is s&op delivering value for you - apics sop delivering value for you.pdf · most companies not...
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1 © 2014 Steelwedge Software, Inc. Confidential.
Single Line of Sight: Plan, Perform, Profit
Is S&OP Delivering Value for You?
2 © 2014 Steelwedge Software, Inc. Confidential.
“The successful business executive is a forecaster
first, everything else follows”
Peter Bernstein Against the Gods: The
Remarkable Story of Risk’
3 © 2014 Steelwedge Software, Inc. Confidential.
How Far Can you Forecast?
70%
19%
11%
1 Quarter or less
2 Quarters
3 Quarters or More
70% Cannot Forecast
Beyond One Quarter
4 © 2014 Steelwedge Software, Inc. Confidential.
“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”
5 © 2014 Steelwedge Software, Inc. Confidential.
“ 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)
6 © 2014 Steelwedge Software, Inc. Confidential.
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
7 © 2014 Steelwedge Software, Inc. Confidential.
S&OP (and IBP): Decades of Evolution Led by Oliver Wight International & TF Wallace & Company
8 © 2014 Steelwedge Software, Inc. Confidential.
“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
9 © 2014 Steelwedge Software, Inc. Confidential.
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”
10 © 2014 Steelwedge Software, Inc. Confidential.
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
13 © 2014 Steelwedge Software, Inc. Confidential.
ES&OP/IBP Bridges the Gap between Strategic and Operational Decisions
Strategic Goals
Operations
Financial Plans
Integrated Business
Planning
14 © 2014 Steelwedge Software, Inc. Confidential.
S&OP or IBP?
Supply Chain
Sales
Supply Chain
R&D
Finance
Customers
Suppliers
Executives
15 © 2014 Steelwedge Software, Inc. Confidential.
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
16 © 2014 Steelwedge Software, Inc. Confidential.
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
18 © 2014 Steelwedge Software, Inc. Confidential.
S&OP to IBP – the “Planning” Disconnect: Which Plan?
19 © 2014 Steelwedge Software, Inc. Confidential.
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?
20 © 2014 Steelwedge Software, Inc. Confidential.
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
21 © 2014 Steelwedge Software, Inc. Confidential.
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
23 © 2014 Steelwedge Software, Inc. Confidential.
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
24 © 2014 Steelwedge Software, Inc. Confidential.
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
25 © 2014 Steelwedge Software, Inc. Confidential.
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
?
26 © 2014 Steelwedge Software, Inc. Confidential.
Great Results when Executives are Fully Engaged “How involved is your executive team?”
Closing the Gaps in S&OP Study 2013: CSCO Insights
27 © 2014 Steelwedge Software, Inc. Confidential.
Reality: Most Execs Not Engaged in S&OP Process “Does your executive team own the S&OP process?”
Closing the Gaps in S&OP Study 2013: CSCO Insights
28 © 2014 Steelwedge Software, Inc. Confidential.
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
Closing the Gaps in S&OP Study 2013: CSCO Insights
29 © 2014 Steelwedge Software, Inc. Confidential.
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
Closing the Gaps in S&OP Study 2013: CSCO Insights
30 © 2014 Steelwedge Software, Inc. Confidential.
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”
Closing the Gaps in S&OP Study 2013: CSCO Insights
31 © 2014 Steelwedge Software, Inc. Confidential.
Gap between Best Practices & Current Situation “Rate your S&OP process” (maturity)
Closing the Gaps in S&OP Study 2013: CSCO Insights
32.2%
14.7%
8.4%
1.7%
Below Average
Only Adequate
Excellent
World Class
32 © 2014 Steelwedge Software, Inc. Confidential.
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
33 © 2014 Steelwedge Software, Inc. Confidential.
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
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
38 © 2014 Steelwedge Software, Inc. Confidential.
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 …
40 © 2014 Steelwedge Software, Inc. Confidential.
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
41 © 2014 Steelwedge Software, Inc. Confidential.
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
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
far out enough, everything
is variable: executive
decisions have most impact
easier to understand ,
but too late – most
decisions already made
43 © 2014 Steelwedge Software, Inc. Confidential.
Gap between Best Practices & Current Situation “What tools do you use for S&OP?”
Closing the Gaps in S&OP Study 2013: CSCO Insights
functional tools for experts:
(demand planning,
supply planning)
focused on near-term
flexible tool (MS Excel) to
connect the functions,
extend into future
45 © 2014 Steelwedge Software, Inc. Confidential.
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
46 © 2014 Steelwedge Software, Inc. Confidential.
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
48 © 2014 Steelwedge Software, Inc. Confidential.
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
49 © 2014 Steelwedge Software, Inc. Confidential.
What Users Really Want in S&OP/IBP Software
Source: Ventana Research, Sales and Operations Planning Study 2006
50 © 2014 Steelwedge Software, Inc. Confidential.
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
Family / Series / BU Geo Revenue, Margin & Cash
Family / Series / BU Geo Revenue, Margin & Cash
Planning Views Stakeholders
Account Managers
Sales Managers
Marketing
Demand Planners
Supply Planners
Production Planners
Finance
Executives
Customers
Suppliers
Cross-functional Planning Environment
Systems Landscape
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
Op
tim
ize
Desig
n
Financial Budget/AOP
S&OP Stage 3
what you really need for S&OP…
• make it easy & inclusive
• facilitate cross-functional
collaboration
• empower the executives
53 © 2014 Steelwedge Software, Inc. Confidential.
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
55 © 2014 Steelwedge Software, Inc. Confidential.
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
56 © 2014 Steelwedge Software, Inc. Confidential.
Uncertainty will always be part
of the taking charge process.
Harold S. Geneen
57 © 2014 Steelwedge Software, Inc. Confidential.
We Have a Plan Until We Change It
“Plans are nothing; planning is everything.”
– Dwight D. Eisenhower
58 © 2014 Steelwedge Software, Inc. Confidential.
Thank You
Questions?