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Stephen P. Crane, CSCP Wacker Chemical Corporation Director Strategic Supply Chain Implementing an Integrated Sales & Operations Planning Process  August 11, 2009 An Executive S&OP Case Study Supply Chain & Operations Group Supply Side Demand Side
CONTENT ,[object Object],[object Object],[object Object],[object Object]
Wacker Chemie AG WACKER Group (2007) OVER 90 YEARS OF SUCCESS ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
WE ARE COMMITTED TO BENCHMARK-QUALITY PRODUCTS DESIGNED FOR OUR FOCUS INDUSTRIES ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
CONTENT ,[object Object],[object Object],[object Object],[object Object]
WHAT IS SALES & OPERATIONS PLANNING? ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
FROM 10,000 FEET Executive S&OP A process to reconcile, agree upon, and communicate the company game plan -- Operations (Units/Hours/Materials) Product Development (Product Introduction) Finance (Dollars) Sales & Marketing (Units/$$ by family)
SALES & OPERATIONS PLANNING OVERVIEW Volume Mix Supply Demand Demand Planning/ Forecasting Supply Planning (Capacity) Master Scheduling Plant & Supplier Scheduling Distribution Scheduling  Executive S&OP
SALES & OPERATIONS PLANNING’S PLACE Strategic Planning Business Planning Sales & Operations Planning Plant, Supplier, Distribution Scheduling & Execution
TOP MANAGEMENT NEEDS ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
IMPLEMENTATION PATH Months Business Improvement 1  2  3  4  5  6  7  8  9 Phase I Preparation Phase II Expansion Phase III Financial Integration
IMPLEMENTATION ALTERNATIVES “ Build it and they will come”   –  design it first, get the mechanics working, then attempt to sell it to top management = Low probability of success “ Hold the high ground”  –  involve top management at the very beginning of implementation and throughout  = High probability of success
CONTENT ,[object Object],[object Object],[object Object],[object Object]
TYPICAL BENEFITS FROM IMPLEMENTING S&OP ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Source:  IBM
HIGH FORECASTING ACCURACY YIELDS TANGIBLE BENEFITS IN SUPPLY CHAIN PERFORMANCE ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Source:  AMR Research 2008
[object Object],[object Object],BENEFITS OF IMPROVING FORECAST ACCURACY Source:  PRTM 2008
INVENTORY LEVEL VS. FORECAST ACCURACY Source:  Aberdeen Group 2008
BENCHMARKING OBSERVATIONS ,[object Object],[object Object],[object Object],[object Object],[object Object]
CONTENT ,[object Object],[object Object],[object Object],[object Object]
AIR PRODUCTS POLYMERS BUSINESS UNIT  ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],WHERE THEY STARTED IN 2003
GLOBAL WORK PROCESSES Metrics Follow the Money!
S&OP PROCESS STEPS P1.1A – Identify, Prioritize, & Aggregate SC Requirements DAY 0 - 8 P1.4 – Establish &  Communicate SC Plans   DAY 13-15 P1.3A – Balance Supply Chain Requirements with SC  Resources   DAY 9 – 12 P1.2A – Identify, Prioritize, & Aggregate SC Resources DAY 0 - 8 Review Historical Sales Data Review Demand Metrics Apply Historical Sales Data Adjustments Apply Future Demand Change Notifications Run Forecast Model Agree & Communicate Approved Plans Communicate Implications to Financial & Sales Plans Review Supply Plan & Cost Projections Develop/Modify Supply Chain Plans Review Supply Planning Measures Adjust Supply Planning Constraints Load & Review Unconstrained Demand Plan Submit Supply Plan with Documented Options Approve & Publish Supply Plan Approve & Publish Unconstrained Demand Plan Gather Data [DAY0] Gather Data [DAY 0] Define Supply Capability [DAY 1 – 8] Develop Supply Plan Proposals  [DAY 9] Finalize & Approve Supply Plan  [DAY 10 -12] Aggregate All Sources of Supply Initiate Req Master Data Changes Review Inventory Available Review Supply Capability Create Demand Change Summary B A Partnership Meeting [DAY 13] Executive S&OP  [DAY 15] Summarize Supply Chain Plans Gather Collaborative Input (Future Function) Create Unconstrained Demand Plan [DAY 1 -8] Develop Unconstrained Revenue Projection Apply New Characteristic Combos Adjust Statistical Parameters  (if needed) Review and Validate Unconstrained Forecast Input Source, Make, Deliver Product & Capacity Plans Create Supply Change Summary Develop Supply Plan Proposal (Optimization) Review Alerts Assess Impact & Develop Options Review Excess Capacity, Supply Options, Demand Exceptions Issue Resolution Agree to Supply Plan Initiate any Master Data MOC Review Supply Chain Plans Review Revenue Projections A B C C BI
S&OP PROCESS CYCLE Monthly Cycle Create Unconstrained Demand Plan (Days 1-7)   Adjust Historical data, Statistical Forecast Develop Supply Plan Proposals (Days 7-9) Approved Demand Plan Partnership Meeting (Day 13) Approved Supply Plan (Days 10-12) Approved Plan Executive Meeting (Day 15) Balanced Plan Demand Change Summary  (Day 0)
EXECUTIVE S&OP MEETING Review Demand Plan (Review Product Families, Demand Assumptions) Review Supply Plan (Inventory Plan, Cost Projections, Supply Assumptions, Issue Resolution) Agree to Supply Plan (Develop Supply Chain Plans, Source, Make, Deliver) Develop Revenue Projections (Identify Gaps) 18 Month Projections Communicate Approved Plans (Source, Make, Deliver) Communicate Plan Implications (Financial, Sales)
S&OP DRIVES THE BUSINESS PLAN Create Unconstrained Demand Plan (Days 1-7)   Revenue Forecasting Volume Forecasting Process Links Together Business, Supply Chain, and Finance Demand Change Summary (Day 0) Partnership Meeting (Day 13) Executive Meeting (Day 15) Develop Supply Plan Proposals (Days 7-9) S&OP Monthly Cycle Adjust Historical data, Statistical Forecast Approved Demand Plan Approved Supply Plan (Days 10-12) Approved Plan Balanced Plan Drives Business Plans: -   Outlooks/Budgets - Sales/Marketing Plans - Gross Profit Forecast Drives Supply Chain Plans: - Plant Loadings - Inventory Levels - Raw Material Forecasts Financial Variances: volume, price & margin
S&OP PROCESS KPIs ,[object Object],[object Object],[object Object],[object Object]
FORECAST ACCURACY IMPROVEMENT (Product Mix Level) Process, People, Statistical Forecasting Exception Analysis Forecast Adjustments Forecast Segmentation Data Aggregation World Class + 6% + 15% + 7%
Demand Forecast Accuracy (%) Inventory Days of Supply 20% Improvement Forecast Accuracy (%) FORECAST ACCURACY VS INVENTORY DOS Target Target
38% Improvement 2004  2007 PRODUCTION PLAN ADHERENCE SUPPLY PLANNING ACCURACY
21% Improvement 2004  2007 FINANCIAL FORECAST ACCURACY
WHERE ARE THEY TODAY ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],MAJOR IMPROVEMENTS SINCE 2003 “ All these benefits were driven by better supply chain planning & forecasting”
THE S&OP CHECK LIST ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
ROAD BLOCKS & CHALLENGES ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
BU A FORECAST DEVIATION TREND  ,[object Object],Target
BU B FORECAST DEVIATION TREND  ,[object Object],Target
[object Object],But those who can build superior, agile, and  responsive supply chains, have a real chance CONCLUSION
The WACKER Group THANK YOU FOR YOUR ATTENTION Stephen P. Crane Director Strategic Supply Chain Management [email_address] CREATING TOMORROW'S SOLUTIONS

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Executive S&OP Case Study presented at GPSEG

  • 1. Stephen P. Crane, CSCP Wacker Chemical Corporation Director Strategic Supply Chain Implementing an Integrated Sales & Operations Planning Process August 11, 2009 An Executive S&OP Case Study Supply Chain & Operations Group Supply Side Demand Side
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  • 7. FROM 10,000 FEET Executive S&OP A process to reconcile, agree upon, and communicate the company game plan -- Operations (Units/Hours/Materials) Product Development (Product Introduction) Finance (Dollars) Sales & Marketing (Units/$$ by family)
  • 8. SALES & OPERATIONS PLANNING OVERVIEW Volume Mix Supply Demand Demand Planning/ Forecasting Supply Planning (Capacity) Master Scheduling Plant & Supplier Scheduling Distribution Scheduling Executive S&OP
  • 9. SALES & OPERATIONS PLANNING’S PLACE Strategic Planning Business Planning Sales & Operations Planning Plant, Supplier, Distribution Scheduling & Execution
  • 10.
  • 11. IMPLEMENTATION PATH Months Business Improvement 1 2 3 4 5 6 7 8 9 Phase I Preparation Phase II Expansion Phase III Financial Integration
  • 12. IMPLEMENTATION ALTERNATIVES “ Build it and they will come” – design it first, get the mechanics working, then attempt to sell it to top management = Low probability of success “ Hold the high ground” – involve top management at the very beginning of implementation and throughout = High probability of success
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  • 17. INVENTORY LEVEL VS. FORECAST ACCURACY Source: Aberdeen Group 2008
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  • 22. GLOBAL WORK PROCESSES Metrics Follow the Money!
  • 23. S&OP PROCESS STEPS P1.1A – Identify, Prioritize, & Aggregate SC Requirements DAY 0 - 8 P1.4 – Establish & Communicate SC Plans DAY 13-15 P1.3A – Balance Supply Chain Requirements with SC Resources DAY 9 – 12 P1.2A – Identify, Prioritize, & Aggregate SC Resources DAY 0 - 8 Review Historical Sales Data Review Demand Metrics Apply Historical Sales Data Adjustments Apply Future Demand Change Notifications Run Forecast Model Agree & Communicate Approved Plans Communicate Implications to Financial & Sales Plans Review Supply Plan & Cost Projections Develop/Modify Supply Chain Plans Review Supply Planning Measures Adjust Supply Planning Constraints Load & Review Unconstrained Demand Plan Submit Supply Plan with Documented Options Approve & Publish Supply Plan Approve & Publish Unconstrained Demand Plan Gather Data [DAY0] Gather Data [DAY 0] Define Supply Capability [DAY 1 – 8] Develop Supply Plan Proposals [DAY 9] Finalize & Approve Supply Plan [DAY 10 -12] Aggregate All Sources of Supply Initiate Req Master Data Changes Review Inventory Available Review Supply Capability Create Demand Change Summary B A Partnership Meeting [DAY 13] Executive S&OP [DAY 15] Summarize Supply Chain Plans Gather Collaborative Input (Future Function) Create Unconstrained Demand Plan [DAY 1 -8] Develop Unconstrained Revenue Projection Apply New Characteristic Combos Adjust Statistical Parameters (if needed) Review and Validate Unconstrained Forecast Input Source, Make, Deliver Product & Capacity Plans Create Supply Change Summary Develop Supply Plan Proposal (Optimization) Review Alerts Assess Impact & Develop Options Review Excess Capacity, Supply Options, Demand Exceptions Issue Resolution Agree to Supply Plan Initiate any Master Data MOC Review Supply Chain Plans Review Revenue Projections A B C C BI
  • 24. S&OP PROCESS CYCLE Monthly Cycle Create Unconstrained Demand Plan (Days 1-7) Adjust Historical data, Statistical Forecast Develop Supply Plan Proposals (Days 7-9) Approved Demand Plan Partnership Meeting (Day 13) Approved Supply Plan (Days 10-12) Approved Plan Executive Meeting (Day 15) Balanced Plan Demand Change Summary (Day 0)
  • 25. EXECUTIVE S&OP MEETING Review Demand Plan (Review Product Families, Demand Assumptions) Review Supply Plan (Inventory Plan, Cost Projections, Supply Assumptions, Issue Resolution) Agree to Supply Plan (Develop Supply Chain Plans, Source, Make, Deliver) Develop Revenue Projections (Identify Gaps) 18 Month Projections Communicate Approved Plans (Source, Make, Deliver) Communicate Plan Implications (Financial, Sales)
  • 26. S&OP DRIVES THE BUSINESS PLAN Create Unconstrained Demand Plan (Days 1-7) Revenue Forecasting Volume Forecasting Process Links Together Business, Supply Chain, and Finance Demand Change Summary (Day 0) Partnership Meeting (Day 13) Executive Meeting (Day 15) Develop Supply Plan Proposals (Days 7-9) S&OP Monthly Cycle Adjust Historical data, Statistical Forecast Approved Demand Plan Approved Supply Plan (Days 10-12) Approved Plan Balanced Plan Drives Business Plans: - Outlooks/Budgets - Sales/Marketing Plans - Gross Profit Forecast Drives Supply Chain Plans: - Plant Loadings - Inventory Levels - Raw Material Forecasts Financial Variances: volume, price & margin
  • 27.
  • 28. FORECAST ACCURACY IMPROVEMENT (Product Mix Level) Process, People, Statistical Forecasting Exception Analysis Forecast Adjustments Forecast Segmentation Data Aggregation World Class + 6% + 15% + 7%
  • 29. Demand Forecast Accuracy (%) Inventory Days of Supply 20% Improvement Forecast Accuracy (%) FORECAST ACCURACY VS INVENTORY DOS Target Target
  • 30. 38% Improvement 2004 2007 PRODUCTION PLAN ADHERENCE SUPPLY PLANNING ACCURACY
  • 31. 21% Improvement 2004 2007 FINANCIAL FORECAST ACCURACY
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  • 39. The WACKER Group THANK YOU FOR YOUR ATTENTION Stephen P. Crane Director Strategic Supply Chain Management [email_address] CREATING TOMORROW'S SOLUTIONS

Editor's Notes

  1. Major sources for forecast inaccuracy: Upside account assumptions Consignment billing issues Price increases Raw material supply allocations APO master data
  2. If you answer no to any of these questions, you have an opportunity to go back and make improvements to your current S&OP process. Hopefully you have heard a few key points this afternoon that you can take back to your company and apply to your S&OP process. Thank you.