S&OP Overview Implementation Approach Biel 06-15-12

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Business Forecasting 2012
Predictive Intelligence Summit
Demand Planning & Forecasting
Implementing Demand & S&OP Processes

Hyatt Regency McCormick Place
Chicago, IL
Friday, June 15, 2012

Discussion Facilitator
Jim Biel
Management Consultant

E-Mail: bielconsulting@gmail.com
Phone: 847.687.5379

LinkedIn Profile: http://www.linkedin.com/in/jimbiel
S&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.

Jim Biel, Ph: 847.687.5379, E-Mail: bielconsulting@gmail.com, http://www.linkedin.com/in/jimbiel (June 15, 2012)

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Professional Biography – Jim Biel
Phone: 847.687.5379, Chicago, IL
E-Mail: bielconsulting@gmail.com
LinkedIn Profile: http://www.linkedin.com/in/jimbiel
SlideShare 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

• 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)

Jim Biel, Ph: 847.687.5379, E-Mail: bielconsulting@gmail.com, http://www.linkedin.com/in/jimbiel (January 18, 2012)

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Discussion Topics
“An Interactive Discussion”
• Survey Results
• Your Implementation Questions / Concerns
• Implementation Topics
• My Thoughts / Overview
• Q&A
• One-on-One Discussions


4

Implementation Topics
• The Why / Rationale
• Ownership / Sponsorship / Stakeholders
• Education
• Metrics
• Assessment / Discovery
• Project Planning
• Change Management
• Process Design
– One Forecast
– What IF’s / Scenarios
– Unconstrained / Constrained Demand
• Roles / Responsibilities
• Tool Box / Systems
• Execution / Implementation
• Process Improvement
• Business Performance Improvement


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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
business objectives of profitability, productivity,
competitive customer lead times, etc., as
expressed in the overall business plan.


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Implementation Steps
• Ownership / Sponsor / Key Stakeholder
• Education (at least 2 levels)
• Metrics
• Project Planning (Includes Change Management)
• Process Design
• Data Management
• Tools / IT Solutions

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Business Drivers / Pain Points
The Why
• Implement Concepts & Tactics To:
– Improve Demand Forecasting Accuracy
– 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)


8

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

• My Preferred Business Model To:
– Improve Forecast Accuracy
– Reduce Supply Chain Volatility
– 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.


9

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
• Reduction of inventory

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


10

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
• 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 Fire
– May Need a Process Coach
– Treat Implementation as a Project
– S&OP Could / Should Be the Way You Run Your Business

Jim Biel, Ph: 847.687.5379, E-Mail: bielconsulting@gmail.com, http://www.linkedin.com/in/jimbiel (January 18, 2012)

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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) –
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


12

Metrics
– 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
– Improvement From a Baseline
– More Holistic Metrics: Total Cost to Serve, etc.


13

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
– 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

14

S&OP
• Process Alignment / Integration
– (Demand-Supply-Finance-GM)
• “Connect the Knobs” for Leadership

GM Owner

Dem Pl

Finance Supp Pl


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“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
Anything”
– VP & GM Quote From Tom Wallace’s Book,
Sales & Operations Planning, The Executive’s Guide
Page 24


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The S&OP Flow
Demand Finance GM
Generates Controls Monthly
Proformas, S&OP
Cost, Risk /
Ops Monthly; + Results
As Needed In + Metrics Review
Interim + Var to Bus Pl
+ Future Frcst
Utilize Demand + Assumptions
Supply Outputs as Basis
For Forecasts, + Bulk of Meeting:
Daily Annual Plans, Gaps, Opps in
Strategic Plans,
Weekly Add Risks / Opps / Future Frcst
Monthly Other Lifts /
Discount Factors
Balancing As Needed

+ 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


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One Forecast
(Linkage – S&OP to Other Plans)
Strategic Use S&OP
Strategic Demand Supply
Target / Financial As a Gut
Plan Plan Plan Check
Intent

Use S&OP
Business Annual Demand Supply As Key
Financial
Plan Plan Plan Plan Input / Core,
Plus Risks/Ops

Use S&OP
Latest Interim Demand Supply As Key
Financial
Est / Frcst Forecasts Plan Plan Input / Core,
Plus Risks/Ops

Future Future Execution
Demand Supply Forecast / Details,
S&OP Execution Financial Active Risk / Ops
Plan Plan
/ Forecast Discussion

S&OP Outputs Validate, Support Other Planning Processes

18

Alignment Between Corporate Strategy and
Operational Execution
Corporate Strategy Business Plan S&OP

Revenue Targets Revenue Targets Revenue Targets
Margins Margins Margins
Working Capital Working Capital Working Capital
New Products New Products New Products
New Markets New Markets New Markets
New Customers New Customers New Customers
New Channels New Channels New Channels
Exit Strategies Exit Strategies Exit 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 processes)

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


19

Cross Functional Alignment
Functional Role Business Role S&OP Role Communication
General Manager Strategic Direction Owns the Overall Owns Monthly S&OP
Process – The Process Meeting; Consulted
Owner Daily/Weekly as
Needed (Exception)
Demand Translates Strategy into Owns the Demand Daily, Weekly
> Sales Demand Generation; Forecast; Accountable Interaction with Supply
> Marketing Dem Planning Reports for Excess Inventory & Finance; Owns
to a Demand Leader; Generated by a Monthly Demand
Unconstrained Demand Forecast Miss Component of S&OP

Supply Fulfillment of Owns the Fulfillment of Daily, Weekly
> Finished “Constrained Demand”, the” Constrained” Interaction with
> Raw Least Cost Demand Forecast at Demand & Finance;
Least Cost (Balancing Owns Monthly Supply
with Demand Planning) Component of S&OP
Finance Economic Oversight / Counsel, Input, Risk Provides P&L
Counsel Assessment, Pro- Proformas & Risk /
Formas of Future Opportunity
Forecasts Assessment


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

Role Daily Weekly Monthly
GM Rarely Rarely Owns the
Meeting

Demand Active w/ Supply Active w/ Supply Owns Demand
Planning Planning; Sales; Planning; Sales; Component
Marketing; Marketing;
Customers Customers
Supply Planning Active w/ Active w/ Owns Supply
Demand Demand Component
Planning Planning
Finance Consulted As Consulted As Owns Financial
Needed Needed Component


21
Methodological Approach Measuring, Managing, Executing Strategies

Frequency Activity Typical Finance GM
Interactions
Daily Demand Dem Pl with When needed, If Needed, very
Planning: System & exception rare
+ Dem Planners Sources; basis
+ Sales Dem Pl w/
+ Marketing Supply –
+ Customers Balancing
+ Synd Data Supply Metrics
Weekly Demand Same as When needed, If Needed, very
Planning: Above exception rare
+ Same as basis
Above
Monthly + Demand Pre- Demand to P&L Proforma S&OP Meeting:
Meeting Supply; Supply with Gaps / Metrics

+ Supply Pre- Back to Opps; Risks Best Frcst
Demand; Assumptions
Meeting New Products
Finance P&L w/
+ Capacitization Risks / Opps Gaps / Opps
Strategic Issues


S&OP Time Fences 22

Short-Term Mid-Term Long-Term

(1-3 Months) (4-12 Months) (13-36 Months)

Demand Demand Demand - Strategy
Dem Pl – SKUs Dem Pl – Prod Fam Dem Pl – Prod Fam
All Demand Streams All Demand Streams All Demand Streams
Sales Marketing Marketing
Customers Customers Customers
Promotions Promotions Promotions
New Products New Products New Products

Supply Supply Supply - Strategy
Fulfillment Fulfillment Fulfillment & Sourcing
Cust Serv Finished Gds, Raw Ingred Contracts
Finished Goods Supply Contracts Plant/Cap Network/Invest
Supply Contracts


23

Process, Metrics, Results

PROCESS PERFORMANCE METRICS
Leadership Revenue, Cost Targets
(Strategic Direction) Forecast Accuracy,
Working Capital Targets,
Inventory Targets
New Product Launch Success
Demand Feeds Service Level Targets
Supply; Balancing / Cycle Time / Quality - Processes
Capacitization / Shipment
(Ops Execution, Future Forecast)

Finance DESIRED RESULTS
($ Scorekeeper, Forward Looking Positive P&L Outcomes
Economic Advisor) Positive Working Capital Outcomes
Customer Service Levels
Productivity Improvements
Leadership Decision Making Improvements
(S&OP Process Owner)


24

Tool Box Needed to Execute

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

Need a well thought-out and efficient S&OP Reporting Tool
to support Meetings and interactions
> Numbers
> Metrics Reporting
> Assumptions

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


S&OP 25

(The Recipe / A Holistic View)
Process, People, Performance, Platform
• DP Starts the Process (Demand-Supply-Finance)
Process / • Business Intelligence / Collaboration Essential
People
• Defines Units, Revenue, Margin $ Can Be Derived
• Ownership of Forecast: Demand Owner
• Unconstrained Demand / Constrained Demand
• One Forecast (Demand/Supply/Finance/GM Consensus)
Performance
• Metric Driven: Forecast Accuracy (Level/Time Fence)
• Metric Driven: Supply Fulfillment
• Tool / System – Foundation For Demand Forecast
Platform /
Process • Tool/ System – Rough Cut Capacity
• Tool/ System – Detailed Supply Planning
• How (Demand Management): Tools, Collaboration, and
Summary Assumptions Managed By Demand With a Defined Accuracy
Metric (Start With Baseline)
• Debate the Assumptions Not the Number


26

Implementation Steps
• Ownership / Sponsor / Key Stakeholder
• Education (at least 2 levels)
• Metrics
• Project Planning (Includes Change Management)
• Process Design
• Data Management
• Tools / IT Solutions

27

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

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


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