Summary of challenges to improving S&OP and the six trends shaping the evolution of S&OP and Integrated Business Planning

1. Stephen P. Crane
Stephen Crane Consulting, LLC
Supply Chain Risk Consortium
November 19, 2015
APICS-SV Chapter
Meeting
Trends Shaping the Evolution of S&OP
& Integrated Business Planning

2.  Principal & Founder – Stephen Crane Consulting, LLC
 B.S. Chemical Engineering - University of New Hampshire
 APICS CSCP – Certified Supply Chain Professional
 Board Member – Supply Chain Council & APICS
 Member of The Supply Chain Risk Consortium
 30+ years industry experience from Air Products, Wacker-Chemie and Firmenich
 Implemented Sales & Operations Planning in 12 businesses, 3 companies, 4 countries
 Implemented best-in-class supply chain organizations and planning processes
 Practitioner focused on sustainability of benefits
Background
Stephen Crane/APICS-SV/November 19, 2015 2

3.  S&OP vs. Integrated Business Planning
 Greatest Challenges to Improving S&OP
 Six Trends Shaping the Evolution of S&OP & IBP
 Key Takeaways
 Questions?
Agenda
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4. S&OP vs. Integrated Business Planning
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5. S&OP & IBP: Decades of Evolution
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6. Evolution of S&OP
Stephen Crane/APICS-SV/November 19, 2015
The S&OP process develops tactical plans that provide management the ability to strategically
direct its businesses to achieve competitive advantage on a continuous basis by integrating
customer-focused marketing plans for new and existing products with the management of the
supply chain. The process brings together all the plans for the business (sales, marketing,
development, manufacturing, sourcing, and financial) into one integrated set of plans. (APICS
Dictionary, 14th edition)
In the past, S&OP is most often identified as a Supply Chain based process and has been too
singularly focused to engage and provide value across functions to provide true business
optimization.
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7. Evolution of S&OP
Stephen Crane/APICS-SV/November 19, 2015
“Traditional Sales and Operations Planning (S&OP) processes and supporting technologies are no
longer sufficient in today’s 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 the financial analysis in relation to the business goals
and strategy.”
“The broader strategic mandate for S&OP is key to superior returns. S&OP leaders are
aggressively converting S&OP from an operations level demand and supply balancing process to
the mechanism of choice for integrated business planning and strategy deployment.”
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8. Evolution of S&OP
Stephen Crane/APICS-SV/November 19, 2015
Every company needs to decide on how they want to use S&OP in their business. Best-In-Class
companies use S&OP as a way of running the business supporting a company’s growth strategy
by routinely reviewing customer demands, anticipating shifts in business patterns, and aligning an
extended enterprise of resources, suppliers and service providers to deliver on expectations in a
dynamic and evolving global marketplace.
 Management’s handle on the business…
 All P&L impacts integrated into process…
 Is an Executive decision making process…
 A set of decision making processes…
 Provides "long range vision“ to issues before they become a crisis…
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9. 9
Month-End Close Drives Price/Volume
Variance Analysis and Monthly Outlook
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10. Companies That Have implemented S&OP See Benefits
Across Many Areas - Performance Benefits (% Improvement)
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11. Greatest Challenges to Improving S&OP
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12. 12
 Always under promise and over deliver
 Never submit your real budget the first time
 Always inflate your budget, as it will likely be cut
 Always make your budget, it’s what really matters
 Avoid specific measures, especially if you can’t control them
 Get the most people reporting to you and protect your budget
Unwritten Rules Causing Profit
Leakage
Stephen Crane/APICS-SV/November 19, 2015

13. 13
 Cost Reduction (Conference Board)
─ 90% of organizations that launch cost
reduction programs fail to sustain
results for > 3 years
 Execution (McKinsey)
─ Organizations realize only 63% of the
value of their strategies
 Complexity (AT Kearney)
─ Complexity costs organizations 3-5% of
sales
Lost Business Value
Stephen Crane/APICS-SV/November 19, 2015

14. 14
Greatest Challenges to Improving S&OP
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15. 15
 Lack of Executive support, commitment, and engagement
o Leadership team needs to be committed to a new style of running the
business
o Organizations need to comprehend the true scale of what the process can
achieve for the business
o The sizable challenge of overcoming the traditional thinking of operating in
functional silos and mis-aligned incentives
o Integrating all the key areas of the business (Sales, Product Management,
Manufacturing, Purchasing, Finance, R&D) into a single integrated business
planning process
o There is no one owner of the management process
Greatest Single Challenge to Improving S&OP
Stephen Crane/APICS-SV/November 19, 2015

16. Six Trends Shaping the Evolution of S&OP &
Integrated Business Planning
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17. 1. Speed of Business Continues to Accelerate
2. Complexity, Volatility, Lack of Value Based Planning
3. One Size Does Not Fit All
4. Develop Planning Talent
5. Global is More Than a Template
6. Software is Not a Silver Bullet
Six Trends Shaping the Evolution of S&OP
& Integrated Business Planning
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18. 18
Speed of Business Continues to Accelerate
Stephen Crane/APICS-SV/November 19, 2015
1
The need for organizational alignment is more critical than ever. The
speed of business continues to accelerate driven by the consumer
now dictating the channels, any confusion about priorities or delays in
orders can result in increased costs, inventory or even loss of
business.
 Need to capture timing and volume shifts is critical to maintaining
customer service and fulfill orders profitably
 The need for strategic focus on Sales Forecasting has never been
greater
 S&OP is the perfect process mechanism to recognize, evaluate, and
determine the impact of these changes
 Effectively communicate changes and align the organization to “one
plan”

19. 19
Companies need to better manage complexity and volatility which are
squeezing margins and decreasing profitability. By focusing on value
based planning, companies can maximize their profitability.
 Increasing complexity of products and length of global supply chains
 Increased product proliferation and shorter lifecycles
 Demand volatility is increasing while customers require increased
responsiveness and better service
 Value based planning not integrated into S&OP
Complexity, Volatility, & Lack of Value
Based Planning Squeezing Margins
Stephen Crane/APICS-SV/November 19, 2015
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20. 20
Companies should leverage segmentation techniques in planning to target
performance improvement opportunities and capitalize on those
opportunities. By combining portfolio and planning techniques,
organizations can drive segmented strategies to achieve maximum
business profitability.
 The 80/20 rule (Pareto)
 Measure and manage complexity
 Focus on synergy areas: procurement, product
design, manufacturing, planning and order fulfillment.
One Size Does Not Fit All
Stephen Crane/APICS-SV/November 19, 2015
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21. 21
With recognized talent gap in the marketplace, companies should establish
talent management programs and career paths that attract and retain
planning talent. Career paths need to include opportunities to move into
other functional areas in the organization to broaden planners’ experience
and establish context for better decision making.
 New generation of the workforce expects to be mentored
 Universities are not providing the necessary planning skills, so companies
should expect to develop these skills
 Culture and capability differences makes it difficult to plug-and-play new talent
from other companies
Develop Planning Talent
Stephen Crane/APICS-SV/November 19, 2015
4
Area 1. PF 2. PPR 3. MPP 4. PP 5. DP 6. SP 7. IM 8. S&OP Total
ZEU 76% 75% 77% 78% 88% 65% 74% 63% 76%
ZNA 74% 63% 66% 73% 80% 58% 74% 66% 70%
ZCN 80% 73% 82% 75% 91% 59% 83% 70% 78%
ZLA 88% 82% 86% 75% 89% 85% 76% 81% 83%
ZSEA 81% 72% 74% 74% 86% 74% 69% 82% 77%
WW 81% 83% 73% 76% 94% 80% 90% 85% 83%
ZIMEA 82% 67% 69% 78% 74% 74% 80% 46% 73%
ZJPN 65% 67% 64% 52% 79% 62% 61% 79% 67%
Total 78% 72% 75% 74% 86% 68% 75% 71% 76%

22. 22
As companies look to expand S&OP globally, standardized process
templates can help efficiently establish a common understanding of
desired process. However differences exist in data, skills, and market
structure that can significantly impact planning capabilities regionally. So
companies should review go-to-market strategies and align their global
S&OP process with regional considerations to optimize business
capabilities and performance.
 Globalization is core to most growth strategies
 Templates are a good start, but not enough
 Global vs. regional vs. local, regional considerations to increase alignment
and engagement
Global is More Than a Template
Stephen Crane/APICS-SV/November 19, 2015
5
Gather and
update data
Supply Network Planning
Demand Planning
Guidance on
BU Priorities
Vetted Supply
Options
Correct
Sales
History
Validate
Sales
Agent
Forecast
Make
Stat/Marke
t Intell
Forecast
Adjustme
nts
Historical Sales
vs. Prev. Sales
Plan
Pre-
Demand
Changes
Complete
d
Update
and Add
New
CVCs
Upload/E
nter
Customer
Forecasts
Generate
24 Month
Unconstrai
ned
Forecast
Conduct
Pre-
Supply
Review
w/Plants
KPIs DP
Released
to CO for
Financial
Forecast
Review
Supply
Metrics
Review
&
Confirm
Availabl
e
Inventor
y
Create
Statistical
Forecast
Update
Resource
Capacitie
s &
Assumpt
ions
Refresh
Inactive
Version /
Release
DP to
SNP
Review
Financial
Projections
vs. AOP &
Gap
Closure
Measures
Review
Major
Supply
Chain Risks
and Top
Issues
Review
KPIs,
Revenue,
Cost
Projections
, & Gaps to
AOP
Lock &
Deploy
S&OP
Plans for
Execution
Pre-
Alignment
Executive
Sign-off
Publish
Minutes,
Decisions,
and Action
Items
Review
Supply
Options
Financial
Implicatio
ns
Review
Business
Strategy&
Objectives
Review
Demand &
Supply
Plans
Review
Major
Business
Issues
Review
Capital &
Resource
Requests
Summari
ze
Supply
Option
Proposal
s
Make
Changes
to
Constrain
Final
Forecast
Run
Heuristi
cs for 24
Month
Supply
Plan
Communic
ate
Decisions &
Actions to
Organizatio
n
Competitive/M
arket
Intelligence
1.0 2.0
3.0
4.0
5.0
Upload Sales
Historyto APO
Add New
Customer Items
to R3
Review
Demand
Metrics
Publish
Assumpti
ons,
Minutes,
Decisions,
and
Action
Items
Validate
Changes
to Sales
Plan and
Update
Months 1
and 2
Identify
Supply
Imbalanc
es /
Review
Supply
AlertsSubmit
Supply
Options
to BU for
Approval
Financial
Impact of
Supply
Options
Finalize
Supply
Options
&
Assumpt
ions
Conduct
Supply
Review
Publish
Minutes,
Decisions
, and
Action
Items
Publish
24 Month
Raw
Material
Forecast
Update
Network
Source
Changes
Preferre
d
Sources
Assigne
d to
Demand
Summarize
Key
Decisions
& Top
Issues Still
Outstandin
g
Iteration loop
Demand
Review
Approve
Unconstra
ined
Forecast
Finalize 3-
month
Sales Plan
Order Book
(Sales Backlog)
Conduct
Pre-
Demand
Reviews
Stat
Forecast
Copied to
BW
Provide
Supply
Constrain
ts to DP
Review
Supply
Options to
Balance
Demand
Summariz
e top
issues/acti
ons &
decisions
expected
ESO
Adjust
SNP
Supply
Planning
Constrain
ts

23. 23
Software is Not a Silver Bullet
Stephen Crane/APICS-SV/November 19, 2015
6
Companies continue to invest money, time, and resources into buying and
implementing software, typically ignoring segmentation, analytics, and skill
development critical to maximizing their return on these investments. To
generate real improvements in S&OP, companies should refocus their
efforts on building planning competencies and capabilities to ensure real
and sustainable benefits on investments.
 Use segmentation to apply software automation appropriately (ABC
Pareto)
 Remember, software does not solve business problems
 Focus on defining the questions that need to be answered first, then build
the capabilities to provide those answers
 Competency development starts with teaching people how to think,
followed by teaching them how to click – not the other way around

24. Key Takeaways
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 New dynamics are creating complexities that require enhanced integrated
planning capabilities to drive efficiency and effectiveness – people, process,
technology
 A renewed focus on Planning For Growth provides a platform for collaboration,
internally with Commercial Teams and externally with trading partners
 One size does not fit all – leverage segmentation to apply appropriate focus and
capability to specific situations
 Building an effective Planning organization requires development of portfolio and
planning competencies
 Executives have to lead the changes
Key Takeaways
Stephen Crane/APICS-SV/November 19, 2015

26. 26Stephen Crane/APICS-SV/November 19, 2015
Thank you!
Stephen P. Crane
Stephen Crane Consulting, LLC
Supply Chain Risk Consortium
cranesp1@gmail.com