the evolution of sales operations planning: beyond the ... · pdf filethe evolution of sales...

The Evolution of Sales & Operations Planning:

Moving Beyond the "Single Plan"

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March 29, 2012

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1Copyright © 2012 Kinaxis Inc. All Rights Reserved.

The Evolution of S&OP

Dick Ling – Ling-ColdrickPatrick Bower – Combe Inc.Trevor Miles – Kinaxis


Presenters

• Dick Ling– Creator of S&OP– Consultant to companies on S&OP best practice– Author of “Orchestrating Success”

• Pat Bower – Senior Director, Corporate Planning & Customer Service at Combe Incorporated– Frequent writer and recognized demand planning and S&OP expert– Latest article entitled “IBP: Hoax or Reality in spring’s IBF Journal”

• Trevor Miles– VP Thought Leadership, Kinaxis– Worked with many of the largest corporations in the world– @MilesAhead


The Evolution of S&OPA historical & current perspective

Dick Ling – Ling-Coldrick

4Copyright © 2012 Ling-Coldrick . All Rights Reserved.

Thought leaders in aligning S&OP with business and strategic agendas, and in

working with companies to catalyze them to maximize the benefits of S&OP through education, workshops and coaching.


S&OP Creation – 1984

S&OPMeetingPre-S&OP

SUPPLYMEETING

DEMANDMEETING

Gather Data

The terminology was a mistake 1988


The role of the General Manager is like the Conductor

The Conductor is there …first of all for the oversimplified reason of being the traffic cop, making sure everyone is playing at the same speed and the same volume.

Andre Previn, American conductor


Original Version of S&OP

PAST MONTHS FUTURE MONTHS

SALES -3 -2 -1 1 2 3 4 5 6 7 8 9 ANNPLANNED 1200 1200 1200 1200 1200 1200 1200 1200 1200 1200 1200 1200 14400PREVIOUS 1211 1197 1200 1200 1200 1200 1200 1200 1200 1200 1200 1200 14408ACT/PROJ 1211 1197 1257 1225 1250 1250 1250 1250 1250 1250 1250 1250 14890DIFF 11 -3 57 25 50 50 50 50 50 50 50 50 490CUM DIFF 11 8 65PRODUCTIONPLANNED 1200 1200 1200 1200 1200 1200 1200 1200 1200 1200 1200 1200 14400PREVIOUS 1195 1202 1200 1200 1200 1200 1200 1200 1200 1200 1200 1200 14397ACT/PROJ 1195 1202 1197 1200 1200 1400 1250 1250 1250 1250 1250 1250 14894DIFF -5 2 -3 0 0 200 50 50 50 50 50 50 494CUM DIFF -5 -3 -6INVENTORYPLANNED 600 600 600 600 600 600 600 600 600 600 600 600 600PREVIOUS 584 589 589 589 589 589 589 589 589 589 589 589 589ACT/PROJ 584 589 529 504 454 604 604 604 604 604 604 604 604DIFF -16 -11 -71 -96 -146 4 4 4 4 4 4 4 4COVER (WKS) 2.06 2.07 1.83 1.75 1.56 2.08 2.08 2.08 2.08 2.08 2.08 2.08 2.08

S&OPMEETING

PRES&OPMEETINGSUPPLY

PLANNING

DEMANDPLANNING

Typical S&OP Agenda:

• Sales Review• Inventory / Order Book• Supply Plan• New Products• Financials

Product Family – Dining Tables

The data has always been important


The Original S&OP Process as implemented by many companies

• All about demand & supply• An attempt to achieve one number• Operations led• Pushing it up to senior management• Lacking technology tools• Planning horizon too short


As S&OP Matured

• All areas of the company involved– Marketing, Sales, Development, Finance, Operations

• Cross functional collaboration• Senior management led• Planning horizon 1&1/2 to 3 years• Implementing your business strategy


Sales and Operations Planning

SupplierFactory / Plant

Warehouse / Distributor

Sister Plants

Customer

People

Ship to

The Eyes of Management: Driving, Overseeing and Monitoring the

Supply Chain


Today’s Model

SENIORBUSINESS

MANAGEMENTREVIEW

INTEGRATEDRECONCILIATION

WITH BUSINESS PLAN

MANAGING THEPORTFOLIO &

NEW ACTIVITIES

MANAGINGSUPPLY

MANAGINGDEMAND


Forces a cross-functional way of operatingand this requires collaboration

integrate /|inti|greite/ adj.

1. Combine parts into a whole; incorporate.2. make into a whole by bringing all parts together; unify.3. join with something else; made part of a larger unit; unite.4. form into one whole; make entire; complete.5. complete (imperfect thing), by addition of parts

reconcile /|rεk( )n|sail/ n.

1. make (two or more apparently conflicting things) compatible or consistent with each other.

2. bring back to harmony; cause to be no longer at variance.3. make consistent or congruous; bring to agreement.4. harmonise, make compatible, show compatibility of by argument or in practise

(apparently conflicting facts, statements, qualities, actions of one such with others)5. bring into consonance or accord.

Integrated Reconciliation


What needs reconciling?

• New directives from senior management• New opportunities in the market place• New product timing• Deviations from the business plan• Supply problems• Any issue emerging through the monthly process


Who Makes up the Integrated Reconciliation Team?

Who Needs to Collaborate?

• You need a leader or process owner of the Integrated Reconciliation process

• Leaders from finance, new product development, sales and marketing and supply chain

• Members from each area of the company who are needed to reach a consensus, make decisions and make recommendations on a path forward


OPTION 5

OPTION 4

OPTION 2

OPTION 1

OPTION 3

STRATEGY

GAP

OPTION 7

OPTION 8

OPTION 6

2 YEARS 5 YEARS0

LATEST VIEW

OPTION 9

What is the work of the Integrated Reconciliation Team?

MANAGINGNEW

ACTIVITIES

MANAGINGSUPPLY

MANAGINGDEMAND

MANAGEMENT BUSINESSREVIEW

Analysis/DecisionsRequired

Options/Contingencies

DecisionSupport

Interactive

EmergingIssues

European Business SummaryAustria

Belgium

France

Germany

Greece

Holland

Ireland

Italy

Norway

Portugal

Spain

Switzerland

UKInventory KPIs 1-3 KPIs 4-6

Brand Y

Brand X

Major Assumptions (In ata)Price rise q303 75% certainSupply does not inclunewlyacquired plant ItalyBased on IRR total growthof 8%…….

Major Changes thiiterationTiming of price rise broughtforward by 3 weeks t Tescorange review date…….

Vulnerabilities and OpportunitiesCapacity constrained. If erises by 12% stockouts occur qtr 3 03Low stock position leads to

Emerging Issues and GapsSupply at near fullcapacity.Overtime cannot uaranteatAvezzano over Christmas ……

Decision Made in PreviousStepsLow service rates will be erated Reduce the bridge buying ading price rise……

Decisions Required – endations& Costs Phase marketing spend in 0bolster demand through price rise. Pull £1.5m in media fromqtr 4 03 to qtr 3 03

Brand Z

Europe - Total Business

68

980

378 370653169

1084 1060

17961687

0200400600800

100012001400160018002000

02Actual 03CurrentView

03 LQR 03 Plan 04Forecast

03 Plan

$ MM's Gross MarginCOGS

European Rolling Quarterly Summary

245

96

245 245

98

245

9589 89 89 96 96

473 468425 430

270 274256 255 256 274285 274

050

100150200250300350400450500

CurrentView Q2LGR Q2Plan Q2 CurrentView Q3LQR Q3Plan Q3 CurrentView Q4LQR Q4Plan Q4 CurrentView Q1LQR Q1Plan Q1

$ MM's Gross MarginCOGS

Euro Total

PerformanceMonitoring

FinancialImpact &Analysis

• Review global performance outlook and differences between business strategy, budget and forecast

• Reconcile gaps between new activities, demand, supply and financial targets

• Highlight impact of changes (units and financials), gaps, opportunities and major integration issues over a 2 Year-end horizon

• Develop scenarios considering the interdependencies and trade-offs that drive overall business performance

• Redirect issues that should have been resolved elsewhere, in line with organisational accountabilities

• Make recommendations and/or decisions for alternatives with business impacts for each

• Elevate to senior management major issues and opportunities still requiring resolution


Focus on Change

• It is very important that the S&OP process focus on what is changing and facilitate the change

• The questions are:– What has changed?– Do we agree with the changes?– Do we understand the impact of the changes?– Are there any alternatives?– What decisions need to be made?


Management Business ReviewVolumes, Financials and the Story on One Sheet or Screen

• Ongoing Planning Assumptions

• Major Assumption Changes In this Cycle

• Emerging Issues

• Decisions made in Previous steps

• Risks and Opportunities

• Decisions Required

Image: Copyright © 2012 Kinaxis Inc. All Rights Reserved.


Decisions Made During this Cycle 1. Strategy about Widget II Demo units is

that new builds will take priority unless otherwise defined by US Sales and Marketing leadership.

Decisions Required –Recommendations & Costs

1. For the remaining Wigit II Demo units we need to decide if additional material be purchased for remanufacturing.

Major Assumptions (In Data)1. Widget II Launch schedule

US IVD Clearance – estimated Sep 06Japan Registration approved to sell Canto II in August.China and Taiwan registration estimated by end of FY07

2. Based on current inventory and open purchase orders the assumption is that the current Widget supply will satisfy current demand of 48 units (Aug 06 to Aug 07). No additional demand can be satisfied.

Risks and Opportunities –Not in Data

1. High volume for Widget lines still causing serious constraints in test.

2. Chassis availability for Widget II is still an issue. Supplier concern about meeting current requirements for September.

Major Changes this Cycle (In Data) 1. Last Month’s statement (Current Widget I Demand from July to

August 07 is 45 units. No additional Widget I can be built based on material availability.)

2. Europe increased Widget II demand by 16 units for the period of August and September.

Emerging Issues and Gaps –In Data

1. Widget II mix is still not stable and could create supply issues.

2. Production still unable to meet plan. Production resources will be stretched in September.

CA2%

EU45%

US34%

AP10%

JP6%

NLA1%

SLA2%

FY06


Welcome Change

SeniorManagement

ReviewCROSS-FUNCTIONAL

COLLABORATION

MANAGINGSUPPLY

MANAGINGDEMAND


NEW ACTIVITIES

Customers

Suppliers

Scenario Planning

S&OP: A unique people-centric methodology which helps companies to navigate

in good or turbulent times


The Myth of The Single Plan

SHORT-TERM

2-3 YEARS

HISTORY

“Roughly RightNot

Precisely Wrong”

Historic DataProviding Trendand Seasonality

‘Baseline’

DetailOperational

Focus

Scenarios –An

Integrated Set of Plans

NotOne Number


Example of Process, Assumptions AND Decisions Driven

Hypothèses M-1

•+20% Pub sur Octavia•Lancement ASKEO Avril•Promotion OverNest Juin

Hypothèses M

•2% Mix négatif sur CA•Baisse de 1pt de la Tendance

Time

CA Estimate

High Scenario

Low Scenario

Which decisions do we need to take, and when, if we are in the

Low Scenario ?

SeniorManagement

ReviewCROSS -FUNCTIONAL

COLLABORATION

MANAGINGSUPPLY

MANAGINGDEMAND


NEW ACTIVITIES


The emergence of Scenario Planning

• Scenario Planning involves testing business strategies against a number of alternative futures

• We need a new set of tools in order to accomplish Scenario Planning


2 YEARS 4 YEARS0

Future Portfolio Model


2 YEARS 4 YEARS0

2 YEARS 4 YEARS0

2 YEARS 4 YEARS0

Which of the 5 portfolio models best describesyour market segment, brand or business unit?

5

4

3

2

1

Line Extension and Promos

2 YEARS 4 YEARS0

Existing Portfolio

2 YEARS 4 YEARS0


Uncertainty by Portfolio Model

2 YEARS 4 YEARS0

5

2 YEARS 4 YEARS0

4

2 YEARS 4 YEARS0

2

1

Line Extension and Promos

2 YEARS 4 YEARS0

Existing Portfolio

3

2 YEARS 4 YEARS0

Leve

ls o

f Unc

erta

inty

Portfolio Model


What are you trying to determine with each scenario?

• Will it solve the business plan problem or take advantage of an opportunity?

• What will it do to profitability?• What will it do to market share?• Can I accomplish it with my resources?• Is the risk worth it?• What did we learn from looking at these scenarios?


Scenario Planning

• Each scenario that you are exploring should therefore be defined by a set of assumptions in order to meet your business goals

• A different scenario would be to define a different set of assumptions

• Scenario planning does not make the decision for you, it enables you to make a more informed decision


Scenario Planning is here

• The tools are emerging• Some companies are utilizing scenario planning well• We will see more companies performing scenario planning

as they learn how to do it and begin to use the new tools


The Evolution of S&OP A practitioner’s perspective

Patrick Bower – Combe Inc.

31Copyright © 2012 Pat Bower . All Rights Reserved.

Real examples of S&OP Scenario Planning

Routine (seen often)• Examine the bounds of next year’s operating plan• Testing impacts of current year’s plan• Tweaking S&OP plan on new news

Anticipatory (planning for reasonable events)• Estimating impact of a strike on the “stuffing business”• Determining optimal seasonal pre-build• Hedging on inventory due to limited (unresponsive) capacity for NPI• Developing OB based on three different potential views of product mix


Real examples of S&OP Scenario Planning

Reactive (often as a result of extreme unplanned event)• Re-sourcing output of 3 Gulf Coast mfg facilities after Katrina • Re-planning both global supply and demand after loss of several key

raw ingredients due to Japanese tsunami• (Re)-planning of constrained capacity after Wal-Mart listing change

Optima• Re-sourcing customer distribution network after facility shut down• Planning secondary source of supply for critical raw ingredient• Determining outsourced vs. expanded co-owned manufacturing• Make buy now or later decisions based on commodity prices


Scenario: What if New Product Demand Exceeds Plan?

Banded forecasts are common for new product introductions….scenario planning within S&OP should provide a reasonable set of answers to “what happens if ?”

?

Sensing?

Hedging?

Targets?

Limits?

Priorities?

Mix?

Capacity?

Suppliers?

How to Handle?

How Do I Know?


Challenges with S&OP Scenario Planning

• Not common place– Misunderstanding of the role of scenarios within S&OP – “Let’s just do the S&OP cycle more frequently”

• Transfer of S&OP plan and ‘directions’ weak– Usually due to poor implementation of S&OP process

• Conversion to tactical/execution planning poor – Directions, guideposts, rarely translated to tactical implications– Realistic supply chain parameters not used– Plan not vetted through supply chain planning or scenario tools

• Sensing mechanisms not available– Sensing measures not developed – Lack of consistent assumption capture


Challenges With “existing” S&OP Tools

• Excel is not an S&OP solution– Never detailed enough - not sustainable as an enterprise platform– Aggregation and Disaggregation is a major issue– Quality of Capacity #’s is a persistent problem– No/Limited scenario planning

• Synthesizing tools– Don’t provide integrated “planning” platform

• Connection to planning tools is dependent on linkages– Offer slicing and dicing and a nice “presentation” layer– Not a bottoms-up tool– Very rough cut view of capacity– No/Limited scenario planning


Challenges With “Existing” S&OP Tools

• LPs are wonderful if you have PhDs on staff– Good for strategic planning– Often lack heuristics – Difficult to keep current– Difficult to interpret results– Real Life: Food / Dessert company examples used LPs often

• Difficult to keep it current and interpret results

• ERP’s are rarely best of breed planning tools– Cannot handle major assumptions changes / save of scenarios– Change can be very slow in coming – Real Life: Beverage company created “test” or simulation ERP

environment to run scenarios, but iteration was VERY difficult


Emerging Technology for S&OP?

• The promise of Moore’s law being realized for S&OP• Dynamic businesses require responsive supply chains• Speed of response is important


Which Features of S&OP Tools are Important?

Planning• Volume & Mix planning for realistic S&OP plans• Accurate “testable” simulation – back”castable”• Adjust both demand and supply• Current plan as baseline scenario• Multiple type of forecast consumption logic

Utility• Aggregate/Disaggregate different supply and demand profiles

– class of trade, dollars/units, capacity families, etc• Priorities by customer, product, product group• Ease of navigation• Build relevant categories and sub-categories

Metrics• Pre-packaged alerts/metrics

– Customized “sensing / altering” metrics


Which Features of S&OP Tools are Important?

Scenarios• Alternate supply or demand scenarios (cut capacity, add demand)• Save/Snapshot alternative solutions• Assumptions/comments• Freeze portions of the solve • Scenario comparison for sensitivity analysis

Presentation• PSI/SDI presentation for S&OP – both data and graphs• Dashboard for key planning values and metrics• Capture slideshow views of scenarios for presentation• Drilldown into plan values

Integration / Technical• Able to handle low and high latency data• Ease of integration• Speed


The Evolution of S&OP A vendor’s perspective

Trevor Miles – Kinaxis


Scenario ComparisonHistorical Scenarios

New S&OP Plan

Operational Scenarios

Executive Decisions


Assumption Management


Role-Specific Dashboards


Scenario ComparisonKPI Root Cause AnalysisScenario Navigation


Detailed AnalysisHierarchy Navigation


Hierarchy Navigation


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