s&op overview implementation approach biel 06-15-12

Business Forecasting 2012Predictive Intelligence SummitDemand Planning & Forecasting

Implementing Demand & S&OP Processes

Hyatt Regency McCormick PlaceChicago, IL

Friday, June 15, 2012

1

Jim Biel, Ph: 847.687.5379, E-Mail: [email protected], http://www.linkedin.com/in/jimbiel (June 15, 2012)

Friday, June 15, 2012

Discussion FacilitatorJim Biel

Management Consultant

E-Mail: [email protected]: 847.687.5379

LinkedIn Profile: http://www.linkedin.com/in/jimbielS&OP Writings: http://www.slideshare.net/jimbiel

Note: S&OP may also be known as IBF (Integrated Business Forecasting), SIOP (Sales, Inventory, & Operations Planning), and other names.

Professional Biography – Jim BielPhone: 847.687.5379, Chicago, ILE-Mail: [email protected]

LinkedIn Profile: http://www.linkedin.com/in/jimbielSlideShare Profile: http://www.slideshare.net/jimbiel

• Multi-Functional Experience, Concentrated in Consumer Product Goods (CPG) Industry (Sara Lee, Unilever, Chiquita, Pepsi) – Retail & B-to-B

• Core understanding of multiple supply chains – frozen, fresh, cold, dry, liquid

• Adept at integrating relevant business concepts and processes with enterprise-wide systems, a strong business process understanding and acumen including S&OP (boot strap and retrofit S&OP implementations).

– Demand Planning / S&OP Writings Available Here: http://www.slideshare.net/jimbiel

2

Jim Biel, Ph: 847.687.5379, E-Mail: [email protected], http://www.linkedin.com/in/jimbiel (January 18, 2012)

– Demand Planning / S&OP Writings Available Here

• Experience in Business Forecasting, Sales Operations & Planning, S&OP, Sales Systems, ERP, CRM, Demand Planning, Business Information Management, Supply Chain, Trade Promotion Management, IT, HR, Training & Development, and Finance (Corporate FP&A & Public Accounting, CPA)

• Independent Management Consulting for large and small entities

• Client Services position with a SaaS (software as a service) provider of trade promotion software (Adesso Solutions)

• Practiced public accounting as a CPA with McGladrey; Corporate Finance Financial Planning & Analysis (FP&A) Roles

• Project Management Capabilities (PM Certification – Loyola, Chicago)

• Network of Resources (Can bring additional experts to the table)

Discussion Topics“An Interactive Discussion”

• Survey Results• Your Implementation Questions / Concerns• Implementation Topics• My Thoughts / Overview

3


• My Thoughts / Overview• Q&A• One-on-One Discussions

Implementation Topics• The Why / Rationale• Ownership / Sponsorship / Stakeholders• Education• Metrics• Assessment / Discovery• Project Planning• Change Management• Process Design

4


• Process Design– One Forecast– What IF’s / Scenarios– Unconstrained / Constrained Demand

• Roles / Responsibilities• Tool Box / Systems• Execution / Implementation• Process Improvement• Business Performance Improvement

S&OP Defined

• APICS defines S&OP as the function of setting the overall level of manufacturing output(production plan) and other activities to best satisfy the current planned levels of sales (sales plan and/or forecasts), while meeting general

5


plan and/or forecasts), while meeting general business objectives of profitability, productivity, competitive customer lead times, etc., as expressed in the overall business plan.

Implementation Steps• Ownership / Sponsor / Key Stakeholder• Education (at least 2 levels)• Metrics• Assessment / Discovery• Project Planning (Includes Change Management)

6


• Project Planning (Includes Change Management)• Process Design• Roles / Responsibilities• Data Management• Tools / IT Solutions• Execution / Implementation• Process Improvement• Business Performance Improvement

Business Drivers / Pain PointsThe Why

• Implement Concepts & Tactics To:

– Improve Demand Forecasting Accuracy– Reduce Supply Chain Volatility

7


– Reduce Supply Chain Volatility– Improve Working Capital (Inventory)– Improve Decision Making– Stabilize / Improve Customer Service Levels

• A Blend of Concept & Tactics

• The Recipe: Process, People, Performance (Metrics), Platform (Systems)

My Bias – S&OP(Sales & Operations Planning)

• My Preferred Business Model To:– Improve Forecast Accuracy– Reduce Supply Chain Volatility– Improve Customer Service Levels

8


– Improve Customer Service Levels– Drive Decision Making– Stabilize/ Improve Customer Service Levels

►The Concept is Easy, Execution Can Be Challenging

Note: S&OP may also be known as IBF (Integrated Business Forecasting), SIOP (Sales, Inventory, & Operations Planning), and other names.

Top Business Benefits of Best-in-Class S&OP

• Increasing revenue• Improving forecast accuracy• Improvements in the perfect order/ customer service• Better supply planning/scheduling adherence• Improving new product launch

9


• Reduction of inventory

Source: “Demand Driven Sales and Operations Planning”, One Network Enterprises (Downloaded from CGT E-Mail, 8/22/11)

Key Learnings / Observations

• Key Learnings From My Experience

– The Concept is Easy

– The Initial Buy-In is Fairly Easy

– The Change Management Required Can Be Hard• New Process (Includes Collaboration)• New Technologies / Systems• New Accountabilities / Roles

10

Jim Biel, Ph: 847.687.5379, E-Mail: [email protected], http://www.linkedin.com/in/jimbiel (January 18, 2012)

• New Accountabilities / Roles• Traditional Functional Ownership Dies Hard – Silos• Transparency Hard For Some to Swallow

– Consistency & Month-to-Month Execution is Hard

– Leader Needs to Keep Functional Leads Feet to the F ire

– May Need a Process Coach

– Treat Implementation as a Project

– S&OP Could / Should Be the Way You Run Your Busines s

Best Practices• One Common Set of Metrics

(Performance) – Start with Baseline• One Integrated Process (Process) – Rolling

Forecasts• All Demand Streams (Demand � Supply)

• Integrate All Available Data (Internal & External) –

11


• Integrate All Available Data (Internal & External) –Collaboration (Data Management is Key)

• One Forecast (Used by All Functions * )• Incorporate “What-If” / Scenario Processes• People/Functional Alignment (People)• One System of Record (Platform)

* With Some Caveats

Metrics

– 5 Basic Metrics:• Forecast Accuracy (Demand Owner)• Perfect Orders (Cust Serv, Supply)• Revenue (Units & Mix)• Profitability (Mix, Margins, Costs)

12


• Profitability (Mix, Margins, Costs)• Inventory (Demand Owner + Supply Owner)

– Simple Scorecard– Improvement From a Baseline

– More Holistic Metrics: Total Cost to Serve, etc.

Accountability Systems For Internal Stakeholders

• Metrics – Common– 5 Basic Metrics:

• Forecast Accuracy (Demand Owner)• Perfect Orders (Cust Serv, Supply)• Revenue (Units & Mix)• Profitability (Mix, Margins, Costs)• Inventory (Demand Owner + Supply Owner)

– Simple Scorecard

13


– Simple Scorecard– Improvement From a Baseline

• Active Involvement By All Functions –– Accountability & Roles / Responsibilities

• Daily• Weekly• Monthly (Decisions Made + Follow-Up Assigned)

• Transparency Through Dynamic Communication Flow

S&OP • Process Alignment / Integration

– (Demand-Supply-Finance-GM)

• “Connect the Knobs” for Leadership

14


Dem Pl

Supp PlFinance

GM Owner

“Connecting the Knobs”(Why Integration is Important)

• “Before we had Executive S&OP in the Company, I Spent A Lot of Time Turning Knobs That Weren’t Connected To

15


Knobs That Weren’t Connected To Anything”

– VP & GM Quote From Tom Wallace’s Book, Sales & Operations Planning, The Executive’s GuidePage 24

The S&OP Flow

Demand Finance

Generates Proformas,Cost, Risk /

Ops Monthly;As Needed In

Interim

GM

Controls MonthlyS&OP

+ Results+ Metrics Review+ Var to Bus Pl+ Future Frcst

16


Supply

DailyWeeklyMonthly

Balancing

Utilize DemandOutputs as BasisFor Forecasts,Annual Plans,

Strategic Plans, Add Risks / Opps /

Other Lifts / Discount Factors

As Needed

+ Future Frcst+ Assumptions

+ Bulk of Meeting:Gaps, Opps in

Future Frcst

+ Create Business Rules (Between Demand/Supply)+ Forecast Time Fence: Rolling 12-24-36 Months (“Rolling Forecasts”)

+ Functional Leads & Leader Participate in Monthly S&OP Review

One Forecast(Linkage – S&OP to Other Plans)

Business Plan

Demand Plan

SupplyPlan

FinancialStrategicTarget / Intent

StrategicPlan

Demand Plan

SupplyPlan

FinancialAnnualPlan

Use S&OPAs a GutCheck

Use S&OPAs Key

Input / Core, Plus Risks/Ops

17


Latest Est / Frcst

S&OP

Demand Plan

SupplyPlan

FinancialInterim

Forecasts

Future Execution/ Forecast

FinancialSupplyPlan

Demand Plan

Plus Risks/Ops

Use S&OPAs Key

Input / Core, Plus Risks/Ops

Future ExecutionForecast / Details , Active Risk / Ops

Discussion

S&OP Outputs Validate, Support Other Planning Processes

Alignment Between Corporate Strategy and Operational Execution

Revenue TargetsMargins

Working CapitalNew ProductsNew Markets

New Customers

Corporate Strategy Business Plan S&OP



New Customers



New Customers

18


New CustomersNew ChannelsExit Strategies

Capital Investment


Capital Investment


Capital Investment

Strategic Intent 3-5 Yrs Annual Plan / Frcsts Rolling 36 Mo Review

Amount of Detail (Increases through various process es)

> Working Backwards from S&OP, Provides Validation of Plan & Strategy> S&OP Focuses on Gap / Opportunity Assessment vs. Plan

Cross Functional Alignment

Functional Role Business Role S&OP Role Communication

General Manager Strategic Direction Owns the Overall Process – The Process Owner

Owns Monthly S&OP Meeting; Consulted Daily/Weekly as Needed (Exception)

Demand > Sales

Translates Strategy intoDemand Generation; Dem Planning Reports

Owns the Demand Forecast; Accountable for Excess Inventory

Daily, Weekly Interaction with Supply & Finance; Owns

19


> Marketing Dem Planning Reports to a Demand Leader;Unconstrained Demand

for Excess Inventory Generated by a Forecast Miss

& Finance; Owns Monthly Demand Component of S&OP

Supply > Finished> Raw

Fulfillment of “Constrained Demand”, Least Cost

Owns the Fulfillment of the” Constrained” Demand Forecast at Least Cost (Balancing with Demand Planning)

Daily, Weekly Interaction with Demand & Finance; Owns Monthly Supply Component of S&OP

Finance Economic Oversight / Counsel

Counsel, Input, Risk Assessment, Pro-Formas of Future Forecasts

Provides P&L Proformas & Risk / Opportunity Assessment

Cross Functional Alignment / Effective Communication – The S&OP Communication Flow

Role Daily Weekly MonthlyGM Rarely Rarely Owns the

Meeting

Demand Planning

Active w/ Supply Planning; Sales;

Active w/ Supply Planning; Sales;

Owns Demand Component

20


Planning Planning; Sales; Marketing; Customers

Planning; Sales; Marketing;Customers

Component

Supply Planning Active w/ Demand Planning

Active w/ Demand Planning

Owns Supply Component

Finance Consulted As Needed

Consulted As Needed

Owns Financial Component

Methodological Approach Measuring, Managing, Execut ing Strategies

Frequency Activity Typical Interactions

Finance GM

Daily Demand Planning:+ Dem Planners+ Sales+ Marketing+ Customers+ Synd Data

Dem Pl with System & Sources;Dem Pl w/ Supply –BalancingSupply Metrics

When needed, exception basis

If Needed, very rare

21


+ Synd Data Supply Metrics

Weekly Demand Planning:+ Same as

Above

Same as Above

When needed, exception basis

If Needed, very rare

Monthly + Demand Pre-Meeting+ Supply Pre-Meeting+ Capacitization

Demand to Supply; Supply Back to Demand; Finance P&L w/ Risks / Opps

P&L Proforma with Gaps / Opps; Risks

S&OP Meeting:MetricsBest FrcstAssumptionsNew ProductsGaps / OppsStrategic Issues

S&OP Time Fences

Short-Term

(1-3 Months)

Mid-Term

(4-12 Months)

Long-Term

(13-36 Months)

Demand

Dem Pl – SKUs

All Demand Streams

Sales

Demand

Dem Pl – Prod Fam

All Demand Streams

Marketing

Demand - Strategy

Dem Pl – Prod Fam

All Demand Streams

Marketing

22


Customers

Promotions

New Products

Supply

Fulfillment

Cust Serv

Finished Goods

Supply Contracts

Customers

Promotions

New Products

Supply

Fulfillment

Finished Gds, Raw

Supply Contracts

Customers

Promotions

New Products

Supply - Strategy

Fulfillment & Sourcing

Ingred Contracts

Plant/Cap Network/Invest

Process, Metrics, Results

PROCESS

Leadership(Strategic Direction)

Demand Feeds

PERFORMANCE METRICS

Revenue, Cost TargetsForecast Accuracy,

Working Capital Targets, Inventory Targets

New Product Launch SuccessService Level Targets

23


Demand FeedsSupply; Balancing /

Capacitization / Shipment(Ops Execution, Future Forecast)

Finance($ Scorekeeper, Forward Looking

Economic Advisor)

Leadership(S&OP Process Owner)

DESIRED RESULTS

Positive P&L OutcomesPositive Working Capital Outcomes

Customer Service LevelsProductivity Improvements

Decision Making Improvements

Service Level TargetsCycle Time / Quality - Processes

Tool Box Needed to Execute

Systems of Record & Collaboration Tools- Spreadsheets- ERP System- Collaboration Tools - Purpose Built S&OP System Capability (i.e. SteelWe dge)- Inventory Management System (i.e. SmartOps) - Metrics Scorecard Capability

24


Need a well thought-out and efficient S&OP Reportin g Toolto support Meetings and interactions

> Numbers> Metrics Reporting> Assumptions

Make your analysts “analysts” – not data and report generators

S&OP (The Recipe / A Holistic View)

Process, People, Performance, Platform

• DP Starts the Process (Demand-Supply-Finance)• Business Intelligence / Collaboration Essential• Defines Units, Revenue, Margin $ Can Be Derived• Ownership of Forecast: Demand Owner• Unconstrained Demand / Constrained Demand• One Forecast (Demand/Supply/Finance/GM Consensus)• Metric Driven: Forecast Accuracy (Level/Time Fence)

25

Process / People


• Metric Driven: Forecast Accuracy (Level/Time Fence)• Metric Driven: Supply Fulfillment• Tool / System – Foundation For Demand Forecast• Tool/ System – Rough Cut Capacity• Tool/ System – Detailed Supply Planning• How (Demand Management): Tools, Collaboration, and

Assumptions Managed By Demand With a Defined Accuracy Metric (Start With Baseline)

• Debate the Assumptions Not the Number

Performance

Platform / Process

Summary

Implementation Steps• Ownership / Sponsor / Key Stakeholder• Education (at least 2 levels)• Metrics• Assessment / Discovery• Project Planning (Includes Change Management)

26


• Project Planning (Includes Change Management)• Process Design• Roles / Responsibilities• Data Management• Tools / IT Solutions• Execution / Implementation• Process Improvement• Business Performance Improvement

Resources

• A Book: Sales & Operations Planning, The Executive’s Guide , Thomas Wallace & Robert A. Stahl

• Expanded Library of Resources

27


• Expanded Library of Resources Available Here, – http://www.slideshare.net/jimbiel/sampop-resource-g uide-biel-04-19-11