S&OP Journey, innocent
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This document discusses Innocent's journey with Sales and Operations Planning (S&OP). It describes how Innocent previously managed supply, demand, and fruit buys using separate detached processes in Excel and Access, without a clearly defined integrated process. It then outlines Innocent's new S&OP approach, which involved designing an integrated people, process, and IT system solution. Key aspects of the new process included monthly forecasting across four dimensions, and the ability to evaluate scenarios. Innocent selected the Oracle Demantra system along with additional interfaces and data hub. The outcome has been a more stable platform, improved forecast accuracy, reduced waste, and better fulfillment.
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S&OP Journey, innocent
- 2. agenda • a little bit about innocent • life before S&OP • new ways of working • outcome • Q&A
- 3. 3 Innocent started as a group of three friends in 1999, with one idea… the beginnings Make life a little bit better, and a little bit easier
- 4. 4 This revolutionary thinking led us to our first idea… a tale of two ideas The amazing electric bath
- 5. 5 our first range Fortunately our second idea had more merits
- 6. from small acorns We started small
- 7. our product family and we now have a little family of chilled drinks and veg pots
- 8. 8 We’ve grew very rapidly up until 2007, and after a tough 2008, have returned to strong growth. our sales 0 20 40 60 80 100 120 140 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Revenue (£M)
- 9. agenda • a little bit about innocent • life before S&OP • new ways of working • outcome • Q&A
- 10. 10 Our supply chain is built on a 3rd party modular basis with very different forecasting requirements context – supply chain growers blender manufacturers warehouses packaging suppliers customers store Supply team: Horizon: 6 weeks Unit: Cases Buckets: Daily Fruit buys: Horizon: 18months Unit: tonnes Buckets: annual Demand team: Horizon: 12 months Unit: Revenue Buckets: Monthly
- 11. old innocent solution We used to manage short term supply, demand and fruit buys through 3 detached processes: Supply Team £ ? Excel tracker in revenue & GM Access database in cases & pallets Excel tracker in tonnes & kg Demand Team Fruit buys
- 12. agenda • a little bit about innocent • life before S&OP • new ways of working • outcome • Q&A
- 13. project approach Our solution-design was based on the optimum structure for people, process and IT systems, and their interaction. system people process people
- 14. project approach With the people approach agreed in principle we moved on to the process system people process
- 15. key parts of the process In designing our new process, we worked through what & how we would forecast £ Both Detailed level across 4 dimensions: 4. Breakdown2. Time 3. Geography1. Product £s or Cases Resolution Horizon Frequency 18 months Monthly cycle Weekly light-touch
- 16. Process overview This thinking has developed, and whilst our process has been iterative, our current operation is below: 1. Inputs Updates to forecast collated and signed- off by senior team 2. Forecasting Commercial team adjust forecast accordingly 3a.Demand review Sign-off of updated forecast 3b.Supply review Capacity implications 3c.Fruit review Impact on fruit contracts understood 4. S&OP meeting Summary of performance against KPIs Key decisions made (escalation from prior steps)
- 17. Process overview We also have the ability to escalate to the Board if we need to, and have a weekly process to support this monthly set-up 1. Inputs 2. Forecasting 3a.Demand review 3b.Supply review 3c.Fruit review 4. S&OP meeting Board
- 18. project approach With a good understanding of the organisation and required process we began work on finding the best IT solution to support us system people process
- 19. making the decision The main driver of the decision was finding a system that could incorporate financial complexity with daily forecasting volume revenue revenue (inc. promos) contribution potential suppliers financial complexity forecast type
- 20. the innocent systems world ERP CRM interface interface LOGs Calculator On top of the Demantra installation we also developed a data hub to hold our master data innocent data hub interface interface interface interface interface interface
- 21. forecast breakdown In order to leverage our financial forecast it was essential for us to be able to break down the forecast into constituent parts commercial base forecast customer investment media promo marketing event breakdown Financials (£/ €) final forecast base forecast
- 22. scenario planning The other big driver for us was to be able to financially evaluate a range of scenarios base forecast Financials (£/ €) base Live Scenario 1 Scenario 2
- 23. 3 pillars 3 different elements required for complete solution system people process
- 24. agenda • a little bit about innocent • life before S&OP • new ways of working • outcome • Q&A
- 25. outcome We’ve come a fair way in 2 years, and now have a stable platform to support business growth and SKU proliferation. Whilst there’s definitely more to go after, here’s some of the highlights: Area 2008 2010 Forecast 3 numbers One number for commercial, finance, marketing &the supply chain Ownership Split Commercial team Process Not clearly defined Monthly & weekly cycle System Excel / Access Oracle Demantra - Daily forecasting - Promotional management - Demand planning FG waste c. 2% of NR >0.4% of Net Revenue Fulfilment 97% >98.5% Forecast accuracy (3 wk lag) c. 80% c. 93%
- 26. agenda • a little bit about innocent • life before S&OP • new ways of working • outcome • Q&A
Editor's Notes
- This was the guys first idea. Make the thing called the amazing electric bath. In the history of business ideas, it’s probably one of the worse. It was going to be a revolution in your bathroom - a bath that could fill itself up to a pre-designated level and a pre-designated temperature all at the touch of a button. However, the first design plans showed water and electricity being in close proximity to each other, and we realised that rather than making life a little bit easier and better for our consumers, we would be making lives shorter. So, moved on from that, and one piece of advice we were given was if you’re setting up a business, make sure you really understand your target audience, and the only audience the guys really understood was themselves and their friends. So, whilst on a snowboarding holiday, the boys thought about what do they want on a daily basis? – something which will be natural, fresh healthy, and easy way to do yourself some good. You know what its like, living busy lives in urban areas, going out late, working late and not making it to the gym, and the only place open for food is the local kebab shop. So that was how the idea first began
- So we came back from the snowboarding holiday we were on with the idea and set about trying to make it happen. Spent next 6 months being fruit geeks – trying out recipes, asking people whether they prefer mangoes or kumquats and speaking to shop keepers. Things were progressing and all our friends and family said that they liked our juices, but we couldn’t help thinking that they would say that wouldn’t they, so to get the confidence to leave jobs and go about setting up innocent full time, we did a little test.
- They bought £500 of fruit, and turning into their favourite recipe at the time, they sold bottles of smoothies at a stall in a music festival, and above this stall, there was a sign saying “should we give up out day jobs to make these smoothies. They put out a bin which said yes, and a bin to say no. and asked people to vote using their empty bottles. At the end of the weekend, the yes bin was pretty full, and there was definitely some in the no bin, which they traced back to their mum’s who were trying to persuade them not to give up their decent jobs However, it gave them the confidence to go in the next day and hand in their notice, and so “innocent was born”
- We started with a range of 3 smoothies in May 99 Out to Lunch was first outlet - £24 sales 200 employees 7 european countries 150 live SKUS
- As you can see, we had pretty phenomenal growth in the first 8 years of the business, doubling in size every year. Our 2010 forecast is £135m, which is about 150 euros, which isn’t bad for a 10 year old company, especially given last years market performance
- We have a 3 rd party supply chain, all the way from the fruit growers to our logistics partner delivering to customers. This definitely has its benefits and has allowed the business to grow at the rate is has done. However, it has the challenge of insufficient visibility as most of the essential supply chain management information resides at 3 rd parties; yet as the brand owners, innocent are directly accountable for customer satisfaction, delivery performance and our own financial results. In terms of size: 300 customers live SKUS 40 recipes, 90 fruit types, most of which are bespoke For most of you, this probably doesn’t sound too complicated, but we are have a fully outsources Supply chain, we don’t have lots of people, we have small margins to do all this on, and we don’t have big systems – our ERP system is Microsoft excel. One of our main complexities if the short shelf life of our products - average P+30 This dictates one of the main forecasting requirements of the business : Customers want day 1 for day 2 orders. The business itself runs on a 12 month revenue forecast, whilst suppliers need annual buys and 18month forecasts. The biggest expenditure sits with fruit buys, at 50-60% of our total COGS spend, which are seasonal buys, with a shelf life of one year (we only use the freshest season stock), and a buying window of just a few weeks a year in accordance with the harvest cycle – we only get one shot.
- This set-up of systems and processes was painful, and costly. As an example, one year we were left with 2.8 thousand tonnes of mango. At about £1000 per tonne, this was nearly £3m of mango which we couldn’t use. This was due to the fruit teams forecast not matching the business budget. Our un-joined up process meant that we didn’t have the corresponding passionfruit to go with it in our MP recipe to use up in deep promotions, we couldn’t run long as we only use current season stock, so we had to avoid this nearly crippling situation another way. A shorter term impact we had was the complete mis-match between supply and demand, they were simply working off a completely different set of numbers and objectives
- Put simply, our aim was to have the business worked to one agenda: had one set of priorities, which are managed through one set of numbers, whilst driving the entire business towards its aspirations and strategic goals. We had to have the systems and processes to our phenomenal growth
- We used the 3 pillar approach of “people, processes and systems” in order to design our new solution We didn’t do this all at once, it was an 18month journey and the main reason we were able to get this off the ground was that we grew it organically, we spotted opportunities and went after them then-and-there. In every textbook or article I’ve read, it says that you need senior management support. We were really lucky in that we had one of the founders of the business behind us saying “this is good guys, I can see where you’re going, keep at it” Focussing first on people, we developed a new organisational structure. We created a central business function, reporting directly into the CEO. This was S&OP, and didn’t sit within Supply, nor Demand, but acted completely independently, with the rationale that it would help drive completely independent decision making, the best for the business, not necessarily the best for individual sub functions. Developed a new “demand and revenue planning” team, who were responsible for delivering the optimum business forecasting process, ensuring that ownership of the forecast sat with the right people, reporting on forecast KPIs , and training out forecast systems and processes. We also created a new S&OP manager role, a separate function from both supply and demand, sitting centrally and reporting directly into the CEO. The aim of this was to act as the conduit between supply and demand, and drive the right communication forums and wider business processes to ensure joined-up thinking.
- Off the back of all the problems I outlined previously, we identified the following as what we needed to solve: £ or cs: we needed both to allow for joined up thinking We used these as part of the selection process for our system. As I’ll cover later, we bought a system flexible enough to fit our process and we customised and designed it to fit our process, in conjunction with Oracle.
- We are fortunate in that we embraced S&OP when we were a small business, flexible and people willing to change. Inputs – includes NPD, range changes, promotional strategies, updates on growth overlay curves Re-forecasting – commercial team own the forecast Demand review – eg this year we are targetted to grow one of our markets by £4million. Each month we check against these growth targets, and if we are not hitting them, what, as a business are we going to do: Supply Review – discuss requirements for OJ business plan. What different scenarions might mean for the capacity of the business Fruit review : upcoming mango buy – one of the biggests buys of the year, and one that has stung us in the past. What are our requirements, where can be build in flexibility etc S&OP – We have supply, demand, marketing, innovation all in the same room once a month (at all different levels) We have a slimmed down version on a weekly basis which manages shorter term issues, and escalates to the monthly process when required We started using the S&OP meeting as a forecasting meeting, building confidence in our forecast. When we got to the level where we trusted our forecast (how did we know when we were here?) we transitioned S&OP meeting into an action based, decision type approach – engaging everyone in the business and makes stuff happen In the S&OP meeting, we make key decisions include trade-offs between supply and demand, and procurement buys .
- What this means is that the demand review is conducted in NR, on a monthly basis, discussing customers The supply review is conducted in cases and units, talking about SKUs and recipes Whilst the Fruit review is conducted in tonnes, using specific gravity of our recipes The system is simply a translator, allowing us to do all of this, using different slices and dices of the same data.
- Before we starting looking for a system, we had the people and process elements understood. This allowed us to fully scope what we wanted our system to deliver for us. Whilst the system is vital, it is just one third of the whole solution.
- We use Oracle Demantra. This gives us the vital 1 number forecasting We customised this to allow us to cut it at differenct levels of aggregation, in cases or NR,or GM, or litres etc… We keep snapshots to allow us to track forecast changes, and use a reference points for any decisions we make. The system is vital, but its not enough on its own.– its people and process too.
- I touched on “forecast breakdown earlier”. One of the customisations we did was to allow us to breakdown our forecasts. We can do this in financial or volume metrics, and we use a cube and pivot tables within Excel to access and cut this data
- We can also use the scenario planning ability of Demantra to allow us to look at a range of options, and what this would mean for us. Saves hours of modelling, and assuming we chose one approach, we can just switch from scenario into live and it becomes the “ live business forecast”
- We used the 3 pillar approach of “people, processes and systems” in order to design our new solution We didn’t do this all at once, it was an 18month journey and the main reason we were able to get this off the ground was that we grew it organically, we spotted opportunities and went after them then-and-there. In every textbook or article I’ve read, it says that you need senior management support. We were really lucky in that we had one of the founders of the business behind us saying “this is good guys, I can see where you’re going, keep at it” Focussing first on people, we developed a new organisational structure. We created a central business function, reporting directly into the CEO. This was S&OP, and didn’t sit within Supply, nor Demand, but acted completely independently, with the rationale that it would help drive completely independent decision making, the best for the business, not necessarily the best for individual sub functions. Developed a new “demand and revenue planning” team, who were responsible for delivering the optimum business forecasting process, ensuring that ownership of the forecast sat with the right people, reporting on forecast KPIs , and training out forecast systems and processes. We also created a new S&OP manager role, a separate function from both supply and demand, sitting centrally and reporting directly into the CEO. The aim of this was to act as the conduit between supply and demand, and drive the right communication forums and wider business processes to ensure joined-up thinking.
- Stable platform for growth and SKU proliferation 2 years ago – christmas or BTS example. Now we run it through our S&OP process