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“Business Efficiency Planning – Your Journey to S&OP Maturity ”

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Presentation on theme: "“Business Efficiency Planning – Your Journey to S&OP Maturity ”"— Presentation transcript:

1 “Business Efficiency Planning – Your Journey to S&OP Maturity ”
Eric Wilson CPF “Business Efficiency Planning – Your Journey to S&OP Maturity ” “In the Land of The Blind the One Eyed Man is King” - Desiderius Erasmus

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3 Eric Wilson, CPF Demand Planning and S&OP
Tempur Sealy over a $3 billion company and is the world's largest bedding provider. The company develops, manufactures and markets mattresses, adjustable bases, pillows and other sleep and relaxation products. Combining a proud history and groundbreaking innovation, the company holds some of the most highly recognized brands in the industry: Tempur®, Tempur-Pedic®, Sealy®, Sealy Posturepedic®, Optimum™, and Stearns & Foster®. Eric Wilson, CPF Demand Planning and S&OP 2015 voted by Supply and Demand Chain Executives as one of the Top 20 Pros to Know. Certified Professional Forecaster (CPF), and member of the (IBF) Board of Advisors. Frequent speaker and panelist and written numerous articles in publications such as Journal of Business Forecasting, Supply Chain Brain, and APICS Magazine. tempurericwilson

4 Objectives S&OP how we got here and where here is
Foundational components for successful S&OP Transforming transactional S&OP to a collaborative Business Efficiency Planning 4

5 A process by which a business makes better decisions
S&OP What is it? A process to develop tactical plans that provide management the ability to strategically direct its businesses to achieve competitive advantage on a continuous basis by integrating customer-focused marketing plans for new and existing products with the management of the supply chain. The process brings together all the plans for the business (sales, marketing, development, manufacturing, sourcing, and financial) into one integrated set of plans. APICS Dictionary, 14th edition A process by which a business makes better decisions Eric Wilson

6 1990s S&OP Early 2000 SIOP Today IBP
The Evolution of S&OP 1990s S&OP Early 2000 SIOP Today IBP Created by consultant at Oliver Wight Company 1987 Was not widely adopted by companies until after 1995 Companies began to integrate new products, finance, and inventory into planning process Integrated Business Planning: A decision-making process that realigns the tactical plans to support the company's strategies, business goals, and targets Data Gathering Develop a demand forecast Balance demand with supply Consensus meeting Publish the plan Collect sales input Develop a forecast Shape demand consensus refinement Develop an inventory and constrained supply plan Review and gain agreement through a Consensus meeting Collect sales and market input Develop a demand plan Demand consensus refinement Shape demand based on what-if analysis on demand for supply Constrained plan to supply and align to business targets What-if analysis to determine trade-offs on the measurements and identify demand-shaping opportunities or new strategies Management reviews and gain agreement through a consensus meeting Publish new tactical plans Measure and communicate the plan

7 ??? Benefits of S&OP / IBP N=163 Source: Gartner (February 2014)
N=664 Source: IBF Global survey data of north America (2014)

8 S&OP Supply Chain Trends 2015
Question: Do you think we need more industry standards around S&OP? N=123 (Source: Supply Chain Trends 2015) Question: Do you think there is enough coordinated process innovation in S&OP? N=123 (Source: Supply Chain Trends 2015) Question: Do you think behaviors are addressed enough in S&OP implementations? N=123 (Source: Supply Chain Trends 2015) Question: Do you think there is enough innovation is S&OP systems? N=123 (Source: Supply Chain Trends 2015)

9 S&OP Supply Chain Insights

10 Gartner S&OP Maturity Stage 5 Stage 4 Stage 3 Stage 2 Stage 1
- Goal: E2E trade-offs -”S" equals sales and marketing plans, with input from the supply chain group, and "OP" represents the integrated supply chain capabilities across plan, source, make and deliver -Metrics: Demand error, customer service, working capital, total costs Stage 5 Orchestrate – Coordinated enterprise and E2E supply chain value plan Stage 4 Collaborate – Demand Driven strategic plans - Goal: Creating outcomes -"S" expands to reflect go-to-market plans. "OP" reflects extended supply chain capabilities for profitable response - Metrics: Demand risk, customer service, cash flow, market share and profit Stage 3 Integrate -Alignment to a balanced plan - Goal: develop a plan -"S" reflects sales, and "OP" reflects local supply capabilities. - Metrics: Order fill rate, asset utilization, inventory levels -Goal: balancing supply and demand -"S" reflects sales and customer plans, and "OP" reflects supply plans - Metrics: Order fill rate, forecast error, inventory turns, functional costs Stage 2 Anticipate – Creation of operational plan Stage 1 Reactive – no shared goals or plans

11 S&OP Maturity * 68% of companies that say they have an established S&OP are between stage 1.7 and 2.6 Stage 5 Orchestrate – Coordinated enterprise and E2E supply chain value plan Stage 4 Collaborate – Demand Driven strategic plans Stage 3 Integrate -Alignment to a balanced plan Stage 2 Anticipate – Creation of operational plan Stage 1 Reactive – no shared goals or plans

12 On Gartner Scale of 1 to 5 Maturity
S&OP Roadblocks Why do Companies get Stuck? 7 Deadly Sins: No Clarity of goal Alignment to strategy Misaligned KPI’s No decisions being made Lack of Governance More than one plan or numbers Little Connection of planning to execution On Gartner Scale of 1 to 5 Maturity August 2009 survey based study of 182 companies: 67% stuck in Stage 1 and 2 2010 assessment of 57 companies S&OP maturity: 68% stuck in Stage 1 and 2 2012 assessment of 89 companies S&OP maturity: 60% Change Management 30% Process 10% Technology

13 S&OP attempts to balance many competing goals to a consensus plan
Common S&OP Plan Goal: Maximize revenue & market share, wants guaranteed product availability Sales plan Goal: Item / location forecast, wants predictable customer and marketing insights Demand plan Sales and Marketing Finance Plants Goal: ROI and higher margins, wants flexible supply chain at no extra cost Product Plan Goal: lower cost per piece, wants fixed and higher production runs Build Plan & Sales Operations Supply Chain Goal: Make the financial budget, wants static sales and operations plans Financial Plan Goal: optimization of supply chain, wants eliminate waste and lower inventory Distribution Plan S&OP attempts to balance many competing goals to a consensus plan

14 Business Efficiency Planning
Goal: A feasible plan, maximize revenue and minimize risk and disruption The demand & supply plan Operations Sales and Marketing Operations Sales and Marketing FP&A FP&A Goal: An efficient plan, control assets and resource utilization and improves cash flow The product and inventory plan Goal: An optimal plan, improve costs and maximize price margin realization The profit and operational plan Operations FP&A Sales and Marketing BEP works to align all functional areas around three common business goals to achieve the most efficient plan

15 Business Efficiency Planning
Revenue Service Income Sales Demand & Supply Plan Operational and Profit Plan Demand & Supply Plan Inventory and Product Plan Business Efficiency Planning Inventory Investment Product Cost Expense Margin Cash Earnings Operational and Profit Plan Inventory and Product Plan

16 Business Efficiency Planning
S&OP: No Clarity of goal No Alignment to strategy Misaligned KPI’s No decisions being made Lack of Governance Not one number plan Little Connection of planning to execution BEP: Aligned to three common goals Alignment to business strategy Aligned KPI’s that drive business Strategic decisions are made Clear roles and responsibilities Unified assumptions and plan Connection of planning to execution

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18 Business Efficiency Planning Objectives
A disciplined monthly process to align all functional areas to a unified set of assumptions and to enable and coordinate decision making Perspectives: - A single set of aligned plans that everyone is operating off of - Strategic integration of business plan and exception based decision making - A process that integrates the organization's and plant decision-making culture in the most productive way - Access to critical data to enable balancing of demand management and operational execution Desired Outcomes/Deliverables: Provide the ability to coordinate decision making cross-functionally to create value and achieve competitive advantage on a continuous basis which exceeds customers expectations Leaders will understand how commercial and operational sides of the business are performing against assumptions Everyone will be clear on direction that must be taken to support new assumptions and strategies All participants will be aware of risks and opportunities to current plans and assumptions Consensus will be achieved regarding any required trade-offs Metrics will be reported on performance to objectives related to key assumptions BEP is a process BEP is strategic focused BEP works to align all functional areas BEP will enable you to plan better to save money and increase service to your customers

19 Business Efficiency Planning
Sequential Elements as a Disciplined Process Next Generation S&OP Revenue Earnings Cash Function Reviews Executive Meeting Collaborative Meetings Revenue Strategy - Develop the most FEASIBLE, accurate, meaningful, and actionable plan to maximize revenue and minimize risk and disruption (output – Demand plan and Supply plan) Earnings Strategy - Synchronization that integrates a constrained/unconstrained optimized view of the supply and demand signal to develop the most an OPTIMAL plan to improve costs and maximize price margin realization (output – Operational plan / Profit plan) Cash Strategy – Integrate revenue and earnings and alignment to targets to develop an EFFICIENT plan to control assets and resource utilization and improve cash flow (output – Inventory plan / Product plan) Functional Reviews (meetings consisting of 1 for Commercial side and 1 for Operations side) - Review of individual functional plans and alignment to assumptions, changes, risks, opportunities, and execution of either commercial or operational aggregate plans (output – Commercial alignment / Operational alignment) Executive BEP Meeting - To align all functional areas to a unified set of assumptions and to enable and coordinate decision making across the full planning horizon (output – Enterprise plan)

20 Earnings planning team
Business Efficiency Planning Key Stakeholders Makes decisions on critical issues, authorizes spending, reviews financial plans to business performance, and aligns plans to strategic objectives Executive team Sets top management expectations, leads the monthly step process, manages conflict, and guides the teams toward consensus Process owners Determines the consensus sales forecast and sets production plan and validates resource availability to meet demand. Revenue planning team Details production rates and operational cost to service plans and sales and/or customer incentives to define total customer or item profitability. Earnings planning team Reviews product (including EOL, SKU complexity, and component rationalization), inventory, and investment assumptions to help manage debt to asset ratios. Cash planning team

21 Business Efficiency Planning Best Practices
Engagement and sponsorship of CEO and/or CFO or COO Collaboration and commitment throughout company from finance, manufacturing, marketing, HR, Product development, Supply & Demand, etc. Use cross functional teams for developing and reporting Everyone is using or can tie back to a single plan of record Communication should be formalized Alignment with strategic corporate objectives Regular and disciplined meetings and reviews Comparing plans to actual results Include risks and opportunities Including multiple lines of business that impact over all P&L and balance sheet Communication should be formalized What if analysis capability Integrated supporting applications Workflow management Action item assignment Financial reconciliation Access critical data by all functions for reporting and visibility Automated frequent reporting of KPI’s “it is 60 percent change management, 30 percent process development, and 10 percent technology”

22 Action Plan Monday Morning Next Next 30 Days 12 Months
Before you leave Next 30 Days Next 12 Months Network with others Be purposeful about your learning Support local Universities and determine how you can become more involved to grow our profession Consider gaps in your current processes and technology Assess your S&OP process maturity, be honest and understand impact to deliver value Educate key stakeholders on potential benefits Secure (re-secure) top sponsorship Establish a vision and roadmap Migrate from functional S&OP to collaborative BEP Clearly define goals and align metrics Integration of Business objectives, and financial planning process to support effective decisions and trade-offs Technology is essential and enabler (people and process still need to come first) 22

23 Thank You. Eric.wilson@tempursealy.com 859-983-5190


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