Building an Effective S&OP

Process
Lora Cecere
September 2013

Cereal

Supply Chain Insights LLC Copyright 2013, p. 3

About Us
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.

Supply Chain Insights LLC Copyright 2013, p. 4

Second Printing of Bricks Matter:

16 Five-Star Reviews on Amazon
This is the new bible for all supply chain
executives. It provides an insiders
perspective that will prove incredibly
valuable to even the most grizzled
supply chain veteran. This is the next
must-have business book.
--Bruce Richardson, Chief Enterprise
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

Book can be ordered from Amazon.com in Hardcopy or Digital Format

Supply Chain Insights LLC Copyright 2013, p. 5

18 Reports in 2012

Supply Chain Insights LLC Copyright 2013, p. 6

2014 Publication

Supply Chain Insights LLC Copyright 2013, p. 7

Current State

Supply Chain Insights LLC Copyright 2013, p. 8

Current State

Supply Chain Insights LLC Copyright 2013, p. 9

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

Supply Chain Insights LLC Copyright 2013, p. 11

The Supply Chain Effective Frontier:

Supply Chain Insights LLC Copyright 2013, p. 12

Mining 20 Years of Financial Data

Supply Chain Insights LLC Copyright 2013, p. 13

Industry Progress

Supply Chain Insights LLC Copyright 2013, p. 14

Average Days of Inventory by Year

250.0

Days of Inventory

200.0

150.0

100.0

50.0

0.0

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
Source: Supply Chain Insights 2012

Supply Chain Insights LLC Copyright 2013, p. 15

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 tradeoffs
Supply Chain Insights LLC Copyright 2013, p. 16

Productivity in Manufacturing

Supply Chain Insights LLC Copyright 2013, p. 17

Productivity in Retail

Supply Chain Insights LLC Copyright 2013, p. 18

Progress
(2000-2012)

Supply Chain Insights LLC Copyright 2013, p. 19

Impact of A Recession

Supply Chain Insights LLC Copyright 2013, p. 20

Value Network 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?
Align demand Right product
Supply
chain strategyplatforms
relationships

Demand Networks

Design Networks

Joint Value Creation

Strategies

Innovation
Methodologies

Design the
supply
response

Supply Chain
Network Design

Build
organizational
systems and
manage talent
Continuous
Improvement
Capabilities Required

Align supply
relationships
Effective Supply
Networks
Execution of buyside strategies

Business Process
How do I do the right things right?
Source: Supply Chain Insights, LLC

Supply Chain Insights LLC Copyright 2013, p. 21

Agility

Supply Chain Insights LLC Copyright 2013, p. 22

Collaboration: The Right Stuff

SHARED
VISION

SKILLS

INCENTIVE

RESOURCES

PLAN

SKILLS

INCENTIVE

RESOURCES

PLAN

INCENTIVE

RESOURCES

PLAN

RESOURCES

SHARED
VISION

SHARED
VISION

SKILLS

INCENTIVE

SHARED
VISION

SKILLS

INCENTIVE

SHARED
VISION

SKILLS

RESOURCES

LEADERSHIP

CHANGE

CONFUSION

LEADERSHIP

ANXIETY

LEADERSHIP

FALSE
STARTS

PLAN

LEADERSHIP

FRUSTRATION

PLAN

LEADERSHIP

GRADUAL
CHANGE

Source: J.P. Kotter

Supply Chain Insights LLC Copyright 2013, p. 23

Commodity Price Increases and

Volatility

Supply Chain Insights LLC Copyright 2013, p. 24

Ease of Getting Total Supply Chain

Costs

USERS: Ease of Getting Total Supply Chain Costs

Extremely/very easy

Users

12%

12%

24%

Neutral

Extremely/very difficult

24%

24% EASY

29%

53% DIFFICULT

___________________________________________________________
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?

Supply Chain Insights LLC Copyright 2013, p. 25

26

Driving Value through

S&OP

Supply Chain Insights LLC Copyright 2013, p. 26

Typical Organization

CEO

Chief Customer
Officer

Chief Marketing
Officer

COO

Account Teams

Growth

VP of Supply
Chain

Sales

Volume

Customer
Service

Procurement

Logistics

CFO

VP of
Manufacturing

CIO

Quality

Cost

Supply Chain Insights LLC Copyright 2013, p. 28

Sales and Operations Planning

Supply Chain Insights LLC Copyright 2013, p. 29

Supply Chain Insights LLC Copyright 2013, p. 30

Alignment

Supply Chain Insights LLC Copyright 2013, p. 31

Finance

Supply Chain Insights LLC Copyright 2013, p. 32

Information Technology

Supply Chain Insights LLC Copyright 2013, p. 33

S&OP Process
Existence, Goals & Processes

Supply Chain Insights LLC Copyright 2013, p. 35

S&OP Balance

Supply Chain Insights LLC Copyright 2013, p. 37

What-if Analysis

Getting to Letter Perfect

S
&

OP

Common Practice

Market-driven Focus

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

Manufacturing plan

Trade-offs between make, source and

deliver

39
Supply Chain Insights LLC Copyright 2013, p. 39

S&OP Evolution
Sales Driven
Match Demand
with Supply

ManufacturingDriven
Deliver a Feasible
Plan for Operations
Match Demand
with Supply

Greater Benefit
Growth
Resilience
Efficiency

Businessplanning Driven
Maximize
Profitability

Demand Driven
Maximize
Opportunity
Sense and
Shape
Demand

Market Driven
Maximize
Opportunity and
Mitigate Risk.
Orchestrate
Demand
Market to Market

Supply Chain Insights LLC Copyright 2013, p. 41

S&OP Process
Plan Execution

Supply Chain Insights LLC Copyright 2013, p. 42

Benefits Received
from S&OP Processes
Increasing revenue
Improving forecast accuracy
Reduction of inventory
Improving asset utilization

59%

2%
5-7%

57%

10-15%

50%
42%

3-7%

38%

Determining outsourced manufacturing

36%

Determining procurement requirements

Improving new product launch

3-6%

Transportation and warehouse

management

2-8%

32%
32%

Capital planning and asset management

Improvements in the perfect order

34%

3-6%

30%

Source: Supply Chain Insights, 2012

What benefits have you received from your work with S&OP processes?

Supply Chain Insights LLC Copyright 2013, p. 43

Case Study

Supply Chain Insights LLC Copyright 2013, p. 44

Days of Inventory (2000-2012)

Supply Chain Insights LLC Copyright 2013, p. 45

Growth (2007-2012)

Supply Chain Insights LLC Copyright 2013, p. 46

47

The Role of Forecasting

Supply Chain Insights LLC Copyright 2013, p. 47

A forecast is not a forecast is not a forecast.

Supply Chain Insights LLC Copyright 2013, p. 48

A Forecast is not a Forecast is not a Forecast

Increasing need for value
network strategy alignment

Business Planning
Forecasting
Constrained Forecast
Increasing levels of
granularity

49
Supply Chain Insights LLC Copyright 2013, p. 49

One Number Forecasting is a HOAX.

Supply Chain Insights LLC Copyright 2013, p. 50

Demand-side Views

Supply-side Views

Hole in Enterprise
Architectures

Account-Level
A

VMI C

Downstream Data

Supplier

Supplier

Distribution
Network

Supplier

Distribution
Network

Supplier

Distribution
Network

Supply Chain Insights LLC Copyright 2013, p. 51

Demand-side Views

Supply-side Views

Demand
Translation

Account-Level
A

VMI C

Downstream Data

Supplier

Supplier

Distribution
Network

Supplier

Distribution
Network

Supplier

Distribution
Network

Supply Chain Insights LLC Copyright 2013, p. 52

Talent Shortage

Supply Chain Insights LLC Copyright 2013, p. 53

Gap by Position

Supply Chain Insights LLC Copyright 2013, p. 54

Wrap-up
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.

Supply Chain Insights LLC Copyright 2013, p. 55

Questions?

Supply Chain Insights LLC Copyright 2013, p. 56

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.

Supply Chain Insights LLC Copyright 2013, p. 58

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/loracecere/0/196/573 (5200 in the network)

Supply Chain Insights LLC Copyright 2013, p. 59