Presentation given at the Demand Solutions Conference on Sales and Operations Planning

Building an Effective S&OP
Process
Lora Cecere
September 2013

Supply Chain Insights LLC Copyright © 2013, p. 3
Cereal

Supply Chain Insights is focused on delivering
independent, actionable and objective
advice for supply chain leaders.
A company dedicated to research,
turn to us when you want the latest insights
on supply chain trends, technologies to know
and metrics that matter.
About Us

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must-have business book.
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Strategist, Salesforce.com
Today, the worlds of social business and
supply chain management have many
degrees of separation. I enjoyed working
with Lora to understand what the future
transformation of digital marketing to
digital business could look like.
--Jeremiah Owyang, Research
Director, Altimeter
Second Printing of Bricks Matter:
16 Five-Star Reviews on Amazon
Book can be ordered from Amazon.com in Hardcopy or Digital Format

18 Reports in 2012

2014 Publication

8
Current State

Current State

A Supply Chain
is a Complex System
with Complex Processes
with Increasing Complexity

The Supply Chain Effective Frontier:

Mining 20 Years of Financial Data

Industry Progress

Source: Supply Chain Insights 2012
Average Days of Inventory by Year
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Consumer Packaged Goods 59.0 57.0 62.0 64.0 67.0 67.0 68.0 70.0 70.0 64.0 64.0 67.0
Chemical 71.5 71.9 78.2 75.1 62.0 70.3 68.1 64.3 64.3 78.6 72.9 72.8
Pharma 122.2 133.7 190.1 171.0 184.3 175.6 167.8 149.8 154.9 198.7 154.3 131.8
High Tech 93.1 57.6 46.5 48.5 35.9 37.3 43.8 36.8 34.6 41.3 34.8 30.4
Average 86.5 80.0 94.2 89.6 87.3 87.5 86.9 80.2 81.0 95.6 81.5 75.5
0.0
50.0
100.0
150.0
200.0
250.0
DaysofInventory

What Is Supply Chain Excellence?
• Perform better than peer group
• Improve year-over-year results
• Align internally on metrics
• Deliver against the business strategy
• Demonstrate consistency in results
• Use innovation in supply chain processes
• Balance. Be leaders in managing trade-
offs

Productivity in Manufacturing

Productivity in Retail

Progress
(2000-2012)

Impact of A Recession

Value Network Strategy
Supply chain strategy
Business Strategy
What are the right things to do to increase company value?
Value-network Supply Chain Strategy
What are the right ways to support the business strategy?
What are the right trade-offs between value drivers for each value network?
Right product
platforms
Design the
supply
response
Build
organizational
systems and
manage talent
Align supply
relationships
Align demand
relationships
Effective Supply
Networks
Execution of buy-
side strategies
Continuous
Improvement
Capabilities Required
Supply Chain
Network Design
Design Networks
Innovation
Methodologies
Demand Networks
Joint Value Creation
Strategies
Business Process
How do I do the right things right?
Source: Supply Chain Insights, LLC

Agility

SHARED
VISION
+ SKILLS + INCENTIVE + RESOURCES + PLAN + LEADERSHIP = CHANGE
SKILLS + INCENTIVE + RESOURCES + PLAN = CONFUSION
SHARED
VISION
+ INCENTIVE + RESOURCES + PLAN + LEADERSHIP = ANXIETY
SHARED
VISION
+ SKILLS + INCENTIVE + RESOURCES + LEADERSHIP =
FALSE
STARTS
SHARED
VISION
+ SKILLS + INCENTIVE + PLAN + LEADERSHIP = FRUSTRATION
SHARED
VISION
+ SKILLS + RESOURCES + PLAN + LEADERSHIP =
GRADUAL
CHANGE
Source: J.P. Kotter
Collaboration: The Right Stuff

Commodity Price Increases and
Volatility

Ease of Getting Total Supply Chain
Costs
___________________________________________________________
Source: Supply Chain Insights LLC, Transportation (Aug-Oct 2012)
Base: Transportation Users (Manufacturers, Retailers and Distributors) (n=34)
Q18. How easy is it for your company to get total supply chain costs for your operations?
12% 12% 24% 24% 29%Users
USERS: Ease of Getting Total Supply Chain Costs
Extremely/very easy 5 Neutral 3 Extremely/very difficult
24% EASY 53% DIFFICULT

26
Driving Value through
S&OP

CostVolumeGrowth
CEO
Chief Customer
Officer
Chief Marketing
Officer
Sales
Account Teams
COO
VP of Supply
Chain
Customer
Service
Procurement Logistics
CFO
CIO
VP of
Manufacturing
Quality
Typical Organization

Sales and Operations Planning

Alignment

Finance

Information Technology

S&OP Process
Existence, Goals & Processes

S&OP Balance

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
Getting to Letter Perfect
39

S&OP Evolution
Manufacturing-
Driven
Deliver a Feasible
Plan for Operations
Match Demand
with Supply
Sales Driven
Match Demand
with Supply
Business-
planning Driven
Maximize
Profitability
Demand Driven
Maximize
Opportunity
Sense and
Shape
Demand
Market Driven
Maximize
Opportunity and
Mitigate Risk.
Orchestrate
Demand
Market to Market
Greater Benefit
• Growth
• Resilience
• Efficiency

S&OP Process
Plan Execution

Benefits Received
from S&OP Processes
Source: Supply Chain Insights, 2012
What benefits have you received from your work with S&OP processes?
59%
57%
50%
42%
38%
36%
34%
32%
32%
30%
Increasing revenue
Improving forecast accuracy
Reduction of inventory
Improving asset utilization
Determining outsourced manufacturing
Determining procurement requirements
Improving new product launch
Transportation and warehouse
management
Capital planning and asset management
Improvements in the perfect order
▲ 2%
▲ 5-7%
▲ 3-7%
▲ 3-6%
▲ 3-6%
▼ 10-15%
▼ 2-8%

Case Study

Days of Inventory (2000-2012)

Growth (2007-2012)

47
The Role of Forecasting

A forecast is not a forecast is not a forecast.

49
Business Planning
Forecasting
Constrained Forecast
Increasing levels of
granularity
Increasing need for value
network strategy alignment
A Forecast is not a Forecast is not a Forecast

One Number Forecasting is a HOAX.

Supply-side Views
Downstream Data
Account-Level
A
VMI C
Distribution
Network
Supplier Supplier Supplier Supplier
Distribution
Network
Distribution
Network
Demand-side Views
Hole in Enterprise
Architectures

Supply-side Views
Demand
Translation
Downstream Data
Account-Level
A
VMI C
Distribution
Network
Supplier Supplier Supplier Supplier
Distribution
Network
Distribution
Network
Demand-side Views

Talent Shortage

Gap by Position

• S&OP has grown in importance.
• The trade-offs of the supply chain cannot be
effectively modeled using a spreadsheet.
• Focus on continuous improvement and
serving the business.
Wrap-up

Questions?

Continue the Conversation?
www.supplychaininsightscommunity.com

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.

Where Do You Find Lora?
Contact Information:
lora.cecere@supplychaininsights.com
Blog: www.supplychainshaman.com
(5000 pageviews/month)
Twitter: lcecere 5200 followers.
LinkedIn: linkedin.com/pub/lora-
cecere/0/196/573 (5200 in the network)

Presentation given at the Demand Solutions Conference on Sales and Operations Planning

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