Your Sales and Operations Planning (S&OP) Analytics: Crystal Ball or Ball and Chain?


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Featured Presenter: Bob Ferrari, Ferrari Consulting and Research Group

Rising corporate risk and reward - around the ever-trickier gambit to balance supply and demand is producing a world of new opportunity:

• New Skills: Supply Chain MBAs top Wall Street Journal list in 2013
• New Tools: Cloud-based analytics and planning solutions are delivering today on visibility not previously possible
• New Way of Thinking: 'What if' scenarios are helping mitigate risk and reward for those agile enough to connect plan with execution

Do your S&OP team, process and technologies give you a holistic, predictive look at your business potential, like a Crystal Ball, to get in front of demand shifts, new product prospects and supply cost factors? Or are you stuck in an articulated, but sequential monthly S&OP process that weighs down decision-making within the confines of the schedule and a rigid software system, like a ball and chain?

Please join noted Supply Chain thought leader and analyst, Bob Ferrari, in an interactive webinar on Tuesday, August 13th to learn more about how you can build and polish your corporate Crystal Ball with the right focus and leverage of advanced planning analytics that can blend the best of backward and forward looking context on your business.

For more information about Steelwedge's analytics, please visit:

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Your Sales and Operations Planning (S&OP) Analytics: Crystal Ball or Ball and Chain?

  1. 1. 1 Your S&OP Analytics: Crystal Ball or Ball and Chain? Bob Ferrari, Executive Editor- Supply Chain Matters Blog Managing Director- The Ferrari Consulting and Research Group LLC August 13, 2013
  2. 2. Copyright 2013 The Ferrari Consulting and Research Group LLC Key Messages Slide 2 S&OP needs to move toward more timely decisions and better prediction of events and business outcomes The Planets of Business Needs and Information Technology Are Aligning Toward More Leveraged Use of Predictive Analytics as the Enabler Predictive Analytics Constraint Modeling Best Outcomes for Your Business =+
  3. 3. Copyright 2013 The Ferrari Consulting and Research Group LLC Slide 3 Outline  Snapshot of today’s global supply chains and S&OP mechanisms  Explore what are predictive analytics capabilities  Reflect on todays S&OP challenges and needs  Converging forces (Business, Supply Chain, IT)  Implications and Takeaways  Recommendations
  4. 4. Copyright 2013 The Ferrari Consulting and Research Group LLC 4 End-to-End Supply Chain 4 Supplier CustomerSuppliers’ Supplier Source Internal or External Internal or External Your Company Return Deliver MakeSource Return Plan Deliver Return Source Return MakeSource Return Plan Deliver Return DeliverMake Plan Return Return Customers ’ Customer Physical, Information, and Financial Flow
  5. 5. 5 Today’s Supply Chains • Complex, global-based value-chains • Segmented-Open-Closed-Vertically Integrated- Outsourced • Servicing more demanding customers: • Increased product complexity • Technology-enabled online consumer • Shorter product development cycles • Multiple years of cost-cutting, lean and demand- driven initiatives • Explosion in data- drowning in data • Dramatic increases in supply chain disruption and risk events
  6. 6. The New Normal Slide 6 Risk Complexity Unpredictability Balancing Efficiency – Agility - Responsiveness In a 7 Day by 24 Continuous Cycle
  7. 7. Copyright 2013 The Ferrari Consulting and Research Group LLC S&OP As Originally Launched  Aligning supply and demand in a series of process steps  Achieving one-number consensus  Context of the financial plan  Sequential in nature with lots of data collection and analysis  Operations-led  Execution planning horizons  Push to senior management for needed decisions Slide 7 Demand Analysis Supply Analysis S&OP Meeting Financial Goals & Metrics Business Metrics Sales & Marketing Forecasts Inventory Plans Forecasts and Order Rates Supply Plans New Product Plans Source: Dick Ling, Andy Coldrick Original Creators of S&OP Constant Analysis of Data
  8. 8. Copyright 2013 The Ferrari Consulting and Research Group LLC S&OP As Matured in Today’s Supply Chain Environments  Broad cross-functional involvement and collaboration  External stakeholders and trading partners  Senior management sponsored and need for process to support more integrated business planning  Longer planning horizons (tactical and strategic)  Outside-in orientation  Orchestrate implementation of desired business outcomes Slide 8 Portfolio of Products and Services Suppliers Trading Partners Customers Sales & Marketing Managing Supply Managing Customer Demand Activity Portfolio Demand Supply Integrative Reconciliation Executive S&OP Goal: A Decision Support Process for End-to-End Supply Chain Requirements
  9. 9. Copyright 2013 The Ferrari Consulting and Research Group LLC Previous Steelwedge Webinar- Tom Wallace  Wallace’s takeaway messages regarding today’s evolution of S&OP:  Continues to iterate important inflection points  Needs to integrate both financial and operational planning  S&OP scope is both strategic and tactical  Needs to enhance agility through near-term tactical and medium and long-term strategic plans.  Days of blood, sweat and Excel are over Slide 9
  10. 10. Copyright 2013 The Ferrari Consulting and Research Group LLC Current Process Challenges  Multiple research surveys indicate S&OP processes have stalled  Too much time invested in assembly and analysis of data  Process lacks ability to synchronize planning and fulfillment information  Desire and/or need to move beyond a monthly cycle  More integrative tools beyond spreadsheets / ad-hoc analysis  Too much time required in background analysis projects vs. ability to make informed decisions at an S&OP meeting  Latency and inconsistency in S&OP decision-making leads to senior management frustration  Desire by participants to move toward extensible integrated business planning and response Slide 10
  11. 11. Copyright 2013 The Ferrari Consulting and Research Group LLC Time for Polling Question  What is the single most significant challenge hindering your firm’s S&OP process? A. Too much time required to gather and analyze data to come-up with meaningful insights B. Cannot keep-up with the current pace of business C. Process needs to become more predictive to business outcomes D. Ability to analyze information and trends during the actual S&OP meetings Slide 11
  12. 12. What are Predictive Analytics Capabilities Slide 12
  13. 13. Standard Reports Ad Hoc Reports Query / Drill Down Alerts Statistical Analysis Randomized Testing Predictive Modeling Optimization “What’s the best that can happen?” “What will happen next?” “What happens if we try this?” “Why is this happening?” “What actions are needed?” “What exactly is the problem?” “How many, how often, where?” “What happened?” Predictive and Prescriptive Analytics Descriptive Analytics (the “what”) Degree of Intelligence Source: Analytics At Work, Thomas H. Davenport, Babson College Analytics Defined- Tom Davenport
  14. 14. Copyright 2013 The Ferrari Consulting and Research Group LLC Analytics Within Supply Chain Processes  Deployed in supply chain process for quite some time  Supply chain planning and optimization  Transportation scheduling and routing  Factory and production process scheduling  Multi-echelon inventory optimization/ network design  New advances in information technology, now open new opportunities and awareness  Dramatically accelerated clock speed of business and added complexity and risk Slide 14
  15. 15. Copyright 2013 The Ferrari Consulting and Research Group LLC Analytics and Big Data An Analytically-Driven Process  “Big-Data” term often over-hyped and used to convey all sorts of concepts  Organizations are literally drowning in data but lack meaningful insights  Analytics is essentially how to process, analyze and visualize vast arrays of information in more innovative ways  Analytics-enabled decision-making in speed, quality and context  Both a qualitative and quantitative mindset:  What do we know vs. what do we think we know  Requirement of augmented or new skills Slide 15
  16. 16. Copyright 2013 The Ferrari Consulting and Research Group LLC Analytics Applied to Key S&OP Decisions  Sensing market changes ahead of the competition  Defining the most appropriate segmentation of supply chain(s)  Determining most profitable product and/or customer segments and how to best respond.  Identifying new opportunities for responsiveness, reducing inventory or decreasing costs Ability to simulate or compare different response scenarios to market opportunities and/or supply chain non-alignment quicker than industry competitors Slide 16
  17. 17. Copyright 2013 The Ferrari Consulting and Research Group LLC One Other Polling Question  What is your organization’s current awareness of predictive capabilities? A. We have no such capabilities at this time B. We are beginning to explore use C. We need further understanding to the benefits of S&OP D. We have a staged deployment plan for use Slide 17
  18. 18. Converging Forces in Business, Supply Chain and IT Slide 18
  19. 19. C-Suite Concerns and Objectives Slide 19 “ As a group, CEO’s are investing more in customer insights than any other functional area. They are seeking a better understanding of individual customer needs and improved responsiveness” 2012 IBM Global Chief Executive Officer Study of over 1700 CEO’s Across 18 industries Top CFO and Finance priorities over next 2-3 years: 73 percent cite lowering costs and increasing productivity 61 percent cite investing in analytics, planning, budgeting/forecasting 44 percent cite needs for upgrading organizational skills 2013 Accenture CFO Survey of 1250 Senior Finance Executives from Multiple Industries Top Cited Concerns: • Our inability to predict future performance in the new normal of permanent market volatility (70 percent) • Worried about the resilience of their supply chains (80 percent) March 2012 Accenture Outlook: Preparing for the Unpredictable
  20. 20. Strong Evidence of Business Benefit Slide 21 “Two-thirds of respondents report that use of information (big data) and analytics is creating competitive advantage for their organizations.” Compares with 37 percent citing benefit two year ago- a 70 percent increase in two years Source: Analytics: The real-world use of big data IBM Institute for Business Value and Said Business School 2012 survey of over 1100 professionals across 26 industries
  21. 21. Copyright 2013 The Ferrari Consulting and Research Group LLC IT Technology Convergence  From OLTP to in-memory database and highly scalable OLAP  Sequential processing to MPP  Data attached to the application to de-coupled streaming databases  Data aligned to business constraints, insights and decision-making support  Centralized data warehouse to bundled analytical appliances  Centralized to distributed data management, ownership and control of data Slide 22
  22. 22. Copyright 2013 The Ferrari Consulting and Research Group LLC Supply Chain Process Convergence  More rapid and volatile business cycles are motivating many manufacturers and retailers to re-look at sequential planning and execution processes  Converge planning with sensing of orders, changed events, disruptions, market opportunities  Augment planning with analytics, and shift emphasis toward more predictive capabilities  True decision support fueled by embedded analytics Slide 23 The Holy Grail of Supply Chain Insights-Enabled Execution
  23. 23. Copyright 2013 The Ferrari Consulting and Research Group LLC Implication of These Converged Forces  The ability to extract insights at sophistication levels not easily achieved in the past  From historic sequential to more predictive and near real-time planning and fulfillment information analysis  Leverage the advancements in in-memory computing, visualization, business intelligence convergence  Incorporate both structured and unstructured information  Cloud computing and composite apps allow S&OP teams to fill-in process gaps  Sense and respond capabilities to orchestrate desired business outcomes  Supplemental mobile and social enabled tools to accommodate virtual mobility and time-critical needs Slide 24
  24. 24. An S&OP Information Architecture Blueprint Slide 25 What-If Scenario Management Enhanced Collaboration Analytics- Based Decision SupportSimulation S&OP Information Utility (Streaming Data) Management Dashboard (Sense and Respond) Business Activity Monitor and Management Platform In-Memory Enabled Faster Planning and Decision Support Cycles Demand and Supply Planning Data Leading Indicator Data Execution and Fulfillment Data Unstructured Data Demand & Financial Sensing Data Best Optimized Business Outcomes Continuous or Ad-Hoc Analysis and Review Exception and Response Based Planning Insertion of Additional Analysis or Predictive “Apps”
  25. 25. Implications and Takeaways Slide 26
  26. 26. Copyright 2013 The Ferrari Consulting and Research Group LLC Implications and Takeaways  Clock speed of business change has dramatically increased  Extended and global supply chain now constantly challenged with complexity / variability / volatility and risk  Organizations and S&OP teams drowning in data but lacking important insights  Sequential planning and execution processes no longer keeping-up with business change is reflected in S&OP process frustration  Senior management converging on need for improved business responsiveness and predictive decision-making  Technology convergence will open new opportunities in supporting more predictive decision-support Slide 27
  27. 27. Copyright 2013 The Ferrari Consulting and Research Group LLC A Revised Goal  Extensible Integrated Business Planning  Making timely, more well informed and insightful decisions based on information insights and business goal context  Single information and intelligence-based repository that supports decision-making within the S&OP process (equates to original Reconciliation Process)  Abilities to sense and respond to market opportunities and/or operational risk  Anticipate or shape market, product demand, supply or fulfillment changes quicker than competitors  Simulate or compare various business scenario options  Orchestrate desired business outcomes Slide 28
  28. 28. Select Examples of Predictive Analytics- Case Study 1 Slide 29 Global distributor and wholesaler of pharmaceutical drugs and medicines servicing hospitals, pharmacies and healthcare providers. A predictive capability that synthesizes market intelligence from customers, manufacturers and other sources to identify significant or unusual upticks in orders for specific pharmaceuticals that could trigger a broader market shortage. Can also identify potential areas of abuse. If supply shortage occurs or is expected, an automatic allocation system is recommended and initiated that allocates limited supplies of that drug to customers based on a set of pre-defined parameters. If network-wide shortage is predicted, it can trigger alerts to procurement supply team to augment inventory of specific likely drug alternatives that customers will likely substitute.
  29. 29. Select Examples of Predictive Analytics- Case Study 2 Slide 30 A global wired and wireless network infrastructure equipment provider Within a year of implementing analytics capability, the company could determine in near real-time, when a product was not selling as expected, and trigger demand shaping recommendations for other similar products. Alternatively, if product sales trend higher than forecast, a quick analysis of likely sales growth based on available sales forecasts triggers a review of contract manufacturing material and capacity planning options to determine timing options to boost production both short and long-term.
  30. 30. Recommendations Slide 31
  31. 31. Copyright 2013 The Ferrari Consulting and Research Group LLC Leverage Power of Newer Technology Tools o Data attached to an application to de-coupled streaming planning and execution data feeding an S&OP information utility o OLTP central data warehouse to in-memory, highly engineered, OLAP “apps” o Data aligned to business constraints, insights and predictive decision-support capabilities o More emphasis on data visualization / simulation and planning scenario tools o Augmenting existing IT investments with more cloud-based predictive and business intelligence capabilities Slide 32 Leverage Current Converging Forces of Advanced Technology
  32. 32. Copyright 2013 The Ferrari Consulting and Research Group LLC Plan for Impact on Existing People and Process  Recognize the growing awareness of the power of a predictive analytics driven process  Be cognizant that predictive analytics capabilities are still evolving  Encourage the receptiveness of S&OP participants to analytical concepts  Understand requirement for augmented skills Slide 33
  33. 33. Copyright 2013 The Ferrari Consulting and Research Group LLC Other Recommendations  The goal is enhancing S&OP decision-making vs. that of technology and tools  S&OP team must take ownership- IT partnership and support  Begin in small, managed scope and expand  Tailor the process, data sources and analytics tools to support specified opportunities based on S&OP priorities  Include the change management and skills impacts in your milestones. Consider centralization of capability  Critical to strive for high data quality and well understood information taxonomy  Not a rip and replace of existing systems but rather an insertion of augmented capability Slide 34
  34. 34. Copyright 2013 The Ferrari Consulting and Research Group LLC Final Thoughts Slide 35 A vibrant S&OP process supporting timely decisions and better prediction of events and business outcomes Seize the opportunity of the alignment of business, supply chain and IT planets toward more leveraged use of predictive analytics From Key Performance Indicators (KPI’s) To Key Responsive Indicators (KRR)
  35. 35. Slide 36 Thank You Contact Information: Bob Ferrari Email: Twitter: @Bob_Ferrari Web Site:
  36. 36. Slide 37 Appendix Slides
  37. 37. Copyright 2013 The Ferrari Consulting and Research Group LLC Slide 38 Introduction • Independent supply chain and B2B industry analyst- previous leadership roles at AMR Research and IDC • Multiple years of supply chain business planning, operational and IT systems implementation experience • Recognized supply chain strategic and tactical thought leader, technology market influencer • Consultant in supply chain strategy, business process, and information technology deployment • Founder and Executive Editor Supply Chain Matters blog Top Ten SCM Blogs Top 25 Most Influential SCM Blogs Logistics
  38. 38. © 2013 Steelwedge Software, Inc. Confidential. 1 Single Line of Sight: Plan, Perform, Profit Planning Analytics – Big Data Driven S&OP Nari Viswanathan
  39. 39. © 2013 Steelwedge Software, Inc. Confidential. 2 < Control and visibility > Risks > Business change > Collapse: planning/execution 12 months=70% Growth in Data Bigger Demand/Supply Network = Bigger Data
  40. 40. © 2013 Steelwedge Software, Inc. Confidential. 3 Explosion of Data Requires Advanced S&OP TechnologyDatavolume/complexity Business Value 20- 100X 2- 10X X Big Data Powered S&OP: Measures units/dollars, links departments/ time horizons and delivers multiple supply scenarios Advanced S&OP: Measures units/dollars links supply, demand & finance Traditional S&OP: Measures units
  41. 41. © 2013 Steelwedge Software, Inc. Confidential. 4 Characteristics of S&OP Datasets • Classic Big Data problem – High volume, velocity and variability • Steelwedge Integrated Business Planning manages – Millions of planning data elements – 1000’s of business rules – Deep & complex hierarchies
  42. 42. © 2013 Steelwedge Software, Inc. Confidential. 5 Volume Velocity Variability Vertical, horizontal and multi-dimensional aggregation and disaggregation in real-time Reflects real world complexity Harmonizes Heterogeneous Data (from different formats, structures & semantics) S&OP Big Data Model 1000 Customers 100M to 1 B planning relations 10000 orders per day 1-10M calculations per minute 100 new items per day 1000 new customer- product combinations per week
  43. 43. © 2013 Steelwedge Software, Inc. Confidential. 6 Planning Versus Analytics • Planning – Forward looking – Suited for simulation and mathematical calculations – Planner roles typically use – OLTP technology • Analytics – Backward looking – Suited for metrics and aggregation – Execs and business analysts – OLAP technology Ideal solution marries the best of both these worlds
  44. 44. © 2013 Steelwedge Software, Inc. Confidential. 7 Planning Analytics Scalability & Performance Benefits • Higher User & Data Scalability • Higher Performance at Scale • Faster Report Creation • Superior End-user Self-service • Dedicated Reporting Data base Operational Data base (OLTP) S&OPInsight S&OP Insight High Performance with High Scalability Operational Data base S&OP Insight (OLAP)
  45. 45. © 2013 Steelwedge Software, Inc. Confidential. 8 #1: To High Resolution S&OP The Hierarchy of Supply Chain Metrics Source: Gartner
  46. 46. © 2013 Steelwedge Software, Inc. Confidential. 9 #2: Extra-Ordinary Scenarios
  47. 47. © 2013 Steelwedge Software, Inc. Confidential. 10 #3: Better Global Visibility
  48. 48. © 2013 Steelwedge Software, Inc. Confidential. 11 S&OP Apps – Planning Analytics For Offline Processes Set S&OP Parameters & Drive Process S&OP Enhanced Data Inventory Segmentation Stocking Strategy Demand Policy Demand Pattern Segmentation Inventory Segmentation Service Level Planning Automate and Standardize Offline Orphaned Processes Customer Developed Solutions Range Based Forecasting In collaboration with Aztral & Blake Johnson Range Forecast
  49. 49. © 2013 Steelwedge Software, Inc. Confidential. 12