Agenda Introductions Journey to Business Excellence: Integrated Business Planning Next Generation Sales & Operations Planning by Terry Johnson Oracle Customer Success Stories Wrap up and Q&A
Introductions Gerald O Sullivan Director, Application Strategy Group Oracle Value Chain Planning Applications Terry Johnson Senior Principal Oliver Wight Americas Professional speaker, educator and coach for Class A Business Excellence - Keynote at management conferences worldwide
Key Takeaways Value Chain Planning implementation is a journey, not a project each phase has its own short time to value, but one should have a long term vision. Where to start Focus on the highest bang for your buck within each BU/Region and don t wait for ERP Implementation or upgrade Pick your critical green KPIs one cannot be perfect at all measures which KPIs defines you as a company, and meet your strategy? Create transparency between All departments, Sales, Marketing, Finance, and SC and align your Supply with your Opportunities
A Contemporary View of Best Practice S&OP - Integrated Business Planning - Oliver Wight International 2009 Terry L. Johnson Oliver Wight Americas tjohnson@oliverwight.com 800-258-3862
Oliver Wight Positioning Statement Oliver Wight are leading business improvement specialists who educate, coach and mentor people to lead and sustain change on the journey to business excellence and outstanding business performance Oliver Wight
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S&OP Has Been Evolving for Decades Present Integrated Business Planning (With Supply Chain Collaboration) 1990s Present Integrated Business Planning (Internal) 1980s 1990s Present Sales and Operations Planning Oliver Wight International 2009 1970s 1980s Production Planning
Integrated Business Planning.... Through People, Processes and Technology Advanced Planning Command Center Advanced Planning Command Center MANAGEMENT MANAGEMENT BUSINESS BUSINESS REVIEW REVIEW Aggregate Planning STRATEGY BUSINESS PLAN PERFORMANCE SUPPLY SUPPLY REVIEW REVIEW Hyperion Planning PRODUCT PRODUCT MANAGEMENT MANAGEMENT REVIEW REVIEW DEMAND REVIEW Demantra Integrated Business Planning Demantra Advanced SUPPLY CHAIN Supply MANAGEMENT Chain Planning Real-Time Sales & Operations Planning Rapid Planning SUPPLY POINT MANAGEMENT Strategic Network Optimization SUPPLIER Sourcing MANAGEMENT Demantra MARKET MANAGEMENT Demand Management DEMAND MANAGEMENT PROJECT MANAGEMENT Projects & RESOURCE Primavera MANAGEMENT Predictive SALES Trade MANAGEMENT Planning PROCUREMENT Procurement MANAGEMENT PROCUREMENT Procurement MANAGEMENT HCM PORTFOLIO MANAGEMENT Agile PLM Detailed Planning & Execution
S&OP/IBP Is a Simple, Common Sense Process for Aligning Company Plans Every Month Oliver Wight International 2009
Introductions-What are your experiences? Are you practicing S&OP what vintage? Are you generating significant benefits? Is S&OP a key decision making process for your business? Are your executives heavily involved in the process?
S&OP/IBP Ownership & Accountability Dir / VP GM /CEO Dir / VP Dir / VP Dir / VP Oliver Wight International 2009
Broadly Speaking, the Differences Between S&OP and IBP Are: 1. Greater financial integration Income statement, balance sheet, cash flow projections (including anticipated results from projects and initiatives) across the planning horizon resulting in improved information for decision-making and greater accountability; financial performance metrics 2. Inclusion of strategic initiatives and activities in the monthly management process, reinforcing that one primary management process is used to run the business 3. Improved simulation Changing operating and financial parameters resulting in improved contingency planning (volume, mix, pricing, costs, SG&A) Oliver Wight International 2009
Broadly Speaking, the Differences Between S&OP and IBP Are: (con t.) 4. Easier translation from detail information to aggregate and aggregate to detail enabling quicker, more timely simulations and greater granularity of information for operations and finance 5. Improved decision-making Integrated reconciliation keeping decisions at the lowest practical level 6. Improved trust throughout the management team with one process, clear accountabilities and commitment to Class A Behaviors. Oliver Wight International 2009
Improved Business Results Through Integration -- Alignment and Synchronization Excellent Performance Requires Continuous Focus, Alignment (Realignment) and Synchronization of People, Processes and Tools Oliver Wight International 2009
To create and sustain a successful enterprise multiple business processes require the integration, communication and precision of a watch! Consistent Process Consistent Planning Consistent Results! The more effective the processes, the more predictable the output! Greater financial predictability is one of the driving forces for performing the S&OP process well!
IBP Integrates Core Processes & Finance and Ensures Alignment / Realignment With Business Strategies Managing Demand Managing Supply Managing Products Oliver Wight PV977/015 F I N A N C E
From My Personal Perspective... Now the knobs are connected... Decisions turn into action! Of all the benefits... Management teamwork was a bonus! Thought we wouldn t be in business... Look at us! Oliver Wight International 2009
Typical Results Oliver Wight Clients Increased Forecast Accuracy 18 25% Increased Sales Revenue 10 15% Increased On-Time Delivery 10 50% Inventory Reduction 18 46% Safety Stock Reduction 11 45% Increased Productivity 30 45% Source: Oliver Wight Oliver Wight International 2009
Best Practice Is Now to Integrate Product Portfolio Management Into S&OP/IBP Oliver Wight International 2009
A Focus on and Integration of Product Management into the S&OP Process is Required to Successfully Grow the Business New Product Demand Plan Inventory Plan Production Plan Product Management Business Reconciliation Will our collective programs deliver commitments? Annual plan / Strategy Enough new product plans in the pipeline? Are the priorities still correct? Working on all the right ones? Projects still attractive revenue & margins? Consensus impact on current portfolio revenue / margin? Impact on the organization resources / priorities / capacity? Oliver Wight International 2009
Best Practice Is Now to Incorporate a Financial Appraisal into the S&OP Process Oliver Wight International 2009
Bridging the Gap - Financial Plans & Reality Integrated Business Planning Ensures that all processes (pieces of a business) are working together to produce a single, agreed to correct time ($$$)! Single Set of Numbers CEO /COO Board Street Oliver Wight International 2009 Financial Plans = Operational Plans
The Finance Organization has Specific Responsibilities during each S&OP Review Ensure that Demand and Supply has the financial information that they need to prepare for S&OP meeting Work with Product Management, Demand and Supply to ensure one set of numbers Review Product Management, Demand and Supply plans from a financial perspective challenge assumptions that do not seem realistic and ensure that plans are financially achievable Present financial implications of Product Management, Demand and Supply plans at the MBR, compare plans to annual and strategic objectives Address Financial metrics
How Are Misaligned Plans and Performance Concerns Addressed? Oliver Wight International 2009
Integrated Business Planning 1) What is different about the assumptions to cause the gap? 2) Is the assumption change transient or a trend? 3) What plans can I now put in place to close the gap? Oliver Wight Top Down Process Strategy 4/5 years horizon Business Plan 2/3 years horizon Bottom Up Process S&OP horizon 24S&OP Months S&OP horizon 24 Months S&OP horizon 24 Months S&OP horizon 24 Months S&OP horizon 24 Months S&OP horizon 24 Months S&OP horizon 24 Months S&OP horizon 24 Months S&OP horizon 24 Months S&OP horizon 24 Months 24 Month Horizon EAME 1085-01a
Executive Team Reaches Consensus, Approves Plans and Makes Needed Decisions in the MBR Executive Led Executive Participants Oliver Wight International 2009
Focusing on Management Information The One Page Summary by Family Demand Supply CHANGES EXPLAINED Explanation of the change depicted in this month versus last month or versus annual plan projections KEY ASSUMPTIONS Customers Markets Product Management and rate of NPI Supply / Distribution Resource VULNERABILITIES / OPPORTUNITIES Identify key upside / downside issues for this family from an understanding of the assumptions Oliver Wight Inventory AGREED ACTIONS, DECISIONS AND RECOMMENDATIONS Identification of key issues identified from the Integrated Reconciliation Review: Actions Agreed Decisions required options and alternates costs and implications recommendations EAME 0357-03
Information Management A Critical Component Visibility to demand, supply, capacity, finance, and exceptions Compare alternate scenarios Analyze key Planning metrics Drill down to relevant details Analyze constrained forecast Analyze profit and loss 31 Oliver Wight International 2009
S&OP / IBP The Issue Is: Most companies that have Sales and Operations Planning have set too low an ambition and treat it as: Logistics and Supply Chain planning process only Demand & Supply Volume Balancing 1 to 12 months only (Fiscal year) And they believe that they already have the process in place so they miss out on the benefits of doing it well. Executive teams that use S&OP/IBP as the primary management process to run the business achieve the greatest benefits and ROI. Oliver Wight International 2009
Achieving Benefits - Two Keys to Success: Financial Alignment & Executive Led and Owned Financial Plan Alignment Executive Leadership & Ownership Oliver Wight International 2009
S&OP A Necessity? Virtually all enterprises, irrespective of starting S&OP capabilities, size, and industry, generated improvement in key business performance with an S&OP program, sufficient to justify investment in these programs. The Sales and Operations Planning Benchmark Report: Leveraging S&OP for Competitive Advantage The Aberdeen Group Harvard Business Review: "... S&OP is indispensable to creating a world-class global supply chain, which in turn would become a major competitive advantage for the company. AMR Research at Stanford Global Supply Chain Management Forum S&OP is the ultimate best practice. Oliver Wight International 2009
S&OP/IBP Should Be Implemented Quickly And Continuously Improved Audit/ Assess Executive Education Implementation Education Implement the Process Demand Review Product Review Financial Appraisal Integrated Reconciliation Process Design Investigate/Decide Supply Review Performance Measures Assess Progress Improve Communications Problem Solving Assess Progress Problem Prevention Management Bus. Review Cycle 0 Cycle 1 Cycle 4 Proven implementation process Fast Track implementation -- takes months, not years Continuous improvement approach -- improve each cycle Formal progress assessment points and documentation of results Oliver Wight International 2009 Cycle 7 Document Results Tactical/ Strategic Decision Making Cycle 9
Final Message Simply Stated 1. S&OP/IBP is Organized Common Sense 2. Implementing S&OP/IBP is worth the effort 3. Companies that do S&OP/IBP well make more money than those that Common sense is don t do it well not so common Will Rogers 4. S&OP/IBP continues to evolve 5. S&OP/IBP is the industry best practice model today Key Words: Organized and Integrated Oliver Wight International 2009
Agenda Introductions Journey to Business Excellence: Integrated Business Planning Next Generation Sales & Operations Planning by Terry Johnson Oracle Customer Success Stories Wrap up and Q&A
Oracle Value Chain Planning Solution Service Parts Planning Demand Signal Repository Global Order Promising Strategic Network Optimization Production Scheduling Manufacturing Operation Center Adv. Planning Command Center RT Sales and Operations Planning Collaborative Planning Rapid Planning Advanced Supply Chain Planning Trade Promotion Planning and Optimization Deductions and Settlement Management Inventory Optimization Planning Complete Open Integrated Modular 38 Demand Management and Advanced Forecasting Single source of truth Integrated with ERP
Synchronize Demand Signals - Sense & Shape Leverage Downstream Demand Data of all types Capture, Cleanse & Harmonize Data Leverage Data in Downstream Processes Trade Management POS Demand Signal Repository Purchase Orders ASN Warehouse Withdrawals Shipments To Retailer Network Optimization DSR Harmonize Promotions Shelf Price Aggregate Geo- Campaign Demo Calendar Distribution Resource Planning Validate $ Trusted 3rd Party Data Interchange Cleanse Store Inventory Capture Demand Forecast Demand Planning Sales & Operations Planning DC Inventory EDI-XML-GDSN Inventory Movement Trade Optimization Replenishment Planning Transportation Management Product Lifecycle Management Weather Loyalty 39
Engage Managers With IBP Dashboards KPIs for key decision makers Compare alternative business scenarios Analyze profit and loss Analyze key planning metrics Link directly to detailed planning Evaluate supply constraints Aggregate key performance indicators enable decision makers to see the business impact of plan alternatives Analytics based on planning data provides forward looking view Drill-down for greater detail and link to planning applications Execute companyspecific planning scenarios
Oracle Integrated Business Planning Provides critical link between operations, sales and finance Performance Management Sales and Operations Planning Sales Forecast Financials Targets Strategic Network Optimization Demand Management Supply Chain Planning Inventory Optimization Planning driven from key performance indicators to engage managers and planners Aggregate roll up for financial reconciliation; supports $ to units synchronization Workflow coordinates 9-step process and drives consensus process to gather sales forecast and customer demand Works with Oracle ERP and legacy ERP applications What-if simulation to examine alternative plans Strategic supply chain analysis and inventory planning
Interactively Reconcile To Financial Plans Review financial implications of operational plans View Demand Plan and Supply Plan translated into revenue, cost and gross margin by period Compare consensus forecast, constrained forecast, and financial plan Track YTD performance of aggregate fiscal year constrained forecast vs. budget Designed to integrate with financial planning and budgeting applications Supports top-down and bottom-up plan reconciliation Enables profitable demand/supply balancing to ensure company goals are achieved
Scenario Analysis Provides Alternatives Simulate and analyze interactively Optimized demand shaping Profit-optimized supply scenarios Compare scenarios for informed decision making Powerful what-if simulation capability enables alternative scenarios to be tested Assesses supply chain capacity to meet demand changes Enables lowest cost, most profitable, best customer service level and other scenarios to be evaluated
Cost Volatility and Low Margin Fierce Competition Products becomes a commodity Pressure on Product Life Cycle Oracle VCP, Helping impact your TOP and BOTTOM line
Customers Achieving Significant Benefits Alcoa moved to a global demand and supply review greatly improving their sales and operations planning process Motorola achieved weekly sales and operations planning process that incorporates demand and supply planning cycles to improve supply chain responsiveness Organic Valley streamlined sales planning, demand management and operations planning to improve revenue and save $6M in trade spend Zoran integrated supply/demand review in semiconductor industry Baxter rolled global demand/supply plan across more than 90 countries VTech reduced order fill rate from 55% to 95%, increase inventory turns by 100%, reduced price protection claims by 40% Kodak has aligned demand creation activities with critical components to improve customer service Wilton reduced inventories by 20% while improving customer service
Cabot MicroElectronics Achieves value with VCP OnDemand COMPANY OVERVIEW Develop, manufacture and market high performance Chemical CUSTOMER PERSPECTIVE Mechanical Planarization (CMP) polishing slurries for advanced semiconductor devices #1 Supplier of CMP Slurries Cabot Microelectronics believes it has approximately three times the annual revenue of the next largest CMP slurry competitor Industry: Chemicals Employees: 1000 Revenue: US$500M CHALLENGES/OPPORTUNITIES AsiaPac customers increased to 71% in 2007 from 53% in 2002 70% market share through technology leadership CMP is an enabling technology One of the fastest growing sectors in the semiconductor industry Track record of profitable growth, despite semiconductor cycle Pursuing multiple new market and product opportunities acquisitions SOLUTIONS Demantra DM and RTSOP Advanced Supply Chain Planning/CBO Inventory Optimization Global Order Promising Hyperion Planning All deployed OnDemand OPM backbone Internal Use Only Steve Gustafson VCP North Central We wanted to choose a player that would be in the game for the long haul, so we looked at Oracle's investment in the outsourcing model and its expertise in technology. Simply put, Oracle provides us with the best technology available." said Tim Roessler, CIO User adoption happened very quickly, almost automatically, we were surprised how easily it went with no complaints from the field said James Dillon Dir Global Sales Ops and Customer Service RESULTS Reduced Monthly forecasting cycle 48% from 21 to 11 days Reduced Forecast error (MAPE) from 50% to 20% and falling Full enterprise planning solution with Hyperion integration Enabled live on-line consensus ability Saved $2-$4 million in hardware and facility expenses (on demand) Saved $1 million in compensation costs (on demand) Improved employee morale July 2009
Emerson Real-Time Sales & Operations Planning COMPANY OVERVIEW Emerson is a diversified global manufacturing & technology company offering a wide range of products & services in the areas of process management, climate technologies, network power, storage solutions, professional tools, appliance solutions, motor technologies, industrial automation. Revenue: $24.8B 140,000 Employees 265 Manufacturing Sites CHALLENGES/OPPORTUNITIES SOLUTIONS Demantra Demand Management Demantra AF&DM Demantra RT S&OP Demantra Predictive Trade Planning (PTP) Decentralized and non-formal S&OP Processes RESULTS Manual & inconsistent forecasting process across sites. Single Global Master Scheduler per Difficulty measuring forecast accuracy :SKU & Piece Part Forecasting performed qualitatively, without a solid statistical basis for decisions. Multiple Master Schedulers for the same product group; difficult to get global roll up view Communication of forecast decisions within and across sites was sporadic and typically not timely Each site is on a different legacy system Lack of Forecast ownership: Marketing & Sales provide dollarized annual amount as forecast Lack of Global Visibility No Bottoms up fcstng & reconciliation to upper levels Product Line Centralized Planning Process for Collaboration and Consensus. Demand Capture at Model and Options level for Independent and Dependent Demands Integrated Planning Process for the entire Model Option Tree Enhanced Service Levels, Superior Forecast Accuracy 43% reduction in Inventory Month 2008
General Parts, Inc./CARQUEST COMPANY OVERVIEW Industry: Aftermarket Auto Parts Distribution Annual Revenue: US $2.4 Billion Employees: 23,000 ERP: EBS CARQUEST Auto Parts is the premier supplier of replacement products, accessories, supplies and equipment for virtually all makes of automobiles, as well as light and heavy-duty trucks, off-road equipment, buses, recreational vehicles and agricultural equipment. Additionally, it distributes and sell tools, equipment, chemicals, paint and accessories. CHALLENGES/OPPORTUNITIES Reduce inventory cost Increase revenue (avoid lost sales) Improve customer service SOLUTIONS Demantra Demand Management (DM) Advance Forecast Demand Modeling (AFDM) Real Time Sales and Operations Planning (RT-SOP) Advanced Supply Chain Planning (ASCP) Constraint Based Optimization (CBO) Inventory Optimization (IO) Strategic Network Optimization (SNO) Internal Use Only Content Provided by [insert name] CUSTOMER PERSPECTIVE Oracle s Value Chain Planning has enabled CARQUEST to get to the Holy Grail of Supply Chain-Improve service & sales while reducing inventory. - David Collier, Director of Demand Planning RESULTS Reduced inventory nby $20 Million Expect to reduce obsolete inventory sat store level an average of $200,000 per store Identified opportunity to add high velocity items at the store level an average of $100,000 per store Month 2008
World Class Value Chain Solutions Complete Open Integrated Modular Flexible Optimization Optimize inventory holdings and deploy inventory networks Use advanced statistics and causal factors Real-Time Sales and Operations Planning Optimize networks and sourcing decisions Optimize networks and sourcing decisions Collaborate with customers Collaborate with customers Constraint based supply chain planning Constraint based supply chain planning Executive dashboards and reporting Executive dashboards and reporting Manage rolling forecasts Manage rolling forecasts Collaborate with all constituents on one number Collaborate with all constituents on one number Collaborate with all constituents on one number Use basic statistics, alerts, and seeded worksheets Use basic statistics, alerts, and seeded worksheets Use basic statistics, alerts, and seeded worksheets Deploy fast MRP across multiple ERP instances Deploy fast MRP across multiple ERP instances Deploy fast MRP across multiple ERP instances From less complex to best in class Competitive Necessity Competitive Advantage Evolve at your own pace to a best in class solution Efficiency Manage rolling forecasts Effectiveness Focus on return on assets Incremental Value Eliminate spreadsheets Focus on return on assets
Key Takeaways Value Chain Planning implementation is a journey, not a project each phase has its own short time to value, but one should have a long term vision. Where to start Focus on the highest bang for your buck within each BU/Region and don t wait for ERP Implementation or upgrade Pick your critical green KPIs one cannot be perfect at all measures which KPIs defines you as a company, and meet your strategy? Create transparency between All departments, Sales, Marketing, Finance, and SC and align your Supply with your Opportunities
Questions And Comments Learn More about VCP www.oracle.com/goto/vcp Thank you! Please contact us with questions at: Gerald.osullivan@oracle.com T.johnson@oliverwight.com
Thank You Provide Business Card to Draw for Complimentary Book: Enterprise Sales and Operations Planning Five Copies To Give Away Oliver Wight International 2009
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