Stuck in Neutral?

Sales and
Operations Planning Best Practices

Jane Barrett
Noha Tohamy

Planning Track
© 2010 AMR Research, Inc. | Page 1
Agenda

Sales and Operations Planning: Process Best Practices

•  Findings from 2009 study
•  S&OP maturity
•  The seven deadly challenges of S&OP

Sales and Operations Planning: Technology Best practices

•  What do you need to support S&OP?
•  Where do you go to get it?

© 2010 AMR Research, Inc. | Page 2

S&OP Key Research Findings

•  As the curtain closes on the recession, S&OP has gained steam.

•  Performance gaps have grown.
•  Metrics remain a stumbling block.
•  Gap between strategy, S&OP and execution.
•  Data accuracy and timeliness issues cause pain.
•  Better use of technologies drives S&OP maturity.
•  No clear definition of S&OP technology space.

August 2009 study of 182 manufacturers and retailers

© 2010 AMR Research, Inc. | Page 3

S&OP Process Definition Changes

1990s Early 2000 Demand-driven Leaders

1.  Develop a demand 1.  Collect sales input 1.  Collect sales and market input
forecast 2.  Develop a forecast 2.  Develop a demand plan
2.  Balance demand 3.  Shape demand 3.  Demand consensus refinement
with supply consensus refinement including financial reconciliation
3.  Consensus meeting 4.  Develop a constrained 4.  Shape demand based on what-if
4.  Publish the plan supply plan analysis on demand for supply
5.  Review and gain 5.  Develop a constrained plan by supply
agreement through a 6.  What-if analysis by supply to determine
Consensus meeting trade-offs on the measurements,
6.  Publish the plan financials, and identify demand-shaping
opportunities
7.  Review and gain agreement through a
consensus meeting
8.  Publish the constrained plan
9.  Measure and communicate the plan

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Business Benefits—Importance vs. performance
Q. Please rate how important each of the following business benefits are. Please rate how well your company performs at
achieving each of these benefits (top three box summary) Performance
Gap Score

Increasing revenue 65%

38% 27%

Improving forecast accuracy 55%

28% 27%

Improving new product launch 53%

36% 18%

Improving logistics planning 48%

37% 11%

Better supply planning/chedule adherence 48%

35% 14%

Improvements in the perfect order/customer service 47%

38% 9%

Capital planning and asset management ` 46%

38% 8%

Improving asset utilization 46%

32% 14%

Improve translation of demand into procurement 42%

requirements/buy-side contract needs 34% 9%

Developing and executing demand shaping programs 41%

32% 8%

Reduction of inventory 40%

36% 4%
N = 182 total respondents

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 S&OP Capabilities—Importance vs. performance
Q. Please rate how important each of these S&OP capabilities are to the success of your companies 2009 business
strategies. Please rate how well your company performs on each of these capabilities (top three box summary) Performance
Gap Score

Collect sales/market input 70%

44% 26%

Develop a demand plan 68%

40% 28%

Communicate the plan/measure effectiveness 66%

44% 23%

Review/gain agreement of total demand, supply and 60%

financial plan 40% 19%

Use S&OP for the annual planning process 55%

41% 14%

Evaluate implications of a constrained supply plan 51%

43% 9%

Use S&OP for demand plan execution 48%

36% 12%

What-if analysis by supply to determine trade-offs 43%

25% 18%

Publish the constrained plan 41%

44% -3%

Shape demand based on what-if analysis of demand 37%

29% 8%

Demand consensus refinement 29%

26% 3%

N = 182 total respondents

© 2010 AMR Research, Inc. | Page 6

S&OP Maturity
Stage 1: Stage 2: Stage 3: Stage 4:
Stage
Reacting Anticipating Collaborating Orchestrating
Balance: S&OP 27% 40% 19% 14%
OP OP
OP S OP
S S
S
Goal Development of an Demand and supply Profitability Demand sensing, and
operational plan matching conscious tradeoffs for demand
shaping to drive an optimized
demand-response

Ownership S = Sales S = Sales and S = Go to Market S = Go to Market Strategies and

OP = Factory Marketing Plans Plans Solutions
capabilities OP = Planning and OP = Design of OP = Translation of demand into
factory capabilities demand driven plan, plan, make, deliver, source and
make and deliver service strategies, with
processes connection to execution

Metrics Order fill rate, Order fill rate, forecast Demand error, Demand risk, customer service,
asset utilization, error, inventory turns, customer service, cash flow, market share and
inventory levels functional costs working capital, total profit
costs

Increase in Organizational Balance

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 Demand Maturity

Constraint- Opportunity-
Forecasts
based S&OP based S&OP

Active Demand Translation

Demand Demand
MRP VMI
Visibility Shaping

Channel Market
Orders Orders
Sensing Opportunity

Stage 1: Stage 2: Stage 3: Stage 4:

Reacting Anticipating Collaborating Orchestrating

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Getting Out of Neutral: Why Is It So Hard?

The Seven Deadly Challenges of S&OP

•  Clarity of goal
•  Alignment to strategy
•  Reward systems
•  What is a good decision? 60% Change Management
•  Governance 30% Process
10% Technology
•  The role of the forecast
•  Connection of planning to execution

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S&OP: 10 Key Capabilities Required

1.  Data management and quality

2.  Integration into operational planning
3.  New product Introduction and management
4.  Multilevel and multidimensional hierarchies
5.  Assumption tracking and management
6.  Workflow and process management
7.  Constraint-based planning
8.  Performance management
9.  Financial planning/budgeting integration
10.  What-if, scenario management, simulation

© 2010 AMR Research, Inc. | Page 10

 Enterprise Planning: A Range of Solutions Will Be Needed

Corporate
Align and Manage
Strategy Driven Identify
Objectives and Performance

Planning, Budgeting, Forecasting

where and
Business Dashboards and Scorecards
how value
Units Model and is created
Spreadsheets SNO 6s in the
Innovate business.
Measure and Profitability Modeling
Geographies Decide
Analysis Driven
Categories Reporting Respond
ISO Model and more quickly
to market
Operational Analytics TPM Align and
SKUs SCP
Measure and Control Process Driven business
(low-level optimization) changes.
BAM
Events
Function Sub-Process E2E Process Extended
Supply Chain
Scope
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 Establish Governance of the Master Data
Metadata Master Data Model

Engineering/Marketing Sales/Finance Operations

•  BOMs/routings •  Customers •  Products
•  Components •  Markets •  Locations
•  Suppliers •  Regions •  Calendars
•  Prices •  Costs/prices •  Regions
•  Rates •  Categories •  Hierarchies
•  Calendars •  Calendars •  DOMs
•  Hierarchies

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Reference Architecture for S&OP
User Visualization/Interaction (Scenario Socialization)
CPM
S&OP Platform

Scenario planning Workflow/BPM

Supply Chain Modeling Financial Reconciliation Perf Mgt

Network Design
Workflow/BPM Hierarchy Mgt Collaboration
FB&P
Operational Planning Platform
PLM

Demand Mgt Supply Mgt NPI Mgt Inv Opt

Analytics/BI/BAM TPM

MDM Sales planning

Integration: e.g. CRM, FB&P, PLM, Sales, Excel, BI

ERP DP SP Local BI

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 Technology Sourcing
Customer Mgt

Product Mgt

Supply Mgt

Demand Mgt

S&OP

Analysis
Scenario

Performance Mgt
Customer/Product

Planning
Financial

Performance Mgt
Corporate
Operational Planning Sales and Operations Planning Financial/Strategy Planning

Spreadsheets

Business Intelligence

Business Suites

SCP Applications

Pure Plays/BoBs

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S&OP Solutions

Source: MarketScope for Sales and Operations Planning, 2009

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S&OP Technology Best Practices

•  Phase in technology support for S&OP after S&OP processes are

defined.
•  Resolve major outstanding issues with the underlying operational
planning systems before proceeding with S&OP technology.
•  Leverage SCP investments into S&OP lower level reviews.
•  Focus on support for technology-enabled collaboration in S&OP
tools.
•  Don’t rely on BI platforms alone to provide S&OP capabilities.
•  Get the financial plan integrated with the S&OP plan.
•  Support scenario-based planning, and timeliness of scenario-based
planning at the right level of detail.

© 2010 AMR Research, Inc. | Page 16

Thank you

© 2010 AMR Research, Inc. | Page 17