-core items like packagingmaterial and spare parts.

Would your competitors consideroutsourcing their Supply ChainPlanning processes?

MaybeYes, they are/they would No

28%

26%

46%


Interestingly 54% of the respondentsbelieved that their competitors mightoutsource or already are outsourcingsome of their planning processes.

Some respondents felt that theirorganizations could consideroutsourcing portions of the planningprocesses associated with finishedgoods distribution, internationaltransport, material handling,inventory management, supply ofcommoditized materials, as well asshort-term planning.

These respondents felt that potentialcandidates for outsourcing includedplanning processes associated withproducts that have a “low risk” (interms of undermining reputation andprofits), products with large volumesand stable demand with longlifecycles, product groups with low orhistorically predictable fluctuations,third-party goods, packagingmaterials, raw materials and spareparts.

Inventory planning and management,supply and demand planning werecited as potential candidates foroutsourcing in the future.

Preferred partners for providingplanning services are 4PLs (fourth-party logistics providers), suppliersand specialist planning businessprocess outsourcing (BPO) providers.


Effective planning is crucial toachieving a truly world-class supplychain, which, in turn, determines thesuccess and often the survival oforganizations in the current globalizedworld. Even today, for mostcompanies, the traditional supplychain challenge of balancingoperational costs, working capital,agility and increasing servicerequirements is still the most relevant.Herein lies the opportunity for theplanning function to innovate andorchestrate the supply chain toeffectively achieve business goals andgain competitive advantage.

Capgemini’s study reveals that SupplyChain Planning in some organizationsis still quite a distance away frombeing innovative or best-in-class. Thisis attributable to the fact that manyorganizations across industries andgeographies:

•Do not perceive Supply ChainPlanning as a strategic and criticaldecision making activity.

•Lack end-to-end integration acrossthe supply chain (internally andexternally).

•Have not adopted sophisticated andfully integrated tools to supportplanning.

•Do not factor into their planningprocesses many risks associated withdynamic operating environments.

Successful companies have designedtheir supply chains around thecustomer in order to deliver the bestservice, quality and cost. They have aformalized and mature demand andsupply planning process handlingboth stakeholders and delivery

constraints. The supply chains areflexible and responsive andinformation technology is usedeffectively. In addition, theysuccessfully leverage the competenciesof their supply chain partners.

Capgemini has identified improvementopportunities that we believe areeffective strategies for companies toachieve sustainable competitiveadvantage through improvedmanagement and execution of theplanning process. Some of theseopportunities for improvement thatwere inferred from the analysis ofsurvey responses are as follows:

Engaging the End-to-EndEvaluating processes andcapabilities. Significant benefits canbe obtained by organizations that areproactive and clearly identify theirstrengths and complementary skillsand capabilities they might need tohave a world-class Supply ChainPlanning organization.

Integration and collaboration. Riskand volatility in predicting productionand deliveries will be reduced byhaving better information from yourcustomer. Managing and integratingthe information flow internally (localand global) and externally (customersand suppliers) is fundamental tooptimize the supply chain.

Revisiting the forecasting/demandplanning process might beworthwhile. The importance of areliable forecast for service levels andcost reduction is well known.Capgemini’s experience has shownthat organizations adopting a holistic

Taking Planning to the Next Level



Leveraging the ToolsIntegrated planning tools.Sophisticated and fully integratedtools are not yet widely adopted.Leveraging technology to make the“calculations” easier and more robustwill leave more time for the humanefforts to focus on analysis, gaininginsight and decision making (scienceversus art).

The availability of powerful tools andnear real-time data enables complexdecision making. The massiveimprovements in computing performancethat have been made in recent yearshave enabled application vendors todevelop functionally rich, workablesolutions and there is a resurgence ofinterest in the marketplace for thesesystems.

Despite being difficult to implement,APS can play a significant role inimproving supply chain efficiencies.The selection of an advanced planningtool should be done in line withoverall IT strategy, business contextand the existing IT landscape,particularly when consideringinterfacing with other enterpriseapplications.

Getting to NextFrom “support” to strategic. Themajority of organizations still perceiveSupply Chain Planning as a supportor even back-office executionfunction. The opportunity is to gain acompetitive advantage and toorchestrate the supply chain tobecome more effective by movingplanning into a strategic function.

Holistic demand managementsolution. By applying new tools,technologies and techniques that areavailable to integrate supply and

approach to forecasting have beenable to achieve significant businessimprovements, such as a 5% to 40%reduction in inventory levels andimproved order fill rates to more than99%.1 At the same time, companieshave issues in the process of creating areliable forecast. Recently, Capgeminiand Tilburg University jointlydeveloped a “quick scan” method thatcan provide a rapid assessment of thecurrent methods, identifyopportunities for improvement andimprove the forecast reliability byutilizing robust quantitative analysis.

Global S&OP process. Thechallenges in implementing a singleglobal S&OP process are varied andinclude data availability issues,organizational issues, and issuespresented by the sheer complexity oftrying to coordinate a process that isglobal in scope. However, as wasnoted in a recent article by Capgeminion this topic, there are five things thatorganizations can to do to pave theway for the implementation of aglobal S&OP process2:

1. Stakeholders across the businessneed to be engaged and educated tounderstand the objectives, theprinciples, the decision rights andthe benefits locally and globally.

2. All plans must be aligned to “onenumber” across the variousfunctions in order to truly driveholistic business value.

3. A global S&OP model must haveclear accountabilities and decisionforums.

4. Business objectives and KPIs mustbe aligned globally.

5. The S&OP process needs tomaintain a medium- to long-termfocus.

demand planning, companies cancreate a profit-driven planning andexecution organization. Capgemini’sexperience in implementing improveddemand and supply planningcapabilities for major automotive andindustrial manufacturers has shownbenefits to the tune of 10% increase inservice levels, 20% reduction in totalinventory levels, 56% drop in finishedgoods inventory and $100 millionimprovement in working capital.Specific areas to consider includeevent management, demand shaping,dynamic profitable-to-promisefulfillment, customer-drivenreplenishment planning andcollaborative planning and execution.

Go beyond the basics. The basicplanning process is getting done andmost organizations are simply tryingto keep up, while only a few areinnovators in their planning approach.With increasing pressure andcomplexity resulting from globalsupply chains, process innovation andplanning as a differentiator could beleveraged to turn the supply chaininto a competitive advantage.

This study has provided deeperinsights into the strengths, challengesand opportunities across a number ofareas with reference to Supply ChainPlanning. We hope that you too havebenefited from the findings anddiscussions presented in this reportand invite you to share your thoughtsthrough one of the contact addressesprovided at the end of this report.

21

1 Ian Batey, “Forecasting Accuracy: Holy Grail or Fool'sGold?” Capgemini, 2006.

2 “Global Sales and Operations Planning – Releasingcash and capital while improving margins for globalbusiness,” Capgemini Consulting, 2009.


Appendix


4PL Fourth-Party Logistics Provider

APS Advanced Planning Systems

ATP Available-to-Promise quantity

CP Consumer Products

CPG Consumer Packaged Goods

CPR Consumer Products and Retail

CSL Customer Service Level

ERP Enterprise Resource Planning

KPI Key Performance Indicators

SCM Supply Chain Management

SCP Supply Chain Planning

S&OP Sales and Operations Planning

OTIF On Time and In Full

Glossary


2323



fresh approach which uses innovativemethods, technology and the talentsof over 4,000 consultants world-wide.

Capgemini Consulting’s Supply ChainManagement (SCM) practice supportsclients in their procurement,manufacturing, research anddevelopment (R&D), planning,logistics and after-sales relatedprojects.

Capgemini Consulting is the GlobalStrategy and TransformationConsulting brand of the CapgeminiGroup, specializing in advising andsupporting organizations intransforming their business, from thedevelopment of innovative strategythrough to execution, with aconsistent focus on sustainable results.Capgemini Consulting proposes toleading companies and governments a

Capgemini Consulting and Supply Chain Management

Capgemini Global Supply Chain Management Framework

For more information: http://www.capgemini.com/services/consulting-services/supply_chain/


http://www.capgemini.com/services/consulting-services/supply_chain/

Steven LambertCapgemini US LLCIrving, TX, [email protected]

Ian BateyCapgemini UK PLCLondon, United [email protected]

Michael HoeyCapgemini UK PLCBirmingham, United [email protected]

Lia JostenCapgemini Nederland B.V.Utrecht, The [email protected]

Michael BickCapgemini Deutschland GmbHCologne, [email protected]

Abhijith MukundaCapgemini Consulting IndiaBangalore, [email protected]

Frederic MoigneCapgemini Consulting SASParis, [email protected]

Anders MartenssonCapgemini Sverige ABBromma, [email protected]

Susan WoodCapgemini US LLCAtlanta, GA, [email protected]

Tim LeMasterCapgemini US LLCIrving, TX, [email protected]

Jane HarleyCapgemini AustraliaSydney, [email protected]

Roberto BrugnettiCapgemini ItaliaMilan, [email protected]

Capgemini Consulting is the strategy and transformation consulting brand of Capgemini Group© 2009 Capgemini. All rights reserved. Rightshore ® is a trademark belonging to Capgemini.

About Capgemini

Capgemini, one of the world’sforemost providers of consulting,technology and outsourcingservices, enables its clients totransform and perform throughtechnologies.Capgemini provides itsclients with insights andcapabilities that boost theirfreedom to achieve superiorresults through a unique way ofworking, the CollaborativeBusiness Experience™. The Grouprelies on its global deliverymodelcalled Rightshore®,which aims toget the right balance of the besttalent frommultiple locations,working as one team to create anddeliver the optimum solution forclients. Present inmore than 30countries,Capgemini reported 2008global revenues of EUR 8.7 billionand employs over 90,000 peopleworldwide.

More information is available atwww.capgemini.com.

Capgemini ConsultingCapgemini Consulting is the Global Strategy and Transformation Consulting brand of the

Capgemini Group, specializing in advising and supporting organizations in transforming

their business, from the development of innovative strategy through to execution, with a

consistent focus on sustainable results. Capgemini Consulting proposes to leading

companies and governments a fresh approach which uses innovative methods, technology

and the talents of over 4,000 consultants world-wide.

For more information: hhttttpp::////wwwwww..ccaappggeemmiinnii..ccoomm//sseerrvviicceess//ccoonnssuullttiinngg//


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