Sales and operations planning improves enterprise resiliency. In this presentation, we define enterprise resiliency and then discuss how an effective sales and operations planning process can improve enterprise resiliency and balance sheet results.

1. Improving Sales and
Operations Planning
Lora Cecere, CEO and Founder of
Supply Chain Insights
Jim Prescott, Sonoco Products

2. Speakers
Lora Cecere
CEO and Founder of
Supply Chain
Insights
Jim Prescott
Director- Industrial
Supply Chain N.A. at
Sonoco Products

3. Agenda
• Defining Supply Chain Excellence in S&OP
• Delivering Excellence in S&OP
• Wrap-up

7. S&OP Process
Existence, Goals & Processes

8. The Need for Balance

9. Form and Function of Inventory
Form Function
Raw Cycle Stock
Semi-finished Goods Safety Stock
Finished Goods In-transit Inventories
Seasonal Inventories
Promotional Inventories
Slow and obsolete

10. S&OP Balance

11. Need for Agility

12. Agility Importance vs. Performance

13. Getting to Letter Perfect
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
12

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

15. Functions of Center of Excellence

16. Center of Excellence

17. Challenges

18. Talent

19. Talent Issues

20. CEO
Chief Customer
Officer
Chief Marketing
Officer
Sales
Account Teams
Growth Volume Cost
COO
VP of Supply
Chain
Customer
Service
Procurement Logistics
CFO
CIO
VP of
Manufacturing
Quality
Typical Organization

21. S&OP Challenge

22. S&OP Barriers

23. S&OP Process
Plan Execution

24. Benefits
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…
Improving new product launch
Transportation and warehouse…
Capital planning and asset…
Improvements in the perfect order
▲ 2%
▲ 5-7%
▼ 10-15%
▲ 3-7%
▲ 3-6%
▼ 2-8%
▲ 3-6%

25. Case Study

26. Inventory Turns vs.
Operating Margin (2000-2012)

27. Sonoco is a Global Packaging
Company
• Founded in 1899, Sonoco is a $4.8 billion global provider of consumer
packaging, industrial products, protective packaging and packaging supply
chain services.
• With more than 19,600 employees working in more than 340 operations in
34 countries, we serve some of the world’s best-known brands in some 85
nations.

28. S&OP was a Part of a Larger
Transformation Effort
Conflicts between disciplined planning and agile
response
• Traditional production to a forecast with set lead time
agreements with customers (and suppliers)
• Demand driven pull, short lead time processes
emphasized in lean supply chains
Sonoco Products has blended the use of forecast based
supply chain practices with demand pull processes to
create agile supply chains
• Collaborative demand management
• Sales & Operations Planning (S&OP)
• Lean transformation and cash/ cost optimization

29. Industrial Products - Supply Chain
Paper
Manufacturing
Converting
Tubes & Cores
Composite Cans
AGILITY  Conversion must build to order with short lead times and
high service levels
DISCIPLINE  Paper must have Forward, Demand Based planning
for Operational Efficiency

30. Each Supply Chain Type has a set of Practices to Consider
early in the Innovation Process
• Push/ Optimization Supply Chains
– Link into the S&OP process
– Demand, Inventory, Capacity loading all planned in advance
• Pull/ Agile Supply Chains
– Late Stage Customization (at or near the customer)
– Pre-staged Inventory (VMI/SMI)
– Integrated Raw Material Planning
• Composite supply chains (Elements of Push/Pull)
– Raw material Planning/ MRP
– Collaborative Planning/ Inventory Risk pooling
– Integrated information flows
2

31. Sonoco’s S&OP Timeline
• 2006:
– Paper Division Leadership Chartered S&OP initiative
• 2007:
– Engaged Oliver Wight – Leadership training
– Process design / manual volume projections and supply planning
• 2009:
– Implemented Logility Demand Planner
• 2011:
– Implemented Logility Inventory Planner
• 2013:
– Optimizing Supply across the manufacturing network for lowest cost of
supply
• 2014:
– Initiated regular forecast accuracy metrics and field sales review of
forecasts

32. Leadership Sponsorship
• Aimed at Important Business Objectives - address the
pain
– Working Capital - addressed reduction in free cash flow -
every leader has WC Objectives
– Productivity - diminishing returns from traditional cost
improvement so supply chain optimization was key improvement
target
– Perfect Order - Customers do not see Sonoco service levels as
differentiating, started measuring in 2007
• Paper was the initial division to implement S&OP
– Progressive General Manager saw the value
– Paper is traditional “push process” that would benefit
– High impact division that serves 3 other Sonoco divisions as well
as external customers

33. Change Management Elements Required
• Active Leadership Sponsorship
– S&OP must deliver important business results
• External Expertise
– “Don’t know what you don’t know”
• Capable People
– People working in silos; must now work cross functionally
– Educate and address the WIIFM
• Good Data
– It all starts with an unbiased demand picture
– Data must be presented clearly – systems solution required
– Product family structure design, solid inventory management,
manufacturing capability/reliability are critical to success

34. S&OP is a data driven process
• Sonoco started with the data available
– As the process matured, we “outgrew” our spreadsheet demand forecast
process
• Spreadsheets could not properly disaggregate family level forecasts into the by
plant, by customer, by SKU, by sales territories needed to support good decisions
at all levels
• Needed the better statistical analysis provided by the Logility application
– Each S&OP step needed the ability to see data in a way that made sense
• But one source of truth (the common data set) was critical to success

35. S&OP Ongoing Success Factors
• Ongoing routine S&OP meetings… set calendar
• Structured meeting agendas
• Establishing TRUST in the numbers and people from
various departments
– Cross-functional participation, including Finance
– Participants empowered to make decisions
– Pre-work to support meeting inputs
• An unbiased baseline forecast to start the process - Where
Logility helped
• Supply chain facilitates the process, but each function
owns their step
• A separate process to manage daily execution is a must

36. Forecast Analysis and Accuracy by
Submarket
35
Evaluating statistical demand
forecasts
Accuracy measured for -1 and -3
month forecasts

37. Demand Review: By Sub-Market
36

38. Capacity Load Analysis
37

39. Supply Planning: Rough Cut Capacity By Paper Machine
38

40. Integrating S&OP into Management Cycle
 Demand and Supply
reviewed weekly
 Tracking production to
planned supply and budget
 Tracking demand and
fulfillment to forecast and
budget
 Tracking inventory control
performance
26,500
24,500
22,500
20,500
18,500
16,500
14,500
12,500
10,500
Paper Division Total Tons Ordered
2012 to Present
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53
2012 Total 2013 Forecast Est Ttl Period End 2013 Total Nominal Cap
1,800
1,600
1,400
1,200
1,000
800
600
400
200
-
Trade and Corrflex Linerboard Order Trend
2012 to Present
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53
2012 Linerboard Est Ttl Linerboard Wkly Linerboard 2013 Fcst 2013 Linerboard
12,000
11,000
10,000
9,000
8,000
7,000
6,000
5,000
4,000
3,000
Trade Total Order Trend
2012 to Present
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53
2012 Ttl Trade Est Ttl Trade 2013 Trade Fcst Period End 2013 Ttl Trade
18,000
16,000
14,000
12,000
10,000
8,000
6,000
4,000
Total Internal Orders
2012 to Present
2012 Total Internal Est Total Internal 2013 Internal Fcst Period End 2013 Total Internal

41. S&OP Impact in Push and Pull
Supply Chains
• Conversion (Pull from End Customer)
– Many customers, short 2-3 day order fulfillment lead time
– Inventories concentrated on raw materials with primarily make
to order FG
– Postponement strategy with many small facilities close to
customer
– Forecast effort is on raw materials to prepare supplier
– MAPE on raw material demand averages ~5-10%
• Paper (Push from Forecast)
– Runs integration process through monthly S&OP cycle
– Integrates input from 3 internal divisions and external sales
– Operates a forecast based push process for asset optimization
– Each mill tracked weekly on Perfect Order performance
– ABC categorization for inventory strategy & lead time promise

42. Cash & Customer – so how are we doing?
Perfect Order = (On time %) * (in full %) *
(Invoice Accuracy %)
As demand has filled plant capacity,
perfect order performance has
suffered and expedited freight has
increased
Cash Gap improved 12 days
(full year average) between Dec05
and Mar10
New challenge since 2010… CPG
companies driving from net 30 to Net
45607590105120 days
Now ~92%
60
50
40
30
20
10
0
Cash Gap Days
-23%
-12 days
12 Turns
Inventory
2005 2006 2007 2008 2009 2010 2011 2012

43. Key Takeaways
Lean pull systems are most effective in combination with data
driven, disciplined supply chain practices - Push Pull
integration
• S&OP provides the cross functional process to make
decisions based on the best demand information available
• Demand Management is critical to prepare to meet
customer requirements
– Customer information must be supported by statistical view
of Demand
– There is too much data and the world moves too fast to
manage with spreadsheets
• Lean pull systems provide the response capability to deal
with the remaining error

44. 2013 Analysis of Sonoco vs Peers by REL
(producer of the annual CFO Magazine benchmark survey)
In 2005, Sonoco was 3rd Quartile in
Cash Performance among its
Containers and Packaging Peers
Since beginning work on Cash Gap, it
has moved to top Quartile in cash
performance and Number One in
Inventory Days performance
While reducing inventory, Perfect Order
has continually improved

45. Delivering on the Promise
4

46. Business Pain

47. Metrics That Matter
• Lora Cecere’s 2nd book:
Metrics That Matter
• To publish in Fall 2014
Pre-orders available on Amazon:
http://tinyurl.com/metricsthatmatter
#sciwebinar

48. About Lora Cecere
• Founder of Supply Chain Insights
• Invited to be a “LinkedIn Influencer”
• Invited to write a guest blog for Forbes
• Author of 2 books: Bricks Matter (2012) and
Metrics That Matter (to publish Fall of 2014)
• 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.
Contact Information:
• Email: lora.cecere@supplychaininsights.com
• Blog: www.supplychainshaman.com (6000 pageviews/month)
• Forbes: http://www.forbes.com/search/?q=lora+cecere
• Twitter: lcecere (4800 followers)
• LinkedIn: linkedin.com/pub/lora-cecere/0/196/573 (7000 in the network)
#sciwebinar

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