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High-tech S&OP IE Event on April 19
This document discusses supply chain insights and the role of supply chains in building market-driven differentiation. It provides definitions for integrated business planning and sales and operations planning. The document examines questions around goals, decision making, and metrics for supply chain processes. It also discusses the need for balance between demand and supply strategies.
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High-tech S&OP IE Event on April 19
- 1. Supply Chain Insights What does Good Look Like? Supply Chain Insights, LLC © 2012
- 2. BRICKS Book Publishes Matter in August 2012 The Role of Supply Chains in Building Market-Driven Differentiation LORA M. CECERE CHARLES W. CHASE JR.
- 3. What’s in a name? A rose by any other name would smell as sweet. William Shapespeare 3 Supply Chain Insights, LLC © 2012
- 4. What is ina name? 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 company in 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. 4 Supply Chain Insights, LLC © 2012
- 5. 5 Supply Chain Insights,LLC © 2012
- 6. The Questions toAsk What is the goal? How do we make decisions? What do we measure? 6 Supply Chain Insights, LLC © 2012
- 7. The Questions toAsk What is the goal? How do we make decisions? What do we measure? 7 Supply Chain Insights, LLC © 2012
- 8. S&OP Evolution Greater Benefit Business- • Growth Sales Driven planning Driven • Resilience Match Demand Maximize • Efficiency with Supply Profitability Market Driven Manufacturing- Demand Driven Driven Maximize Maximize Opportunity and Deliver a Feasible Opportunity Mitigate Risk. Plan for Operations Sense and Orchestrate Match Demand Shape Demand with Supply Demand Market to Market
- 9. S&OP Process Existence, Goals & Processes Have a Sales & Operations Planning S&OP Process Goal Process Not sure Match demand with supply 43% 3% No 10% Maximize opportunity and mitigate risk 32% Develop a feasible plan 14% Determine the most profitable plan 8% Yes Other 3% 87% # Distinct S&OP Processes 5 S&OP 27% 14% 20% 19% processes 12% 9% on average 1 2 3 4 5 More than 5 Base: Total Sample (117)
- 10. The Questions toAsk What is the goal? How do we make decisions? What do we measure? 10 Supply Chain Insights, LLC © 2012
- 11. 11 Typical Organization CEO Chief Customer COO Officer Chief VP of Supply VP of Marketing Sales CFO Chain Manufacturing Officer Account Customer Procurement Logistics CIO Quality Teams Service Growth Volume Cost Supply Chain Insights, LLC © 2012
- 12. Supply Chain Organization Functions Reporting Through Supply Chain Leader Supply Chain Supply Chain Planning (Supply) 80% Chief Operating Officer 43% 69% Supply Chain Profit Planning (Demand) 72% Center Gen Mgr of Business Unit (P&L Owner) 26% Managers Inventory 63% Deliver (Distribution) 56% Leader of Manufacturing 12% Transportation 52% Chief Financial Officer 9% Source (Procurement) 51% Head of Procurement 3% Make (Manufacturing) 38% Customer Service 37% Chief Information Officer 2% Base: Total Sample (117) Q5. Please tell us how you define your company’s supply chain organization by selecting
- 13. A Supply Chainis a Complex System with Complex Processes with Increasing Complexity Supply Chain Insights, LLC © 2012
- 14. Looking at SupplyChain as a Complex System Growth Corporate Revenue Cost of Goods Trade-offs Working Capital Corporate Social Responsibility Investment Trade-offs R&D Strategy and Investment Asset Strategy and Investment Forecast Accuracy Customer Service Inventory Supply Chain Product and Service Channel Strategy Supplier Strategy Trade-offs Portfolio Sales Distribution Manufacturing Logistics Procurement Policies Policies Policies Policies Policies Supply Chain Backorders First Pass Material Returns Empty Miles Waste Obsolescence Yield Yield
- 15. What is Agility? How Define Supply Chain “Agility” Shorter supply Flexibility to make cycles and deliver whatever is ordered 3% 10% Ability to recalibrate plans in the face of market, demand and supply volatility and 49% deliver the same or comparable cost, quality and customer service 38% Ability to adapt to variations in demand and supply Base: Total Sample (117) Q11. How would you define what it means for your company’s supply chain to be “agile”?
- 16. Agility Importance vs.Performance Agility Importance vs. Performance (7-Point Scale) 6% 5% 40% Low (1-3) 89% 32% Middle (4) 62 % Points (Gap in Performance vs. Importance) 27% High (5-7) Importance Performance Base: Total Sample (117) Q12. How important is it for your company’s supply chain to be “agile” in 2012? Please
- 17. Agility Today vs.Past Agility vs. 5 Years Ago, 1 Year Ago 9% LESS Agile 15% 17% 54% Just as Agile 68% Ongoing Increases in Agility 38% MORE Agile Vs. 5 Years Ago Vs. 1 Year Ago Base: Total Sample (117)
- 18. The Role ofDemand Signals in Becoming Market Driven Sell Deliver Make Source Network Design: Channel Network Design Supplier Network. Probability of Design. Cost- Supplier Demand to-Serve Rationalization Analysis Supply Chain Category Sales and Operations Planning Category Tactical Management New Product Launch Management Planning: Demand Forecast Supply Chain Contract Corporate Social Responsibility Contract Policy: Demand Management Revenue Management Management Shaping Working Capital Management Market-driven Demand/ Demand Orchestration Supplier Sensing Signal Channel Demand Translation Management Sensing Transactional Order Order-to-Cash Purchase Order Processing: Management Procure-to-Pay Management Order and Shipment Processing
- 19. Demand-side Views Supply-side Views Hole in Enterprise Architectures Account-Level VMI C A Supplier Supplier Supplier Supplier Downstream Data Distribution Distribution Distribution Network Network Network
- 20. Demand-side Views Supply-side Views Demand Translation Account-Level VMI C A Supplier Supplier Supplier Supplier Downstream Data Distribution Distribution Distribution Network Network Network
- 21. A Forecast isnot a Forecast is not a Forecast Increasing need for value network strategy alignment Business Planning Forecasting Constrained Forecast Increasing levels of granularity 21 Supply Chain Insights, LLC © 2012
- 22. 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 Supply Chain Insights, LLC © 2012
- 23. Getting to LetterPerfect…. Common Practice Market-driven Focus S Ask sales Focus on market drivers: How do we best shape demand? & Direct integration to supply Design of the value chain to optimize trade-offs, minimize risk, balance cycles, and orchestrate demand OP Manufacturing plan Trade-offs between make, source and deliver 23 Supply Chain Insights, LLC © 2012
- 24. The Need forBalance S: Go-to- OP: Demand Market Strategies & Orchestration Goal 24 Supply Chain Insights, LLC © 2012
- 25. The Questions toAsk What is the goal? How do we make decisions? What do we measure? 25 Supply Chain Insights, LLC © 2012
- 26. S&OP Process Plan Execution S&OP Plan Execution Execution is not connected to S&OP plan 9% We try to execute the S&OP plan, but hardly do in practice 25% We execute the S&OP plan most of the time 35% We execute the S&OP plan nearly all of the time 19% We monitor market events and adjust to S&OP plan within limits 13% Base: Have a S&OP process (102)
- 27. Historically, we have: • Tried to get precise on inaccurate data. • Believed that the most efficient supply chain is the most effective supply chain. • Built efficient chains, but not effective networks. • Focused inside-out, not outside-in. • Rewarded the urgent, not the important. 27 Supply Chain Insights, LLC © 2012
- 28. Comparison of Revenue/Employeefor the Period of 2000-2011 P&G Colgate Unilever Kimberly-Clark Nestle Kraft 700 Revenue/Thousands of Employee 600 500 400 300 200 100 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
- 29. Comparison of EBIT/Employeefor the Period of 2000-2011 P&G Colgate Unilever Kimberly-Clark Nestle Kraft 140.0 120.0 100.0 EBIT/Employee 80.0 60.0 40.0 20.0 0.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
- 30. Consumer Products: Comparisonof Days of Inventory P&G Colgate Unilever Nestle Kraft 80 75 70 65 60 55 50 2002 2003 2004 2005 2006 2007 2008 2009 2010
- 31. Consumer Products: Costof Sales as a Percentage of Revenue Unilever Kellogg Kraft General Mills Campbell Hershey P&G 70% Cost of Sales as a % of Revnue 65% 60% 55% 50% 45% 40% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
- 32. Comparison of Daysof Working Capital in High-tech and Electronics for the Period of 2005-2011 Apple Motorola Solutions Samsung Cisco Intel Dell RIM Average 450.0 400.0 350.0 300.0 Axis Title 250.0 200.0 150.0 100.0 50.0 0.0 2005 2006 2007 2008 2009 2010 2011
- 33. High-tech and Electronics Revenue/Employee Apple Motorola Solutions Samsung Cisco Dell RIM Average 1800.0 1600.0 1400.0 1200.0 1000.0 800.0 600.0 400.0 200.0 0.0 2005 2006 2007 2008 2009 2010 2011
- 34. Cost of Salesas a Percentage of Revenue in High-tech Apple Motorola Solutions Samsung Cisco Intel Dell *cost of revenue* RIM Average 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 2003 2004 2005 2006 2007 2008 2009 2010 2011
- 35. Technology Goal A feasible plan • Model the network • Recognize and respect constraints • Gain plan visibility Match demand with supply • What-if analysis • Multi-tier inventory analysis • Network design Deliver the most profitable • Demand translation • Supply orchestration Plan • Optimize financial drivers Demand-driven • Sense channel demand • Shape demand • Drive the most profitable response Market-driven • Sense buy and sell-side market conditions • Bi-directionally orchestrate demand Key: Demand Planning Supply Planning Inventory Planning Financial Planning Demand Translation Market Sensing 35 Platform
- 36. Ask the RightQuestions What is the goal? How do we make decisions? What do we measure? 36 Supply Chain Insights, LLC © 2012
- 37. Who is Lora? •Founder of Supply Chain Insights •Partner at Altimeter Group (leader in open research) •7 years of Management Experience leading Analyst Teams at Gartner and AMR Research •8 years Experience in Marketing and Selling Supply Chain Software at Descartes Systems Group and Manugistics (now JDA) •15 Years Leading teams in Manufacturing and Distribution operations for Clorox, Kraft/General Foods, Nestle/Dreyers Grand Ice Cream and Procter & Gamble. Supply Chain Insights, LLC © 2012
- 38. Where do youfind Lora? Contact Information: loracecere@gmail.com Blog: www.supplychainshaman.com (3500 pageviews/month) Twitter: lcecere 2900 followers. Rated as the top rated supply chain social network user. Linkedin: linkedin.com/pub/lora- cecere/0/196/573 (2300 in the network) Supply Chain Insights, LLC © 2012