• Share
  • Email
  • Embed
  • Like
  • Save
  • Private Content
SCM World | Integrated Business Planning Webinar
 

SCM World | Integrated Business Planning Webinar

on

  • 4,005 views

Linking financial decision-making to supply chain performance ...

Linking financial decision-making to supply chain performance

As presented by:

Christian Verstraete, CTO worldwide manufacturing & distribution industries, Hewlett-Packard

Nari Viswanathan, vice president and principal analyst, Aberdeen Group

Statistics

Views

Total Views
4,005
Views on SlideShare
3,997
Embed Views
8

Actions

Likes
5
Downloads
0
Comments
0

2 Embeds 8

http://www.slideshare.net 7
http://www.lmodules.com 1

Accessibility

Upload Details

Uploaded via as Microsoft PowerPoint

Usage Rights

© All Rights Reserved

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Processing…
Post Comment
Edit your comment

    SCM World | Integrated Business Planning Webinar SCM World | Integrated Business Planning Webinar Presentation Transcript

    • Integrated Business Planning: Balancing Supply Demand and Finance Nari Viswanathan, VP/Principal Analyst Aberdeen Group May 28, 2009
    • Agenda 1. Business Context 2. Traditional S&OP is Outdated 3. Definition of Integrated Business Planning 4. Best-in-Class Definition 5. Best-in-Class Differentiators 6. Technology Gaps 7. Call-to-Action 2
    • Business Context – Top Pressures Forcing Organizations to Focus on S&OP Need to Improve top line revenue 51% Need to reduce supply chain operating costs 50% Management of increasing demand volatility 41% Customer mandates for faster, more accurate and 36% more unique fulfillment Lack of integration between the financial planning 35% and budgeting process and the S&OP process Need to utilize manufacturing assets with 29% maximum efficiency 0% 10% 20% 30% 40% 50% 60% N=126, Nov 2008 3
    • Traditional S&OP Outdated?  Old concepts may be too supply chain focused:  The Sales and Operations Plan 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[1]. To do so, the S&OP has to coordinate planning efforts among the various departments involved in the process. Time for the Next Generation 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 4
    • Elements of Integrated Business Planning  Simultaneous consideration of supply, demand and finance  a. Demand, including product / customer profitability and product mix optimization  b. Financials should be both a constraint and an output  c. All of these elements must be considered simultaneously and not in silos  Financial modeling needs to be very deep in order to properly consider and evaluate impact on working capital, profits, cash flow and other financial metrics.  In addition, the financial modeling needs to replicate the company’s reporting structure in order to feed directly into the budgeting and planning process including modeling multi- currency, differential tax rates and partial ownership situations. 5
    • 1. Sales Revenue Planning  New Product Planning  Sales Opportunity Planning  Revenue, Margin and Profitability Planning  Alignment to Corporate Goals 5. Management Review 2. Demand Planning  KPI Measurement  Demand Forecasting  Working Capital  Demand Collaboration  Gross Margins (sales, marketing,   Inventory Turns Plan vs. Actual Integrated Business  operations input) Demand Shaping   Forecast error Root Cause Analysis Planning Process (promotions, other events, new product introduction)  Consensus Forecasting 4. Profit based Supply/ Demand Balancing 3. Supply Planning  Product Mix  Capacity Planning  Constraint Management (Labor Leveling,  What-if Analysis resource Planning)  Allocation of Demand  Inventory Optimization to Supply  Material Planning  Consensus  Transportation - “Technology Strategies for Integrated Business Planning”, June 2006 6
    • Existing Process Capabilities are Inadequate……. Respond to unplanned events in a timely manner 18% that aligns with S&OP objectives 91% 31% Ability to rightsize inventory levels at SKU levels 87% Align the S&OP Plan with the company's financial 23% goals 67% Consider phase in/phase out of products during 22% the S&OP Process 61% Perform constrained planning during supply 31% demand balancing 58% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100 % Strong Need Capabilities N=126, Nov 2008 7
    • Best-in-Class Definition  Increased Return on Net Assets (RONA) over last 2 years  Increased Gross Margin over the last 2 years  Return on Net Assets  Customer service levels (on-time and complete to the customer’s requested date)  Average cash conversion cycle  Average forecast accuracy at the product family level 8
    • Best-in-Class Differentiators - Process Ability to compare scenarios KPI's side by side and 10% 25% against target values 26% Ability to identify the cause of an IBP metric being off- 13% 21% target 25% Ability to proactively monitor daily performance against 10% 15% IBP metrics 25% Ability to project from actual to future performance 10% 15% against IBP metrics 23% 0% 5% 10% 15% 20% 25% 30% Best-in-class Average Laggard N=126, Nov 2008 9
    • Best-in-Class Differentiators - Knowledge Management High-level reporting designed for executive 38% 42% management 52% Ability to identify the stakeholders required to 21% 24% resolve the underlying issue 42% Ability to identify the person responsible for the 10% 18% underlying cause of the off-target metric 33% Ability to have all stakeholders collaborate in a 13% 17% scenario 30% 0% 10% 20% 30% 40% 50% 60% Best-in-class Average Laggard N=126, Nov 2008 10
    • Technology Gaps for Integrated Business Planning 17% Demand Planning 25% 52% S&OP 21% Supply Planning 29% 42% 21% Inventory planning 27% 39% 14% Executive reporting/Dashboards 20% 35% 10% New product introduction (phase in/phase out) 11% 33% 7% Ability to optimize product mix 8% 25% Ability to construct and compare different supply and 7% 12% demand scenarios based on volumes 25% IBP 10% Promotion Planning 8% 25% Ability to construct and compare different supply and 3% 5% demand scenarios based on cash flow and ROA 21% 3% Price Optimization 5% 15% 0% 10% 20% 30% 40% 50% 60% Best-in-Class Average Laggard 11
    • Call to Action: Best in Class IBP Process Capabilities Results in a 2.5X-6X Advantage in Key Performance Improvements 90% 84% 83% 81% % achieving metric improvement in past 2 years 77% 80% 73% 70% 60% 48% 50% All Others 40% 40% 33% BIC 30% 23% 23% 26% 18% 20% 10% 0% Customer Finished Complete Average Gross Margin Logistics Retention (%) goods days of Order Fill Forecast (% of costs as a % inventory Rate (%) Accuracy at revenue) of sales the Product Family Level S&OP Supply Demand Matching Strategies June 2008 12
    • Best in Class IBP Process Capabilities Results in a 2.5X-6X Advantage in Key Performance Improvements 90% 84% 83% 81% % achieving metric improvement in past 2 years 77% 80% 73% 70% 60% 48% 50% All Others 40% 40% 33% BIC 30% 23% 23% 26% 18% 20% 10% 0% Customer Finished Complete Average Gross Margin Logistics Retention (%) goods days of Order Fill Forecast (% of costs as a % inventory Rate (%) Accuracy at revenue) of sales the Product Family Level S&OP Supply Demand Matching Strategies June 2008 13
    • Best in Class IBP Process Capabilities Results in a 2.5X-6X Advantage in Key Performance Improvements 90% 84% 83% 81% % achieving metric improvement in past 2 years 77% 80% 73% 70% 60% 48% 50% All Others 40% 40% 33% BIC 30% 23% 23% 26% 18% Integrated  20% Business Planning 10%  0% Link financial planning & budgeting with supply chain  Continuously monitorFill Forecast Grossof plan versus Customer Finished Retention (%) goods days of Order performance(%Margin costs as a % Complete Average of Logistics actuals inventory Rate (%) Accuracy at revenue) of sales the Product Family Level S&OP Supply Demand Matching Strategies June 2008 14
    • Nari Viswanathan, VP/ Principal Analyst Nari.Viswanathan@aberdeen.com | 972-580-0940 15
    • Manufacturing & Distribution Industries – Thought Leadership Series Integrated Business Planning Close the Supply Chain Loop Speaker: Christian Verstraete, CTO MDI Date: May 28th, 2009 © 2009 Hewlett-Packard Development Company, L.P. The information contained herein is subject to change without notice
    • Three levels in analysis Operational addressing Operational Tactical Strategic production scheduling, sales order management and inventory. Tactical is related to market development, product development, business scenario’s, customer plans and resource/capacity adaptation Strategic focuses on markets, technologies, customer priorities, organizational set-up and investments. Source: Managing demand uncertainty in supply planning, Gupta and Maranas 17 5 June 2009 © 2009 Hewlett-Packard Development Company, L.P. Technology for better business outcomes
    • Integrated Business Planning It’s all about trade-offs Strategic • How do I structure my end-to-end Supply Chain to maximize profits? • To what potential risks do I expose my company? Tactical • What is the most profitable way to deliver these orders? • Which products generate most profit? Operational • Which Customers should be served first? • What orders do I deliver? 18 5 June 2009 © 2009 Hewlett-Packard Development Company, L.P. Technology for better business outcomes
    • Operational - Balancing Supply & Demand…. …. But do it profitably Predictable Profit & Accurate Customer Demand Supply Satisfaction Order Visibility Inventory Visibility Forecast Accuracy Capacity Planning Event Management 19 5 June 2009 © 2009 Hewlett-Packard Development Company, L.P. Technology for better business outcomes
    • Data Integration plays an important role Orders, Forecasts, Demand, Price, Revenues, Quality, … Inventory, Capacity, Status, Costs, Environment, Events, Traceability, … 20 5 June 2009 © 2009 Hewlett-Packard Development Company, L.P. Technology for better business outcomes
    • An Integrated Control Tower • Financials Control Tower • Demand • Supply Demand Driven ERP Orders, Forecasts, Demand, Price, Revenues, Quality, … Customers Suppliers Inventory, Capacity, Status, Costs, Environment, Events, Traceability Demand to Replenishment Order to Cash 21 5 June 2009 © 2009 Hewlett-Packard Development Company, L.P. Technology for better business outcomes
    • Tactical - Portfolio management process HP won Frank Edelman Award for their contribution Pre-launch: Post-launch: ROI Screening Portfolio Management with RCO Example Complexity ROI Calculator Example RCO Output 100 % of revenue covered 80 60 40 20 0 0 300 600 900 1200 # of products 22 5 June 2009 © 2009 Hewlett-Packard Development Company, L.P. Technology for better business outcomes
    • Strategic – Understand your Operations Strategic decisions based on numbers • Time Dimension is critical to understand behavior of the eco-system • Modeling the eco-system is a pre-requisite to sound scenario analysis • Analysis provides a base for rational decision making • The emotions are removed from the decision process, facilitating acceptance 23 5 June 2009 © 2009 Hewlett-Packard Development Company, L.P. Technology for better business outcomes
    • Strategic – Understand your Operations Strategic decisions based on numbers • Time Dimension is critical to understand behavior of the eco-system • Modeling the eco-system is a pre-requisite to sound scenario analysis • Analysis provides a base for rational decision making • The emotions are removed from the decision process, facilitating acceptance 24 5 June 2009 © 2009 Hewlett-Packard Development Company, L.P. Technology for better business outcomes
    • An integrated process, covering operational, tactical and strategic Gather data Decide & Up- and Implement Downstream Develop Use analysis scenario’s tools to and identify understand implications the situation 25 5 June 2009 © 2009 Hewlett-Packard Development Company, L.P. Technology for better business outcomes
    • An integrated process, covering operational, tactical and strategic Gather data Decide & Up- and Implement Downstream Develop Use analysis scenario’s tools to and identify understand implications the situation 26 5 June 2009 © 2009 Hewlett-Packard Development Company, L.P. Technology for better business outcomes
    • Integrated Business Planning: Linking financial decision making to supply chain performance Trevor Miles, director product marketing tmiles@kinaxis.com
    • Today’s Supply Chain Challenges Global outsourcing Increasing demand volatility Shorter product lifecycles A new era of surprise and compromise requires capabilities of integrated and collaborative demand-supply planning, monitoring, and response to change 29 Copyright © Kinaxis 2009. All rights reserved. Kinaxis Confidential
    • Key System Requirements Near real-time … Plan  Targets & Metrics • Financial • Operational  Multi-tier visibility  Alerting  Multi-tier collaboration IBP  What-If analysis  Scenario evaluation Respond Monitor • Financial • Operational 30 Copyright © Kinaxis 2009. All rights reserved. Kinaxis Confidential
    • Contact Trevor Miles, director product marketing tmiles@kinaxis.com Office +1 905-901-2336 Mobile +1 647-248-6269