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Evolution of Sales & Operations Planning: Meeting Trends Shaping Integrated Business Planning

Explore the evolution of Sales & Operations Planning into Integrated Business Planning, addressing challenges, trends, and key takeaways. Learn how to optimize business functions through a strategic planning approach.

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Evolution of Sales & Operations Planning: Meeting Trends Shaping Integrated Business Planning

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  1. APICS-SVChapter MeetingTrends Shaping the Evolution of S&OP & Integrated Business Planning Stephen P. Crane Stephen Crane Consulting, LLC Supply Chain Risk Consortium November 19, 2015

  2. Background Stephen Crane/APICS-SV/November 19, 2015 • Principal & Founder – Stephen Crane Consulting, LLC • B.S. Chemical Engineering - University of New Hampshire • APICS CSCP – Certified Supply Chain Professional • Board Member – Supply Chain Council & APICS • Member of The Supply Chain Risk Consortium • 30+ years industry experience from Air Products, Wacker-Chemie and Firmenich • Implemented Sales & Operations Planning in 12 businesses, 3 companies, 4 countries • Implemented best-in-class supply chain organizations and planning processes • Practitioner focused on sustainability of benefits

  3. Agenda Stephen Crane/APICS-SV/November 19, 2015 S&OP vs. Integrated Business Planning Greatest Challenges to Improving S&OP Six Trends Shaping the Evolution of S&OP & IBP Key Takeaways Questions?

  4. Stephen Crane/APICS-SV/November 19, 2015 S&OP vs. Integrated Business Planning

  5. S&OP & IBP: Decades of Evolution Stephen Crane/APICS-SV/November 19, 2015

  6. Evolution of S&OP In the past, S&OP is most often identified as a Supply Chain based process and has been too singularly focused to engage and provide value across functions to provide true business optimization. The S&OP process develops tactical plans that provide managementthe ability to strategically directits businesses to achieve competitive advantage on a continuous basisby integrating customer-focused marketing plans for new and existing products with the management of the supply chain. The process brings together all the plansfor the business (sales, marketing, development, manufacturing, sourcing, and financial) into one integrated set of plans. (APICS Dictionary, 14th edition) Stephen Crane/APICS-SV/November 19, 2015

  7. Evolution of S&OP “Traditional Sales and Operations Planning (S&OP) processes and supporting technologies are no longer sufficient in today’s 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 the financial analysisin relation to the business goals and strategy.” “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.” Stephen Crane/APICS-SV/November 19, 2015

  8. Evolution of S&OP • Every company needs to decide on how they want to use S&OP in their business. Best-In-Class companies use S&OP as a way of running the businesssupporting a company’s growth strategy by routinely reviewing customer demands, anticipating shifts in business patterns, and aligning an extended enterprise of resources, suppliers and service providers to deliver on expectationsin a dynamic and evolving global marketplace. • Management’s handle on the business… • All P&L impacts integrated into process… • Is an Executive decision makingprocess… • A set of decision making processes… • Provides "long range vision“ to issues before they become a crisis… Stephen Crane/APICS-SV/November 19, 2015

  9. Month-End Close Drives Price/Volume Variance Analysis and Monthly Outlook Stephen Crane/APICS-SV/November 19, 2015

  10. Companies That Have implemented S&OP See Benefits Across Many Areas - Performance Benefits (% Improvement) Stephen Crane/APICS-SV/November 19, 2015

  11. Stephen Crane/APICS-SV/November 19, 2015 Greatest Challenges to Improving S&OP

  12. Unwritten Rules Causing Profit Leakage Stephen Crane/APICS-SV/November 19, 2015 Always under promise and over deliver Never submit your real budget the first time Always inflate your budget, as it will likely be cut Always make your budget, it’s what really matters Avoid specific measures, especially if you can’t control them Get the most people reporting to you and protect your budget

  13. Lost Business Value Stephen Crane/APICS-SV/November 19, 2015 • Cost Reduction (Conference Board) • 90% of organizations that launch cost reduction programs fail to sustain results for > 3 years • Execution (McKinsey) • Organizations realize only 63% of the value of their strategies • Complexity (AT Kearney) • Complexity costs organizations 3-5% of sales

  14. Greatest Challenges to Improving S&OP Stephen Crane/APICS-SV/November 19, 2015

  15. Greatest Single Challenge to Improving S&OP Stephen Crane/APICS-SV/November 19, 2015 • Lack of Executive support, commitment, and engagement • Leadership team needs to be committed to a new style of running the business • Organizations need to comprehend the true scale of what the process can achieve for the business • The sizable challenge of overcoming the traditional thinking of operating in functional silos and mis-aligned incentives • Integrating all the key areas of the business (Sales, Product Management, Manufacturing, Purchasing, Finance, R&D) into a single integrated business planning process • There is no one owner of the management process

  16. Stephen Crane/APICS-SV/November 19, 2015 Six Trends Shaping the Evolution of S&OP & Integrated Business Planning

  17. Six Trends Shaping the Evolution of S&OP & Integrated Business Planning Stephen Crane/APICS-SV/November 19, 2015 • Speed of Business Continues to Accelerate • Complexity, Volatility, Lack of Value Based Planning • One Size Does Not Fit All • Develop Planning Talent • Global is More Than a Template • Software is Not a Silver Bullet

  18. Speed of Business Continues to Accelerate 1 Stephen Crane/APICS-SV/November 19, 2015 The need for organizational alignment is more critical than ever. The speed of business continues to accelerate driven by the consumer now dictating the channels, any confusion about priorities or delays in orders can result in increased costs, inventory or even loss of business. • Need to capture timing and volume shifts is critical to maintaining customer service and fulfill orders profitably • The need for strategic focus on Sales Forecasting has never been greater • S&OP is the perfect process mechanism to recognize, evaluate, and determine the impact of these changes • Effectively communicate changes and align the organization to “one plan”

  19. Complexity, Volatility, & Lack of Value Based Planning Squeezing Margins 2 Stephen Crane/APICS-SV/November 19, 2015 Companies need to better manage complexity and volatility which are squeezing margins and decreasing profitability. By focusing on value based planning, companies can maximize their profitability. • Increasing complexity of products and length of global supply chains • Increased product proliferation and shorter lifecycles • Demand volatility is increasing while customers require increased responsiveness and better service • Value based planning not integrated into S&OP

  20. One Size Does Not Fit All 3 Stephen Crane/APICS-SV/November 19, 2015 Companies should leverage segmentation techniques in planning to target performance improvement opportunities and capitalize on those opportunities. By combining portfolio and planning techniques, organizations can drive segmented strategies to achieve maximum business profitability. • The 80/20 rule (Pareto) • Measure and manage complexity • Focus on synergy areas: procurement, product design, manufacturing, planning and order fulfillment.

  21. Develop Planning Talent 4 Stephen Crane/APICS-SV/November 19, 2015 With recognized talent gap in the marketplace, companies should establish talent management programs and career paths that attract and retain planning talent. Career paths need to include opportunities to move into other functional areas in the organization to broaden planners’ experience and establish context for better decision making. • New generation of the workforce expects to be mentored • Universities are not providing the necessary planning skills, so companies should expect to develop these skills • Culture and capability differences makes it difficult to plug-and-play new talent from other companies

  22. Global is More Than a Template 1.0 2.0 Gather and update data Demand Planning Update and Add New CVCs Review Demand Metrics Correct Sales History Create Statistical Forecast Stat Forecast Copied to BW Make Stat/Market Intell Forecast Adjustments Upload/Enter Customer Forecasts Validate Sales Agent Forecast Historical Sales vs. Prev. Sales Plan KPIs Conduct Pre-Demand Reviews Pre-Demand Changes Completed Generate 24 Month Unconstrained Forecast Validate Changes to Sales Plan and Update Months 1 and 2 Demand Review Approve Unconstrained Forecast DP Released to CO for Financial Forecast Publish Assumptions, Minutes, Decisions, and Action Items Make Changes to Constrain Final Forecast Order Book (Sales Backlog) Add New Customer Items to R3 3.0 Supply Network Planning Iteration loop Competitive/Market Intelligence 5 Update Resource Capacities & Assumptions Review & Confirm Available Inventory Review Supply Metrics Update Network Source Changes Preferred Sources Assigned to Demand Run Heuristics for 24 Month Supply Plan Identify Supply Imbalances / Review Supply Alerts Adjust SNP Supply Planning Constraints Refresh Inactive Version / Release DP to SNP Upload Sales History to APO Guidance on BU Priorities Summarize Supply Option Proposals Submit Supply Options to BU for Approval Financial Impact of Supply Options Conduct Pre-Supply Review w/Plants Finalize Supply Options & Assumptions Publish 24 Month Raw Material Forecast Conduct Supply Review Publish Minutes, Decisions, and Action Items Provide Supply Constraints to DP Vetted Supply Options Review KPIs, Revenue, Cost Projections, & Gaps to AOP Review Major Business Issues Review Supply Options to Balance Demand Review Supply Options Financial Implications Lock & Deploy S&OP Plans for Execution Finalize 3-month Sales Plan Summarize top issues/actions & decisions expected ESO Publish Minutes, Decisions, and Action Items Pre-Alignment 4.0 Communicate Decisions & Actions to Organization Review Business Strategy & Objectives Review Demand & Supply Plans Review Financial Projections vs. AOP & Gap Closure Measures Review Major Supply Chain Risks and Top Issues Review Capital & Resource Requests Summarize Key Decisions & Top Issues Still Outstanding Executive Sign-off 5.0 Stephen Crane/APICS-SV/November 19, 2015 As companies look to expand S&OP globally, standardized process templates can help efficiently establish a common understanding of desired process. However differences exist in data, skills, and market structure that can significantly impact planning capabilities regionally. So companies should review go-to-market strategies and align their global S&OP process with regional considerations to optimize business capabilities and performance. • Globalization is core to most growth strategies • Templates are a good start, but not enough • Global vs. regional vs. local, regional considerations to increase alignment and engagement

  23. Software is Not a Silver Bullet 6 Stephen Crane/APICS-SV/November 19, 2015 Companies continue to invest money, time, and resources into buying and implementing software, typically ignoring segmentation, analytics, and skill development critical to maximizing their return on these investments. To generate real improvements in S&OP, companies should refocus their efforts on building planning competencies and capabilities to ensure real and sustainable benefits on investments. • Use segmentation to apply software automation appropriately (ABC Pareto) • Remember, software does not solve business problems • Focus on defining the questions that need to be answered first, then build the capabilities to provide those answers • Competency development starts with teaching people how to think, followed by teaching them how to click – not the other way around

  24. Stephen Crane/APICS-SV/November 19, 2015 Key Takeaways

  25. Key Takeaways Stephen Crane/APICS-SV/November 19, 2015 New dynamics are creating complexities that require enhanced integrated planning capabilities to drive efficiency and effectiveness – people, process, technology A renewed focus on Planning For Growth provides a platform for collaboration, internally with Commercial Teams and externally with trading partners One size does not fit all – leverage segmentation to apply appropriate focus and capability to specific situations Building an effective Planning organization requires development of portfolio and planning competencies Executives have to lead the changes

  26. Thank you! Stephen P. Crane Stephen Crane Consulting, LLC Supply Chain Risk Consortium cranesp1@gmail.com Stephen Crane/APICS-SV/November 19, 2015

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