Bill Nienburg
Managing Director
Integrated Business Planning Associates, LLC
(Former VP S&OP, Sara Lee Corporation)
[email protected]
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Integrated Business Planning
Best Practices for Next Generation
Integrated Business Planning Associates
– S&OP / Integrated Business Planning Consulting – Process & System Development Services
Our Approach…
– Understand your business objectives • Financial and strategic goals
– Understand your data structure
• Product / Customer / Supply Chain Hierarchies • Customer / Consumer Segmentations
• Organizational Structure – Design the process
• Participants, roles & responsibilities • Meeting structure, timing & protocol • Inputs/outputs, data requirements • Planning methodology
– Help you define the right technology
• Support the software search/selection process • Bridge process requirements to configuration – Support culture change necessary to succeed
• Training, concept delivery, resource development – Plan for continuous improvement
Integrated Business Planning Associates
Unlock the Exponential Power of Your Planning Process
TECHNOLOGY Methods &
Approach PROCESS
PEOPLE User Interface/Training Roles & Responsibilities Change Mgmt
Develop a
process
that fits
your
business…
Delivers
broad
cross-functional
value…
With a
financial
and
strategic
focus…
Leading to
improved
bottom-line
results.
Background
Integrated Business Planning Associates
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Background
Georgia Tech, Mechanical Engineering 1993
Procter & Gamble (1993-2003)
– Manufacturing Process Engineer
– Capacity Expansion Lead
– Category Supply Planning Lead
• US Facial Tissue Category• Canadian Paper Products (Tissue/Towel/Facial)
Sara Lee Corporation (2003-2009)
– Director, Supply Planning, US Foods
– Director, Supply Planning Systems Transformation
– VP S&OP, Global System & Process Development
Integrated Business Planning Associates
Best Practices for the Next
Generation of S&OP
Objectives:
1. Introduce the next-generation of Sales & Operations Planning (S&OP) 2. Investigate current best practices for S&OP
3. Show the importance of enabling technology
Evolution of S&OP
S&OP Best Practices
Illustration of Key Concepts in Consensus Planning
Technology Enabled S&OP
Case Study: S&OP Revitalization
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Sales & Operations Planning
Collaborative process to generate demand plan
Demand & supply balanced across resources
Supply chain constraints identified and mitigation options presented
What-if scenarios used to analyze risks & opportunities against constraints Demand
Planning Demand Review
Product Supply Review Mgmt Business Review
Consensus Demand Planning Supply ChainSynchronization Alignment & Agreement
Decision / Exception Management
Pre S&OP Meeting Continuous Collaboration Process: Converges for S&OP Consensus Snapshot
Evolution of S&OP
In the past, S&OP has been most often identified as a Supply Chain based process
– But it has been toosingularly supply chain focused engage and provide value across functions and drive true business optimization?
S&OP is a managerial tool used for manufacturing planning and control. Its
fundamental objective is to reconcile sales forecasts with production plans in terms of volume. To do so, the S&OP has to coordinate planning efforts among the various departments involved in the process.
S&OP is… the function of setting the overall level of manufacturing output and other activities to best satisfy the current planned levels of sales… primary
purposes is to establish production rates that will achieve management’s objective of maintaining, raising, or lowering inventories or backlogs, while usually
attempting to keep the workforce relatively stable… extending through a planning horizon sufficient to plan the labor, equipment, facilities, material, and finances required to accomplish the production plan… normally prepared with information from marketing, manufacturing, engineering, finance, materials, etc."
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Evolution of S&OP
“S&OP is the common and synchronized process for business review and
decision making, to optimize business performance and drive business strategy.”
“Traditional sales and operations planning (S&OP) processes and supporting technologies are no longer sufficient in today’s high-pressured business environment. Sales and Operations Planning has evolved to become Integrated Business Planning. It is a truly cross-functional, multi-dimensional processthat includes all elements of demand, supply and financial analysis in relation to thebusiness goals and strategy.”
-“Technology Strategies for Integrated Business Planning”, June 2006
“The broader strategic mandate for S&OP is key to superior returns. S&OP leaders are aggressively
converting S&OP from an operations level demand-and-supply balancing process to the mechanism of choice for integrated business planning and strategy deployment”
Integrated Business Planning
Cross functional alignment and synchronization
Plan consolidation across execution/tactical/strategic planning horizons Facilitates demand sensing & shaping for margin optimization
Integration with financial planning processes
Attribute based planning; supports market & customer segmentation Technology enabled process facilitation and data management
Demand
Planning Demand Review
Product Supply Review Mgmt Business Review
Consensus Demand Planning Supply ChainSynchronization Alignment & Agreement
Decision / Exception Management
Pre S&OP Meeting Continuous Collaboration Process: Converges for S&OP Consensus Snapshot
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Integrated Business
Planning / S&OP Model
Demand
Planning Demand Review
Product Supply Review Mgmt Business Review Innovation
Strategy Business Plan
Business Strategy
Consensus Demand Planning Supply ChainSynchronization Alignment & Agreement .Decision / Exception Management
Pre S&OP Meeting Pricing & Trade Strategy Customer & Consumer Strategy Procurement Strategy
Continuous Collaboration Process: Converges for S&OP Consensus Snapshot
Critical for
Challenging Economy
Linking together…
– Promotion Plans – Sales Trends – New Products – Marketing Efforts – Financial Management
Will lead to better
reaction/decisions for:
– Production Planning – Labor Management – Procurement
– Financial Management
Actions to Take to Weather a Recession*
“Build demand-driven capabilities”
A good long-term forecast is the foundation of strong buy-side strategies.
“Strengthen price management capabilities”
Strong price management must be closely aligned to trade promotion efforts.
“Make every dollar spent on trade promotions count”
Understand the effect of trade funds on margin not only the increases in volume
“Actively manage the product portfolio”
Historic demand will not be a good predictor of future demand; so focus on product rationalization efforts, streamline complexity and sense portfolio changes.
“Focus on maintaining a balance”
Don’t react too suddenly to market issues and throw the supply chain out of balance
Integrated Business Planning Associates
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Best Practice Capabilities
Executive S&OP
– Compare Base Plan vs. What-If Scenario(s)
– Financial/Profitability Evaluation
– Dynamic Dashboards / Presentation Reports
– Control Demand Building Blocks
– Time-Phased Adjustments to Key Assumptions
– Support Views of Product/Customer/Consumer Segmentation
– Include Trend, Marketing Share, other Macro Economic Data
– Ability to Monitor Performance vs. Business Strategy
Consensus Demand Planning
Integrated Business Planning:
Consensus Demand Planning
Demand Planning Trade Planning
Supply Chain Execution Market Execution Top Down Planning
Updated Financial & Strategic Assumptions Financial Forecasting
“To realize it’s full potential, S&OP must evolve to facilitate alignment and
coordination across a complex and multi-functional business landscape”
Innovation Objectives/Goals
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Incorporating Multiple
Sources of Input
NPD Research NPD Authorizations PromotionCalendars AOP/ OL Targets
Media Campaigns Trade Marketing Programs LRP Targets Promo Analysis
Issues
• Lack of strong tool to handle complexity, integrate all sources of information
• Not a clear strategy for how to manage each input, where it belongs, how it should evolve
Result: confusion & frustration, only partial planning, inaccuracy Statistical Forecasts Macro-Economic Trends Base vs. Lift
Incorporating Multiple
Sources of Input
Bottom UP
Bottom Up
Top Down
+
Bottom Up
Top Down
+
Goals
+
Provide a clear structure that manages where bottom-up forecasts, versus top down plans, versus goals and targets reside in the overall forecast.
Execution Tactical Strategic
Potentially unrealistic goals, or top down plans that are not fully developed, cause poor coordination / inaccurate forecasting when added to the execution horizon
Goals
Goals
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Incorporating Multiple
Sources of Input
Marketing & Innovation Customer Marketing and Sales Initiatives
Statistical Demand Modeling Goals/Expectations
Promotional Planning / NPD Authorizations
Bottom Up
(
only
!)
Bottom Up
Top Down
+
Bottom Up
Top Down
+
Goals
+
NPD Research NPD KAM Authorizations KAM Promotion Calendars AOP/LE Targets Media Campaigns Trade Marketing Programs LRP Targets Statistical Models Statistical Models Statistical Models Promo AnalysisAnalysisPromoEach input should flow into it’s proper time horizon and level of detail, allowing
full planning of the entire IPB planning horizon using all various/valuable sources of information.
“A Place for Everything and Everything in its Place”
Top Down
Goals
Goals
Execution: 0 to “X” months Tactical: “Y” months Strategic: “Z” months
Planning Horizon
Management
Marketing Programs & Innovation Sales/Trade Programs & Initiatives
Goals & Objectives
Promotional Planning / New Product Authorizations
Statistical Demand Forecasting / Base Business Adjust
S&OP manages this flow…
By separately handling the various levels and sources of input, with the
right level of detail over the right time horizon, we can drive
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S&OP Structure
Level,
Multi-Dimensional
Determine right combination of levels across multiple hierarchies at which to conduct S&OP Planning inputs/adjustments should populate throughout the data structure
Attributes should be defined to provide various functional specific views/analysis
UPC Code Product Number T ransac tion Hier ar chy A ll Natio nal Accou nt Parent / All Other Child Ship-to Door • Brand • Consumer Segmentations • Procurement Groupings A tt ribu tes Bus Unit Category Promoted Group • Key Account • Market • Channel Plant Operating Department Resource n/a n/a • Resource Groupings Regio n Source Plant Warehouse Distribution Center Ship-from n/a • Storage Characteristics
Product Customer Distribution Manufacturing
A ll A ll A ll
S&OP Enabling Technology
S&OP technology assists with data management, reporting and process facilitation
• S&OP Functionality
Explore / analyze data by product and customer
Understand constraints
Understand financials Change assumptions Live P&L modeling
Top down planning
Scenario modeling
Work flow / process facilitation
• Close functionality gaps
Statistical forecasting Capacity/sourcing models Account planning Light Sup/Dmd Planning Light Acct Planning
ERP
P&L
S&OP Application
Collaboration * Consensus * Analysis * Review
BI
S&OP Business Planning Process
CRM
SCM
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Case Study:
S&OP Challenges
Data structure mismatches
Not adding significant cross functional value
Tools are too limiting and inflexible (and slow)
Inconsistent approaches
Lacking critical functionality for account planning, demand planning
Lack of focus on profitability / financials
Disconnects with downstream planning (manufacturing, procurement, labor,
etc)
Poor linkage between S&OP and weekly/tactical processes
Objective
: Design a collaborative consensus planning process, generate a
base forecast to cover the full traditional S&OP horizon, and provide
additional functionality to support account planning activity by the sales
function
Enabling Technology
2. Demand Planning
Manage: Stat Forecast, Baseline Forecast •Kilo, Units, Euro
•By S&OP Family or Material 3. Marketing
Manage: NDP, Cannibalization, Promotions
•Kilo, Euro
•By Material (and Key Account)
1. Financial Controlling
Manage: Price, Fixed & Variable Cost, Stales, Kilo Conversion •By SOP Family or Material
4. Account Planning
Manage: Key Account Plan, Promos and Discounts •Euro, Kilo, Units
•By S&OP Family & Key Account
5. Consensus S&OP
Manage: Goals, Total Forecast & Financial Estimates
•Euro, Kilo
•By S&OP Family or Key Account
Calculate Revenue, Cost, Kilos
Disaggregate Per Account Calc Forecast Profit
Consolidate Plans Workflow Process Support Reporting Analysis Monthly Reporting Weekly Reporting
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Enabling Technology
Data is always up-to-date, default plan is pre-prepared
Process management/accountability is workflow assisted
Reporting provides analytical and management tracking capability
Results in an efficient and organized process that provides a complete plan
Week Three Period Close Week Two Week One Preparation Manage History & Events Demand Planning Prepare Updated Assumptions Finance New Product & Promo Forecast Marketing Prepare Base Forecast Demand
Planning Review & Adjust Key Account Plans Sales Mgmt Business Review Business Leadership Team Demand Consensus & Review Sales * Marketing * Demand Planning
Enabling Technology
“Rough Cut Financial Planning”… real time visibility to profitability
Historical Data
Actual Sales(Kgs, Units, €)
> Previous Years, YTD
Prior Plan of Recordw/ Metrics
Plan Building Blocks
Statistical Fcst, DP, Sales Plans, Consumer Promo, Innovation
Integrated Bus Plan
Trade Spend
Gross Sales
Net Sales
Cost of Goods
Gross Profit
Assumptions
Actual Spend(€)Calculated Default Rate(%)
Calculated Defaults (pricing, etc)
Adjusted Trade Assumption
( Key Account, Product Family)
Time Phased Adjustments
Projected Net Sales (€)
Net Sales Bridge Analysis Actual Net Sales History (€)
Base Net Price (€/Kg)
Actual Cost (Fixed & Variable) Actual Yield
Projected Costs (Stnd, Real) Time Phased Adjustments
Gross Production
Actual Gross Profit (€)
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Expected Benefits
Forecast by sku / key account
Updated information for procurement planning Improved portfolio management capability
Improved accuracy & alignment
Improved cross functional coordination & execution
Planning in both volume & value
Better & faster decision making
Crucial tool for management during economic crisis
Productivity gains
Reduction of manual tasks
Over 125 linked/complex spreadsheets eliminated More time to analyze the business, prepare for decisions
Long term visibility
Streamlined AOP & Outlook process Improved risk assessment and mitigation
Objective of S&OP
Utilize business levers to influence future demand for the
optimal (most profitable) plan
• Customer initiatives / trade investment
• Consumer activation (media, consumer promotions, etc) • Pricing
• Commodity / cost structure response • Innovation & commercialization
Identify capacity constraints and manage sourcing to formulate
the
most profitable demand response
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Companies with Best in Class S&OP Processes Have a 2.5X-6X
Advantage in Key Performance Improvements
23% 33% 40% 23% 26% 18% 48% 73% 77% 84% 83% 81% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% Customer Retention (%) Finished goods days of inventory Complete Order Fill Rate (%) Average Forecast Accuracy at the Product Family Level Gross Margin (% of revenue) Logistics costs as a % of sales % a c h ie v in g m e tr ic i m p ro v e m e n t in p a s t 2 y e a rs All Others BIC
Performance Impact
Keys to Success
Difference Makers
Ensure top management support across each function Focus on change management
Apply simplifying concepts to manage the complexity Employ a continuous improvement approach
Ensure alignment/synchronization with master data
Incorporate cross-functional data structures and hierarchies Enable attribute based planning approaches
Integrate with finance to drive fastest adoption
Position the S&OP process as a strategic decision making process Link S&OP cycle to established business review process
Establish well defined process facilitation / workflow steps Inputs should be specific, tangible and actionable
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Integrated Business Planning Associates, LLC
Sales & Operations Planning Consulting
Process & System Development Services
Bill Nienburg, Managing Director
[email protected] www.ibp2.com
+1-630-881-5002
Integrated Business Planning Associates
Unlock the Exponential Power of Your Planning Process
TECHNOLOGY Methods &
Approach PROCESS
PEOPLE User Interface/Training Roles &
Responsibilities
Change Mgmt
