Integrated Business Planning

Transcription

1 Integrated Business Planning Best Practices for Next Generation Sales & Operations Planning (S&OP) Bill Nienburg Managing Director Integrated Business Planning Associates, LLC (Former VP S&OP, Sara Lee Corporation) 1

2 Background Integrated Business Planning Associates Unlock the Exponential Power of Your Planning Process Roles & Responsibilities PEOPLE PROCESS Change Mgmt User Interface/Training Methods & Approach TECHNOLOGY 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 Develop a process that fits your business Delivers broad crossfunctional value With a financial and strategic focus Leading to improved bottom-line results. 2

3 Background Georgia Tech, Mechanical Engineering 1993 Procter & Gamble ( ) Manufacturing Process Engineer Capacity Expansion Lead Category Supply Planning Lead US Facial Tissue Category Canadian Paper Products (Tissue/Towel/Facial) Sara Lee Corporation ( ) Director, Supply Planning, US Foods Director, Supply Planning Systems Transformation VP S&OP, Global System & Process Development Integrated Business Planning Associates S&OP / IBP Process & System Development Resources 3 Integrated Business Planning Associates

4 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 Insights for a Successful S&OP Process 4 Integrated Business Planning Associates

5 Sales & Operations Planning Continuous Collaboration Process: Converges for S&OP Consensus Snapshot Demand Planning Demand Review Product Supply Review Pre S&OP Meeting Mgmt Business Review Decision / Exception Management Consensus Demand Planning Supply Chain Synchronization Alignment & Agreement 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 5

6 Evolution of S&OP In the past, S&OP has been most often identified as a Supply Chain based process But it has been too singularly 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." 6

7 Evolution of S&OP 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 process that includes all elements of demand, supply and financial analysis in relation to the business 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 - Next Generation S&OP: The Path to Bottom-Line Value, Stephen Hochman S&OP is the common and synchronized process for business review and decision making, to optimize business performance and drive business strategy. 7

8 Integrated Business Planning Continuous Collaboration Process: Converges for S&OP Consensus Snapshot Demand Planning Demand Review Product Supply Review Pre S&OP Meeting Mgmt Business Review Decision / Exception Management Consensus Demand Planning Supply Chain Synchronization Alignment & Agreement 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 8

9 Integrated Business Planning / S&OP Model Continuous Collaboration Process: Converges for S&OP Consensus Snapshot Demand Planning Demand Review Product Supply Review Pre S&OP Meeting Mgmt Business Review.Decision / Exception Management Consensus Demand Planning Supply Chain Synchronization Alignment & Agreement Innovation Strategy Pricing & Trade Strategy Customer & Consumer Strategy Procurement Strategy Business Plan Business Strategy 9

10 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 *Source: CP Companies: Seven Actions to Take to Weather the Recessionary Storm, Lora Cecere, AMR Research 10

11 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 11 Integrated Business Planning Associates

12 Consensus Demand Planning Top Down Planning Objectives/Goals Market Execution Updated Financial & Strategic Assumptions Integrated Business Planning: Consensus Demand Planning Financial Forecasting Trade Planning Demand Planning Innovation Supply Chain Execution To realize it s full potential, S&OP must evolve to facilitate alignment and coordination across a complex and multi-functional business landscape 12

13 Incorporating Multiple Sources of Input NPD Research Promo Analysis Base vs. Lift NPD Authorizations Media Campaigns Promotion Calendars Statistical Forecasts Trade Marketing Programs LRP Targets AOP/ OL Targets Macro- Economic Trends 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 13

14 Incorporating Multiple Sources of Input Provide a clear structure that manages where bottom-up forecasts, versus top down plans, versus goals and targets reside in the overall forecast. Potentially unrealistic goals, or top down plans that are not fully developed, cause poor coordination / inaccurate forecasting when added to the execution horizon Goals Top Down Goals Top Down + Goals + Top Down + Bottom UP Bottom Up Bottom Up Time Execution Tactical Strategic 14

15 Incorporating Multiple Sources of Input Each input should flow into it s proper time horizon and level of detail, allowing NPD Media full planning of the Research entire IPB planning horizon Campaigns using all various/valuable sources of information. Promo Analysis NPD KAM Authorizations KAM Promotion Calendars A Place for Everything and Everything in its Place Statistical Models Goals Top Down Goals Top Down + Trade Marketing Programs AOP/LE Targets Goals + Goals/Expectations Top Down Marketing & Innovation + LRP Targets Customer Marketing and Sales Initiatives Time Bottom Up (only!) Bottom Up Promotional Planning / NPD Authorizations Bottom Up Statistical Demand Modeling Execution: 0 to X months Tactical: Y months Strategic: Z months 15

16 Planning Horizon Management By separately handling the various levels and sources of input, with the right level of detail over the right time horizon, we can drive synchronized, cross functional execution and operational excellence S&OP manages this flow Goals & Objectives Marketing Programs & Innovation Sales/Trade Programs & Initiatives Promotional Planning / New Product Authorizations Statistical Demand Forecasting / Base Business Adjust <<< Integrated Business Planning Horizon >>> 16

17 Transaction Hierarchy Attributes S&OP Structure Multi-Level, Multi- Dimensional Product Customer Manufacturing Distribution A ll Bus Unit Category A ll Natio nal Accou nt Parent / All Other A ll Regio n Source Plant Warehouse A ll Plant Operating Department Promoted Group Child Distribution Center Resource UPC Code Ship-to Ship-from n/a Product Number Door n/a n/a Brand Consumer Segmentations Procurement Groupings Key Account Market Channel Storage Characteristics Resource Groupings 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 17

18 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 S&OP Business Planning Process S&OP Application Collaboration * Consensus * Analysis * Review Light Sup/Dmd Planning SCM Light Acct Planning CRM ERP P&L BI 18

19 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 19

20 Enabling Technology 1. Financial Controlling Manage: Price, Fixed & Variable Cost, Stales, Kilo Conversion By SOP Family or Material Calculate Revenue, Cost, Kilos 2. Demand Planning Manage: Stat Forecast, Baseline Forecast Kilo, Units, Euro By S&OP Family or Material 4. Account Planning Manage: Key Account Plan, Promos and Discounts Euro, Kilo, Units By S&OP Family & Key Account 3. Marketing Manage: NDP, Cannibalization, Promotions Kilo, Euro By Material (and Key Account) Disaggregate Per Account Calc Forecast Profit Consolidate Plans Reporting Analysis Monthly Reporting Weekly Reporting Workflow Process Support 5. Consensus S&OP Manage: Goals, Total Forecast & Financial Estimates Euro, Kilo By S&OP Family or Key Account 20

21 Enabling Technology Preparation Week One Week Two Week Three Period Close Prepare Updated Assumptions Finance Manage History & Events Demand Planning Prepare Base Forecast Demand Planning New Product & Promo Forecast Marketing Review & Adjust Key Account Plans Sales Demand Consensus & Review Sales * Marketing * Demand Planning Mgmt Business Review Business Leadership Team 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 21

22 Enabling Technology Rough Cut Financial Planning real time visibility to profitability Historical Data Calculated Defaults (pricing, etc) Actual Sales (Kgs, Units, ) > Previous Years, YTD Prior Plan of Record w/ Metrics Actual Spend ( ) Calculated Default Rate (%) Actual Net Sales History ( ) Base Net Price ( /Kg) Actual Cost (Fixed & Variable) Actual Yield Assumptions Gross Sales Trade Spend Net Sales Cost of Goods Integrated Bus Plan Time Phased Adjustments Plan Building Blocks Statistical Fcst, DP, Sales Plans, Consumer Promo, Innovation Adjusted Trade Assumption ( Key Account, Product Family) Projected Net Sales ( ) Net Sales Bridge Analysis Projected Costs (Stnd, Real) Time Phased Adjustments Gross Production Actual Gross Profit ( ) Prior Plan of Record w/ Metrics Gross Profit Projected Gross Profit ( ) 22

23 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 23

24 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 24 Integrated Business Planning Associates

25 % achieving metric improvement in past 2 years Performance Impact Companies with Best in Class S&OP Processes Have a 2.5X-6X Advantage in Key Performance Improvements 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 23% 48% Customer Retention (%) 33% 73% Finished goods days of inventory 40% 77% Complete Order Fill Rate (%) 23% 84% 83% 81% Average Forecast Accuracy at the Product Family Level 26% Gross Margin (% of revenue) 18% Logistics costs as a % of sales All Others BIC 25

26 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 Support the process with the right technology 26 Integrated Business Planning Associates

27 Thank you! Danke! Develop a process that fits your business Delivers broad cross-functional value With a financial and strategic focus Leading to improved bottom-line results. Integrated Business Planning Associates Unlock the Exponential Power of Your Planning Process PROCESS Integrated Business Planning Associates, LLC Sales & Operations Planning Consulting Process & System Development Services Roles & Responsibilities Change Mgmt Methods & Approach Bill Nienburg, Managing Director bill.nienburg@ibp2.com PEOPLE User Interface/Training TECHNOLOGY