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 Traditional S&OP is Outdated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Traditional S&OP Outdated?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