S&OP IBF-3 Core-Questions-Biel-07-07-12

of 10

IBF / S&OP – Answering 3 Core Questions
“ What Is It? “ / “ Key Elements For Success? “ / “ Implementation Challenges? “
Jim Biel, Saturday, July 7, 2012, http://www.linkedin.com/in/jimbiel
Expanded Library of IBF/S&OP Materials Found Here: http://www.slideshare.net/jimbiel
About the Author (Simple Bio): http://www.slideshare.net/jimbiel/professional-biography-jim-biel

(1) What is Integrated Business Forecasting (IBF) / Sales & Operations Planning (S&OP)?

APICS defines S&OP as the function of setting the overall level of manufacturing output
(production plan) and other activities to best satisfy the current planned levels of sales (sales
plan and/or forecasts), while meeting general business objectives of profitability, productivity,
competitive lead times, etc. as expressed in the overall business plan.

This is a good basic definition that I use to introduce the concept especially to Supply Chain
professionals.

In my own words, IBF / S&OP is the way the business is actually managed day to day and for
the long-term. It connects the hyper-tactical aspects to the long-range planning and execution
phases. It links the major functions and key business process areas together - connects the
demand, supply, finance, and general management / leadership functions together. It
represents the process where all important management decisions can be made, and provides
the most realistic view of the business, supported by key documented assumptions.

Ultimately, the process should be the major input for all planning and forecasting processes,
including providing a litmus test for longer term (24-36 months +) strategic planning horizons.
Some organizations have migrated and evolved their S&OP / IBF processes to be the primary
way they plan, forecast, and execute their businesses, especially for interim / quarterly
forecasts and for the annual planning process, as they leverage the rolling forecast aspects of
IBF.

An interesting article which appeared in a fairly recent edition of CFO Magazine, titled "Let It
Roll", outlines the details of this migration for annual planning for the FP&A function (Financial
Planning & Analysis).

I believe IBF should be the primary business model / process for managing and planning a
business, connected by well-defined metrics / KPIs, a common process, supported by the right
people (skills, competencies), with appropriate technology / software tools.

Much of my understanding is drawn from experience with the Oliver Wight methodologies and
definitions of IBF / S&OP, mixed with some new thinking drawn from Social Media, webinars,
software providers, and other venues.

Jim Biel, Cell: 847.687.5379, E-Mail: bielconsulting@gmail.com or jimbiel@hotmail.com
LinkedIn: http://www.linkedin.com/in/jimbiel / SlideShare: http://www.slideshare.net/jimbiel
Saturday, July 7, 2012

of 10

A graphic depiction of the IBF / S&OP process can be found below:

2) What are the key elements that need to be in place to have a successful IBP
process?

The key elements that need to be in place (a best practices view):
(1) Senior Leadership Sponsorship / Ownership (very important) – my experience, the
literature and studies makes it clear that this is the single most important aspect of
IBF success.

(2) Program / Process Management / Transformation Orientation - this process should
be viewed as a change management project - this is a transformation initiative - it
promotes transparency amongst functions and breaks down traditional functional
silos.

(3) Education and process understanding cascading down through the organization,
from senior leadership, down to at least the individuals who will execute the
process. I recommend at least two levels of education, senior leadership and one
level down. As the process is rolled out, spot and targeted education needs to
occur as issues and opportunities are observed. All new employees need to go
through some level of education based on their role in the S&OP process. This is
an on-going, repeatable effort based on turnover and new members joining the

of 10

team. One of my favorite IBF introduction pieces is a short book titled, “Sales &
Operations Planning, The Executive’s Guide”, written by two early S&OP Oliver
Wight pioneers, Thomas Wallace & Robert Stahl.

(4) Key performance metrics need to be established early for the overall business
performance (demand forecast accuracy, production schedule adherence, customer
service levels, revenue growth, margin growth, etc.) and IBF process performance.
Measure both the business performance and process performance - as the process
gets better the business performance should also improve. Initially understand a
baseline for each key metric (demand forecast accuracy, production schedule
adherence, customer service levels, etc.) and work towards improving the
baseline versus setting some theoretical target. Before applying any changes or
improvements, an organization clearly needs to understand the metrics baseline
(where are we today) to understand the current state and define realistic
improvement goals. Arbitrary theoretical metric goals provide a difficult environment
for teams to improve on important metrics.

(5) Understanding of roles and responsibilities by functional area, linked to appropriate
performance metrics (for example, demand management should have a demand
forecasting metrics, supply should have a fulfillment / customer service metric.
Need to determine who best owns the working capital opportunity (inventory), etc.).
In addition to a monthly process, there are daily and weekly aspects of roles and
responsibilities that need to be incorporated to assure only exceptions are brought
to the executive team for the monthly discussion. S&OP is more than a monthly IBF
Executive Meeting, as there are daily and weekly aspects of the process that also
need to be understood and implemented.

(6) A well-defined process map to understand how the daily, weekly, and monthly
processes work between the various functions (demand, supply, finance, GM). A
transformation map of how best to migrate to the desired process needs to be
established (Oliver Wight calls this the proven path). An assessment of the current
state and transformation map need to be defined early in the process. (Note: Oliver
Wight has published books providing assessment tools (Oliver Wight ABCD Checklist).
.
(7) Apply and leverage appropriate technologies to support the process, including IBF
purpose-built technologies (i.e. Steelwedge and others). This is a data rich process,
and applying appropriate and needed technology enablers will make the process

of 10

and individuals who execute it much more successful and value added. Robust
data management needs to be well understood to leverage and incorporate all the
necessary and available data sources. Using custom Excel and Access templates
are usually not robust enough and sustainable over the life of the process. Using all
sources of data, both inside and outside the organization are necessary to make the
process work best.

(8) A continuous improvement mentality, how to make the process and outcomes better
- a continuous improvement mentality needs to be imbedded in the organization.
The IBF process and outcomes will get better with time.

(9) Need to incorporate all material demand streams to match up against supply
constraints. It is a question of how best to satisfy unconstrained demand with
constrained supply parameters. Some organizations fail to include all demand
streams in the supply constraint process with sub-optimized results.

(10) Incorporate direct customer forecasts and input where available. Can a customer
give you a good forecast, and what might it be worth the supplier if they did? Need
to understand customer concentration and who to target for direct input.

(11) Incorporate all demand information into the mix - shipment data, order data,
consumer data, promotion data, etc. The era of Big Data is here. Many
organizations are challenged by how best to implement.

(12) New thinking in IBF incorporates "what-if" and scenario planning into the monthly
S&OP / IBF discussions with leadership. For example, scenario planning asks
what if the consensus forecast will be +20% or - 20% versus the published forecast
results. It gets the contingency planning discussion in place early and often (at
least monthly) to determine what actions should and could result if opportunities or
risks surface in real time. Some of the new software tools incorporate this process
into the technology.

(13) The concept of One Forecast. The entire organization, all functions, use the one
number derived from the process to manage, report, and analyze the business. If
all functions and leadership understand what is the best, most likely,
expected outcome, a realistic discussion can be executed, focusing more on how
to fill a forecasted performance gap or optimizing the outcome (up-side). The


of 10

monthly S&OP Executive discussion needs to be more a business meeting,
focusing on filling revenue/profit gaps and less of a "what is the exact number?"
meeting. Building the “what-if” scenario process off the One Forecast is also an
important aspect of a well functioning process. This is a migration as the process
matures.

(14) IBF supports long-range planning and strategic discussion / dialogue. A rolling 24-
36 month forecast, incorporating new and lost business should be part of the
discussion at the monthly S&OP discussion. The monthly Executive S&OP
meeting needs to evolve to be a strategic discussion versus a tactical discussion.

(15) An assumptions orientation versus number orientation needs to be in place. It is
best to debate assumptions versus raw reported numbers. Focusing on
assumptions brings the conversation to a much higher and robust level, especially
with executives. Getting caught into the minutiae of the data can be deadly
especially with functional executives.

(16) Need to understand the individual drivers, motivations of each participant and
function. To gain better initial acceptance of the process, it is best to understand what
individuals and functions will get out of this new process versus the old way of
doing things. Leverage this understanding and value to the individual / function.

(17) Drives better organizational decisions, as all relevant functional leads are present,
and utilize this process and monthly meeting as the definitive place for key
decisions to be understood and made. This should be the place where strategic
discussions and key decisions are identified, understood and ultimately made. As
the process progresses, short-term decisions become less important, and key
strategic decisions become the focus. It takes a savvy leader / sponsor and
supporting facilitator to move the group to this place.

(18) Insert a people person with core functional understanding to evangelize and lead
the initiative. If too much of a technician is inserted as the front man / day-to-day
process leader, the change management and other elements of the implementation
can be jeopardized. This needs to be viewed as a project, requiring a project
manager with a core conceptual understanding mixed evenly with a people
orientation. I have seen well-designed technical designs that are sub-optimized
because of a lack of interpersonal and broad-based functional understanding.


of 10

To provide a summary and snapshot of my view on Best Practices, please see the slide below
(extracted from a larger presentation which I have developed and used):

3) What are the key challenges to implementing IBP?

The largest challenge is the change management element of IBP, bringing "silo'd" functions
together to agree and to be transparent (in a public forum). The concept is fairly easy to
understand, however, the actual month on month discipline can be challenging. Transparency
and consensus amongst functions (demand, supply, finance, gm) can be challenging.

The amount of change and top leadership involvement are ultimately the key drivers of the
success of most IBF implementations.

My experience, and the literature suggests this.

It is best to have top leadership validation and involvement, mixed with a technical robust
process to get the full benefits that IBF can provide.
However, I have coached organizations and individuals, telling them that even an average
implementation of IBF concepts and practices, even without top leadership sponsorship can
usually provide some tangible benefits versus their current state.

The IBF concept is easy to understand, the initial buy-in is easy, the change management can
be hard, consistency and month-to-month execution can prove difficult over time. A strong
leadership sponsor needs to keep various functional leads committed and involved; as I have


of 10

seen implementations waver over time (usually within the 12-18 month time frame, especially if
the original leader sponsor leaves the role).

If accepted, IBF can / should be the way an organization understands, manages, plans, and
executes their business model.

In my experience, the way to address key challenges to IBF implementation are:

(1) Assuring up-front education and expectations for each individual within the process
- where needed, initial and on-going education and coaching needs to occur, not
only with existing members of the enterprise, but all new members who join and will
have a role in the IBF process. The subsequent coaching and mentoring needs to
occur based on observations of real time performance. Apply new learnings, and
refresher courses through one-on-one dialogue, and more formal targeted
workshops as needed. You always want to have an easily understood IBF
"playbook" ready to explain the process.

(2) Aggressively work to improve aspects of the process, wherever found.

(3) Always be on the lookout for innovation and new processes to be incorporated in
IBF - for example the latest literature, webinars, studies, software providers, etc. are
preaching the need to incorporate "what-if", "scenario planning", "contingency
planning", "agility" in the process versus the traditional one dimensional One
Forecast concept of traditional IBF / S&OP processes. This makes a whole lot of
sense, but the challenge is how best to do this. There are new age software products
that makes this easier to do, like Steelwedge. The agile IBF process is now the buzz
in this space.

(4) Need to check often with the Executive sponsor and point out areas needing the
most influence / leadership intervention. Sometimes senior functional leads need to
be coached by an executive sponsor to assure understanding and expectations. It is
best for a Senior Business Lead to coach a Senior Functional Lead.

(5) Core understanding of metrics and KPIs needs to be established and socialized
within the organization to support the IBF process. For example, demand forecast
accuracy and working capital (inventory) metrics can and have been imbedded in a
Demand Leaders performance set. When a demand leader has a demand accuracy
and inventory target, the thought process and understanding of the enterprise can
change for the better. KPIs and other performance metrics should be established
before and immediately even before process change has occurred. An organization


of 10

needs to know the baseline and determine how the change and effort is impacting
the business performance.

(6) Month-on-month execution can be very challenging. The team needs to stay the
course, and work the process from top management down. Early renditions of
IBF can be a bit rough as functions and individuals learn the dynamics of
transparency, expectations, and realities of the process. Some level of amnesty
needs to occur early on to assure individuals and functional leads do not disengage
from the process, seeing the process as potentially punitive. Continuous coaching
and guidance need to be part of the process.

(7) A savy process oriented, project management oriented individual needs to be part of
the implementation process, who can effectively work with the Senior Leadership
sponsor(s), and the individuals in various functions who need to execute the
process. This skill set is a combination of IBF understanding, understanding of
multiple functions, able to effectively work with IT resources, and having a sound
business orientation.


of 10

To provide a summary and snapshot of my view on Key Learnings / Observations about the
IBF process, please see the slide below (extracted from a larger presentation which I have
developed and used):

For reference, please see the following link to a fuller presentation which I recently used on
June 15, 2012 as a speaker at a Business Conference in Chicago, titled, “Implementing
Demand and S&OP Processes”. Much of the content and views discussed above are
contained in this presentation, along with some expanded views and content.

Link to a safe SlideShare site,

http://www.slideshare.net/jimbiel/sop-overview-implementation-approach-biel-06-1512


of 10


S&OP IBF-3 Core-Questions-Biel-07-07-12

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Viewers also liked

Viewers also liked (20)

Similar to S&OP IBF-3 Core-Questions-Biel-07-07-12

Similar to S&OP IBF-3 Core-Questions-Biel-07-07-12 (20)

More from Jim Biel

More from Jim Biel (13)

Recently uploaded

Recently uploaded (20)

S&OP IBF-3 Core-Questions-Biel-07-07-12