Driving Sales and Top Line Revenue Improvements through Executive S&OP

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Aberdeen research in 2006 identified that traditional S&OP has evolved into Integrated Business
Planning among Best in Class companies. Traditional S&OP can be thought of consisting of two
distinct stages – operational S&OP and executive S&OP. The focus of this research is on the
executive S&OP process. The thesis of this research is that Best in Class companies are most
focused on improving their top line sales and revenues through initiatives like improving the
ability to create a profit-optimized supply-demand balanced S&OP plan and improved 360-
degree view of the operational and financial aspects of S&OP through BI/Analytics.

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Driving Sales and Top Line Revenue Improvements through Executive S&OP

  1. 1. Supply Chain and Logistics April 13, 2007 Driving Sales and Top Line Revenue Improvements through Executive S&OP Hypothesis Aberdeen research in 2006 identified that traditional S&OP has evolved into Integrated Business Planning among Best in Class companies. Traditional S&OP can be thought of consisting of two distinct stages – operational S&OP and executive S&OP. The focus of this research is on the executive S&OP process. The thesis of this research is that Best in Class companies are most focused on improving their top line sales and revenues through initiatives like improving the ability to create a profit-optimized supply-demand balanced S&OP plan and improved 360- degree view of the operational and financial aspects of S&OP through BI/Analytics. Best In Class PACE Hypothesis Research Background In 2006, Aberdeen research found that traditional sales and operations planning (S&OP) processes and supporting technologies are no longer sufficient in today’s high-pressured business environment. Continued disconnects between financial goals, How to Participate in the Study marketing efforts, and supply chain actions erode If your company is a: corporate performance and cause unnecessary √ Manufacturer footwork and redundant manual data entry. When all √ Distributor parties in the sales and operations planning value chain — from shop-floor managers on up to the CEO — can √ Retailer base their decisions on a shared, consolidated pool of √ Supply chain planning software information, companies can ensure that a single, vendor unified plan is driving the business. √ S&OP software vendor √ Business Intelligence software This is why S&OP has evolved to become Integrated vendor Business Planning (IBP). Figure 1 illustrates the √ Consulting organization that different stages of the IBP process. provides S&OP-related services Aberdeen is launching new research on steps 4 and 5 Contact us right away of the Integrated Business Planning process; these to get involved in this study! stages are also referred to as the “executive S&OP stage.” Announcement Find Out How On-Demand Solutions Enable B2B Collaboration
  2. 2. Driving Sales and Top Line Revenue Through Executive S&OP Research Brief Page 2 Figure 1: Elements of Integrated Business Planning 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 Integrated Business Gross Margins (sales, marketing, Inventory Turns operations input) Plan vs. Actual 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 Source: AberdeenGroup, April 2007 What do Best in Class Companies do Better? To improve S&OP processes, Best in Class companies are not focusing on lowering cost as their primary driver, but are instead placing focus on improving their top-line and sales revenue. These Best in Class companies are focused on providing a 360-degree view of their operational and financial performance to their executive teams. They are using enablers like BI and corporate performance tools, S&OP tools, and supply chain planning tools to move beyond traditional S&OP practices to an Integrated Business Planning process. New research by Aberdeen will measure the impact of improving the executive S&OP stage, including top-line benefits such as: • Improved gross margin • Improved customer retention (market share) • Improved order fill rate © 2007 AberdeenGroup, Inc. Telephone: 617 723 7890 260 Franklin Street Fax: 617 723 7897 Boston, Massachusetts 02110-3112 www.aberdeen.com
  3. 3. Driving Sales and Top Line Revenue Through Executive S&OP Research Brief Page 3 The research will also investigate the effect on cost-related measures like: • Finished goods inventory levels • Logistics costs as a percentage of revenue Table 1 shows the hypothesized Best in Class actions that will be proved or disproved during the upcoming benchmark study. Table 1: Best-in-Class PACE Hypothesis for Executive S&OP Pressures Actions Capabilities Enablers Improve top line Create a profit optimized Profit optimized supply Composite applications revenue supply demand balanced demand matching for S&OP plan Lowering supply Create timely executive Ability to improve ad-hoc Business chain operating reporting for key metrics reporting/analytics Intelligence/Analytics costs capabilities for S&OP Meet customer Create multiple Ability to create and S&OP overlay mandates for faster, scenarios to analyze manage multiple applications built on top more accurate and S&OP plan scenarios for S&OP of spreadsheets more unique process fulfillment Management of Increase the frequency Ability to perform real- Supply chain planning increasingly global of executive S&OP time dynamic S&OP applications (APS) supply chains processes Speed up the new Make the executive Ability to collaborate Spreadsheets product launch S&OP process more internally and externally process to be more collaborative during executive S&OP responsive to customers Create risk management Ability to perform risk ERP modules focused workflows management on S&OP Source: AberdeenGroup, April 2007 Case in Point Seagate Implements Executive S&OP Process Using Integrated Business Planning Solution Seagate designs and manufactures rigid hard disk drives for use in enterprise servers, mainframes and workstations, desktop applications, mobile computing, consumer electronics applications, etc. Seagate has a dynamic business environment resulting in the need for flexible supply chain applications. They implemented an integrated business planning solution that connects excel from a desktop environment to a formal DBMS. The solution handles the executive S&OP process from managing the consensus forecasting process to executive buy-in and plan acceptance, and finally releasing the plan to manufacturing for enabling material planning. © 2007 AberdeenGroup, Inc. Telephone: 617 723 7890 260 Franklin Street Fax: 617 723 7897 Boston, Massachusetts 02110-3112 www.aberdeen.com
  4. 4. Driving Sales and Top Line Revenue Through Executive S&OP Research Brief Page 4 Key Benefits: Executive visibility – allows management to look at various plans and create scenarios around it. Management can model both demand upside as well as downside scenarios. In the past, management had to rely on analysts as well as extended timeframes to perform a fraction of these scenarios. 40% improvement in planner productivity – instead of working with multiple spreadsheets/templates the planners were able to consolidate their input into one interface Data integrity and cleansing – instead of critical data being stored in Excel and in the memories of analysts, the data was moved into an Oracle database. Management and planner commitment – the existing climate of skepticism was turned around based on the initial success and realized value from this initiative, laying the ground for future process change initiatives using established methods such as 6-Sigma. Solution Snapshot The following categories of technology enablers can help to improve the S&OP process. ERP S&OP modules – these are the capabilities embedded within ERP systems to help support the S&OP process. Examples of solution providers in this space: SAP, Lawson, Infor. Supply chain APS – these are the capabilities available within individual demand planning and supply planning applications to support the S&OP process. S&OP Overlay applications – these are the solutions sold as standalone S&OP modules that can sit on top of existing ERP or APS solutions. These are intended to be deployed as an integrated solution tying data together from multiple sources and applications. Composite applications for S&OP – these are emerging solutions that are built using web services/ SOA based architecture and are intended to be deployed as an integrated solution tying together data from multiple sources and applications. Table 1 shows a sample list of vendors who provide solutions for S&OP and the mapping of these vendors to the above categories. © 2007 AberdeenGroup, Inc. Telephone: 617 723 7890 260 Franklin Street Fax: 617 723 7897 Boston, Massachusetts 02110-3112 www.aberdeen.com
  5. 5. Driving Sales and Top Line Revenue Through Executive S&OP Research Brief Page 5 Table 1: List of Vendors Vendor ERP Supply Chain BI/ S&OP Composite S&OP APS Analytics Overlay Applications Modules Apps for S&OP Adexa X (DP/SP/IO) Aspentech X (DP/SP/IO) X Cognos X DCRA X X Demand X X X Solutions Equazion X i2 X(DP/SP/IO/AIO) X X LogicTools X (AIO) (ILOG) Infor X X X Interace X JDA X(DP/SP/IO/AIO) X John Galt X X Solutions Lawson X Logility X(DP/SP/IO) X X Manhattan X Associates Oracle X X X X Prescient X QAD X X SAP X X X X Smart X Software Steelwedge X X X Software Supply X X X Chain Consultants Syncron X Syspro X TXT e- X X solutions/G 4 Analytics WAM X X Systems Source: AberdeenGroup, April 2007 © 2007 AberdeenGroup, Inc. Telephone: 617 723 7890 260 Franklin Street Fax: 617 723 7897 Boston, Massachusetts 02110-3112 www.aberdeen.com
  6. 6. Driving Sales and Top Line Revenue Through Executive S&OP Research Brief Page 6 Legend: Demand Planning – DP Supply Planning – SP Inventory Optimization - IO Advanced Inventory Optimization - AIO (multi-echelen inventory optimization) Given the industry specific nature of Sales and Operations planning processes, it is important for enterprises to be aware of the vertical industries that the vendors are focused in. Table 2 will be helpful in this regard. Table 2: List of Vendors and Applicable Vertical Markets Vendor Consumer Discrete Process Retail Semiconductor/ Packaged Manufacturing High Tech Goods Electronics Adexa X Aspentech X (Process) X Cognos X DCRA X X X Demand X X X Solutions Equazion X X X I2 X X X X X Infor X X X Interlace X X X JDA X X X X X John Galt X X X X Solutions Lawson X Logility X X X X Manhattan X X Associates Oracle X X X X X Prescient X X QAD X X X X SAP X X X X X Smart X X X X X Software Steelwedge X X X X Software Supply Chain X X Consultants Syncron X X Syspro X X X TXT e- X solutions/G4 Analytics WAM X Systems Source: AberdeenGroup, April 2007 © 2007 AberdeenGroup, Inc. Telephone: 617 723 7890 260 Franklin Street Fax: 617 723 7897 Boston, Massachusetts 02110-3112 www.aberdeen.com
  7. 7. Sales and Operations Planning and Supply Chain Business Intelligence Research Brief Page 7 Related Research Integrated Price Management: The Key to Technology Strategies for Inventory Profitable Demand Management; April Management; September 2006 2005 Consumer Industries Strategies for Demand Technology Strategies for Integrated Management: Sensing, Shaping and Pricing; Business Planning; July 2006 Nov 2006 Demand Management in Consumer Industries, Dec 2006 Author: Nari Viswanathan, Research Director, Supply Chain & Logistics, (nari.viswanathan@aberdeen.com) Founded in 1988, AberdeenGroup is the technology- driven research destination of choice for the global business executive. AberdeenGroup has over 100,000 research members in over 36 countries around the world that both participate in and direct the most comprehensive technology-driven value chain research in the market. Through its continued fact-based research, benchmarking, and actionable analysis, AberdeenGroup offers global business and technology executives a unique mix of actionable research, KPIs, tools, and services. This document is the result of research performed by AberdeenGroup. AberdeenGroup believes its findings are objective and represent the best analysis available at the time of publication. Unless otherwise noted, the entire contents of this publication are copyrighted by AberdeenGroup, Inc. and may not be reproduced, stored in a retrieval system, or transmitted in any form or by any means without prior written consent by AberdeenGroup, Inc.

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