Presentation given at the S&OP IE Event on January 2011 in Las Vegas, March 2011 in Atlanta and the Extended Supply Chain Event in London

1. S&OP: Letter Perfect. Practice Imperfect 1 Lora Cecere, Partner April 2011

2. Leaders sensed Market Changes 5X Faster 2

3. 3 What’s in a name? A rose by any other name would smell as sweet. William Shapespeare

4. Integrated business planning (IBP) refers to the technologies, applications and processes of connecting the planning function across the enterprise to improve organizational alignment and financial performance. IBP accurately represents a holistic model of the companyin order to link strategic planning, and operational planning, with financial planning. By deploying a single model across the enterprise and leveraging the organization’s information assets, corporate executives, business unit heads and planning managers use IBP to evaluate plans and activities based on the true economic impact of each consideration. Sales and operations planning (S&OP) is an integrated business management process through which the executive/leadership team continually achieves focus, alignment and synchronization among all functions of the organization. The S&OP plan includes an updated sales plan, production plan, inventory plan, customer lead time (backlog) plan, new product development plan, strategic initiative plan and resulting financial plan. Plan frequency and planning horizon depend on the specifics of the industry. Short product life cycles and high demand volatility require a tighter S&OP planning as steadily consumed products. Done well, the S&OP process also enables effective supply chain management. What is in a name? 4

5. What is Planning? 5

6. What is the goal? What does good look like? How do we align incentives to maximize the outcome? How do we effectively tie the plan to action? The Right Questions 6

7. The Changing Goal 7 1985: Deliver a Feasible Plan for Operations 1995: Match Demand with Supply 2005: Demand Driven 2011: Market Driven to Drive Value-based Outcomes Increasing value…..

8. To Drive More Value….. Demand Orchestration 8

9. Who has the Best Supply Chain? 9

10. Building Value Networks Supply chain strategy Business strategy What are the right things to do to increase company value? Value-network strategy What are the right ways to support the business strategy? What are the right trade-offs between value drivers for each value network? Right product platforms Design the supply response Build organizational systems and manage talent Align supply relationships Align demand relationships Effective Supply Networks Execution of buy-side strategies Design Networks Innovation Methodologies Continuous Improvement Capabilities Required Demand Networks Joint Value Creation Strategies Supply Chain Network Design Business Process How do I do the right things right?

11. What drives Variability? Value: Price, trade incentives, new products, services, freshness, responsiveness Variety: Configurations, items, platforms, components, brands, processing technologies Velocity: Lead-times, order to delivery, inventory turns, time to market Volatility: Demand, inventory, schedules, reliability, yields Volume: Plants, warehouses, distribution centers/points, product flow

12. What is the goal? What does good look like? How do we align to maximize the outcome? How do we effectively tie the plan to action? The Right Questions 12

13. 13

14. Cost Volume Growth Typical Organization 14

15. Getting to Letter Perfect…. 15

16. The Need for Balance 16 & Goal

17. What is the goal? What does good look like? How do we align to maximize the outcome? How do we effectively tie the plan to action? The Right Questions 17

18. Demand-side Views Supply-side Views Global Global Warehouses Plants Ship-from Locations Production Lines Manufacturing View (Units) Sales View ($) Marketing View ($, Units) Logistics View (Units, Cases) Account-Level A VMI C Supplier Supplier Supplier Supplier Downstream Data Distribution Network Distribution Network Distribution Network Translating demand: Demand hierachies

19. Demand-side Views Supply-side Views Adaptive Translation Global Global Global Global Product Categories Countries Warehouses Plants Accounts (Ship-to locations Ship-from Locations Production Lines Brands Manufacturing View (Units) Sales View ($) Marketing View ($, Units) Logistics View (Units, Cases) Account-Level A VMI C Supplier Supplier Supplier Supplier Downstream Data Distribution Network Distribution Network Distribution Network

20. Goal: Make the financial budget. Tops-down Focus. Desires control and wants predictability of operations. Forecast definition: The budget Finance Goal: Maximize revenue & market share, wants guaranteed product availability Forecast definition: Sales plan Operations Sales and Marketing Goal: Factory optimization, improve costs and minimize demand uncertainty Forecast definition: Manufacturing Plan Demand-side Supply-side Supply Chain Goal: A feasible plan. Bottom-up focus. Wants to minimize risk and disruption Forecast definition: The demand plan Start with a Common Goal

21. Goal: Make the financial budget. Tops-down Focus. Desires control and wants predictability of operations. Forecast definition: The budget Finance Goal: Maximize revenue & market share, wants guaranteed product availability Forecast definition: Sales plan Operations Sales and Marketing Goal: Factory optimization, improve costs and minimize demand uncertainty Forecast definition: Manufacturing Plan Demand-side Supply-side Supply Chain Goal: A feasible plan. Bottom-up focus. Wants to minimize risk and disruption Forecast definition: The demand plan Start with a Common Goal

22. What is the goal? What does good look like? How do we align to maximize the outcome? How do we effectively tie the plan to action? The Right Questions 22

23. Forecasting: Trading Places 23

24. Cycles Measure and communicate the plan Measure and communicate the plan Publish the constrained plan Publish the constrained plan Operational Review 1 Executive plan review Executive plan review What if by supply for Trade-offs What if by supply for Trade-offs Operational Review 2 Constrained plan by Supply Constrained pan by Supply Demand consensus refinement Operational Review 3 Demand consensus refinement What if for Demand What if for Demand Develop a demand plan Operational Review 4 Develop a demand plan Collect sales and market Week D Week 2 Week 3 Week 4 Week A Week B Week C Collect sales and market Week 1

25. Peter Murray, Dupont at IBF conference: “The hardest change was changing to focus on market drivers Our work on S&OP reversed a 12 year slide in margin. The downturn made us believers in strong horizontal processes at the executive level” 25

26. Summary In tough economic times, horizontal excellence is paramount. S&OP: Letter perfect. Practice imperfect. Focus on the AND with the End in Mind. 26

27. 27 About Us Altimeter Group is a research insights group providing companies with a pragmatic approach to understanding disruptive technologies. We have four areas of focus: Leadership and Management, Customer Strategy, Enterprise Strategy, and Innovation and Design. Visit us at http://www.altimetergroup.com or contact info@altimetergroup.com.

28. 28 Thank you Lora Cecere lora@altimetergroup.com Blog: www.supplychainshaman.com Twitter: lcecere Linkedin: linkedin.com/pub/lora-cecere/0/196/573