Integrated Business Planning

Agenda
 Introductions
 Journey to Business Excellence:
Integrated Business Planning – Next Generation Sales &
Operations Planning by Terry Johnson
 Oracle Customer Success Stories
 Wrap up and Q&A
Introductions
Gerald O’Sullivan
Director, Application Strategy Group
Oracle Value Chain Planning Applications
Terry Johnson
Senior Principal – Oliver Wight Americas
Professional speaker, educator and coach for Class A Business
Excellence - Keynote at management conferences worldwide
Key Takeaways
• Value Chain Planning implementation is a journey, not a project –
each phase has its own short time to value, but one should have a
long term vision.
• Where to start – Focus on the highest bang for your buck within
each BU/Region and don’t wait for ERP Implementation or upgrade
• Pick your critical “green” KPIs – one cannot be perfect at all
measures – which KPIs defines you as a company, and meet your
strategy?
• Create transparency between All departments, Sales, Marketing,
Finance, and SC and align your Supply with your Opportunities
A Contemporary View of “Best Practice” S&OP
- Integrated Business Planning Terry L. Johnson
Oliver Wight Americas
tjohnson@oliverwight.com
800-258-3862
© Oliver Wight International 2009
Oliver Wight Positioning Statement
Oliver Wight are leading business
improvement specialists
who educate, coach and mentor people
to lead and sustain change
on the journey to business excellence and
outstanding business performance
© Oliver Wight
We “Wrote the Books”
© Oliver Wight
Our Clients
© Oliver Wight
S&OP Has Been Evolving for Decades
Present
Integrated Business Planning
(With Supply Chain Collaboration)
1990s – Present
Integrated Business Planning (Internal)
1980s – 1990s – Present
Sales and Operations Planning
1970s – 1980s
Production Planning
© Oliver Wight International 2009
Integrated Business Planning . . . .
Through People, Processes and Technology
Advanced Planning Command Center
Advanced Planning
Command Center
MANAGEMENT
MANAGEMENT
BUSINESS
BUSINESS REVIEW
REVIEW
“Aggregate”
Planning
STRATEGY
BUSINESS PLAN
PERFORMANCE
SUPPLY
SUPPLY
REVIEW
REVIEW
Hyperion Planning
PRODUCT
PRODUCT
MANAGEMENT
MANAGEMENT
REVIEW
REVIEW
DEMAND
REVIEW
Demantra Integrated
Business Planning
Demantra
Advanced
SUPPLY CHAIN
Supply
MANAGEMENT
Chain Planning
Real-Time Sales & Operations Planning
Rapid Planning
SUPPLY POINT
MANAGEMENT
Strategic Network
Optimization
SUPPLIER
Sourcing
MANAGEMENT
Demantra
MARKET
MANAGEMENT
Demand
Management
DEMAND
MANAGEMENT
PROJECT
MANAGEMENT
Projects
&
RESOURCE
Primavera
MANAGEMENT
Predictive
SALES
Trade
MANAGEMENT
Planning
PROCUREMENT
Procurement
MANAGEMENT
PROCUREMENT
Procurement
MANAGEMENT
HCM
PORTFOLIO
MANAGEMENT
Agile
PLM
“Detailed”
Planning
&
Execution
S&OP/IBP Is a Simple, Common Sense Process
for Aligning Company Plans Every Month
© Oliver Wight International 2009
Introductions-What are your experiences?
 Are you practicing S&OP – what vintage?
 Are you generating significant benefits?
 Is S&OP a key decision making process for your business?
 Are your executives heavily involved in the process?
S&OP/IBP Ownership & Accountability
GM /CEO
Dir / VP
Dir / VP
Dir / VP
Dir / VP
© Oliver Wight International 2009
Broadly Speaking, the Differences Between S&OP
and IBP Are:
1. Greater financial integration – Income statement, balance
sheet, cash flow projections (including anticipated results
from projects and initiatives) across the planning horizon
resulting in improved information for decision-making and
greater accountability; financial performance metrics
2. Inclusion of strategic initiatives and activities in the monthly
management process, reinforcing that one primary
management process is used to run the business
3. Improved simulation – Changing operating and financial
parameters resulting in improved contingency planning
(volume, mix, pricing, costs, SG&A)
© Oliver Wight International 2009
Broadly Speaking, the Differences Between
S&OP and IBP Are:
(con’t.)
4. Easier translation from detail information to aggregate and
aggregate to detail enabling quicker, more timely
simulations and greater granularity of information for
operations and finance
5. Improved decision-making – Integrated reconciliation
keeping decisions at the lowest practical level
6. Improved trust throughout the management team with one
process, clear accountabilities and commitment to “Class A
Behaviors.”
© Oliver Wight International 2009
Improved Business Results Through Integration
-- Alignment and Synchronization
Excellent Performance Requires Continuous Focus,
Alignment (Realignment) and Synchronization of
People, Processes and Tools
© Oliver Wight International 2009
To create and sustain a successful enterprise … multiple business processes
require the integration, “communication” and precision of a watch!
Consistent Process – Consistent Planning – Consistent Results!
The more effective
the processes, the
more predictable the
output!
Greater financial
predictability is one
of the driving forces
for performing the
S&OP process well!
IBP Integrates Core Processes & Finance and Ensures
Alignment / Realignment With Business Strategies
Managing Demand
Managing Supply
Managing Products
© Oliver Wight
PV977/015
F
I
N
A
N
C
E
From My Personal Perspective . . .
 Now the knobs are connected . . . Decisions turn into action!
 Of all the benefits . . . Management teamwork was a bonus!
 Thought we wouldn’t be in business . . . Look at us!
© Oliver Wight International 2009
Typical Results – Oliver Wight Clients
Increased Forecast Accuracy
18 – 25%
Increased Sales Revenue
10 – 15%
Increased On-Time Delivery
10 – 50%
Inventory Reduction
18 – 46%
Safety Stock Reduction
11 – 45%
Increased Productivity
30 – 45%
Source: Oliver Wight
© Oliver Wight International 2009
Best Practice Is Now to Integrate Product
Portfolio Management Into S&OP/IBP
© Oliver Wight International 2009
A Focus on and Integration of “Product Management” into the
S&OP Process is Required to Successfully Grow the Business
New Product
Demand Plan
Inventory
Plan
Production
Plan
Product Management – Business Reconciliation
 Will our collective programs deliver commitments? Annual plan / Strategy
 Enough new product plans in the pipeline?
 Are the priorities still correct? Working on all the right ones?
 Projects still attractive – revenue & margins?
 Consensus impact on current portfolio – revenue / margin?
 Impact on the organization – resources / priorities / capacity?
© Oliver Wight International 2009
Best Practice Is Now to Incorporate a Financial
Appraisal into the S&OP Process
© Oliver Wight International 2009
Bridging the Gap - Financial Plans & Reality
Integrated
Business Planning
Ensures that all
processes (pieces of a
business) are working
together to produce a
single, agreed to
correct time ($$$)!
Single Set of
Numbers
CEO /COO
Board
Street
© Oliver Wight International 2009
Financial Plans = Operational Plans
The Finance Organization has Specific
Responsibilities during each S&OP Review
Ensure that Demand and Supply has the
financial information that they need to
prepare for S&OP meeting
Work with Product Management, Demand
and Supply to ensure one set of numbers
Review Product Management, Demand
and Supply plans from a financial
perspective – challenge assumptions that
do not seem realistic and ensure that
plans are financially achievable
Present financial implications of Product
Management, Demand and Supply plans
at the MBR, compare plans to annual and
strategic objectives
Address Financial metrics
How Are Misaligned Plans and Performance
Concerns Addressed?
© Oliver Wight International 2009
Integrated Business Planning
1) What is
different about the
assumptions to
cause the gap…?
2) Is the
assumption
change transient
or a trend…?
3) What plans can I
now put in place to
close the gap…?
© Oliver Wight
Top
Down
Process
Strategy
4/5 years horizon
Business Plan –
2/3 years horizon
Bottom
Up
Process
S&OP –
– horizon
24S&OP
Months
S&OP
– horizon
24 Months
S&OP
– horizon
24 Months
S&OP
– horizon
24 Months
S&OP
– horizon
24 Months
S&OP
– horizon
24 Months
S&OP
– horizon
24 Months
S&OP
– horizon
24 Months
S&OP
– horizon
24 Months
S&OP
– horizon
24 Months
24 Month Horizon
EAME 1085-01a
Executive Team Reaches Consensus, Approves
Plans and Makes Needed Decisions in the MBR
Executive Led
Executive Participants
© Oliver Wight International 2009
Focusing on “Management” Information
The One Page Summary by Family
Demand
Supply
CHANGES EXPLAINED
Explanation of the change depicted in this
month versus last month or versus annual plan
projections
KEY ASSUMPTIONS
Customers
Markets
Product Management and rate of NPI
Supply / Distribution Resource
VULNERABILITIES / OPPORTUNITIES
Identify key upside / downside issues for this
family from an understanding of the
assumptions
© Oliver Wight
Inventory
AGREED ACTIONS, DECISIONS AND
RECOMMENDATIONS
Identification of key issues identified from
the Integrated Reconciliation Review:
Actions Agreed
Decisions required
options and alternates
costs and implications
recommendations
EAME 0357-03
Information Management – A Critical Component
Visibility to demand, supply, capacity, finance, and exceptions
Compare alternate
scenarios
Analyze key
Planning metrics
Drill down to
relevant details
Analyze constrained
forecast
Analyze profit
and loss
31
© Oliver Wight International 2009
S&OP / IBP – The Issue Is:
Most companies that have Sales and Operations Planning have set
too low an ambition and treat it as:
Logistics and Supply Chain planning process only
Demand & Supply Volume Balancing 1 to 12 months only
(Fiscal year)
And they believe that they already have the process in place … so
they miss out on the benefits of doing it well.
Executive teams that use S&OP/IBP as the primary
management process to run the business achieve the
greatest benefits and ROI.
© Oliver Wight International 2009
Achieving Benefits - Two Keys to Success:
Financial Alignment & Executive Led and Owned
Financial Plan
Alignment
Executive Leadership
& Ownership
© Oliver Wight International 2009
S&OP … A Necessity?
“Virtually all enterprises, irrespective of starting S&OP capabilities,
size, and industry, generated improvement in key business
performance with an S&OP program, sufficient to justify investment
in these programs.”
The Sales and Operations Planning Benchmark Report: Leveraging S&OP for
Competitive Advantage – The Aberdeen Group
 Harvard Business Review: "... S&OP is indispensable to
creating a world-class global supply chain, which in turn
would become a major competitive advantage for the
company.”
 AMR Research at Stanford Global Supply Chain
Management Forum “… S&OP is the ultimate best
practice.”
© Oliver Wight International 2009
S&OP/IBP Should Be Implemented Quickly…
And Continuously Improved
Audit/
Assess
Executive
Education
Implementation
Education
Implement the Process
Demand
Review
Product
Review
Financial
Appraisal
Integrated
Reconciliation
Process Design
Investigate/Decide
Supply
Review
Performance Measures
Assess
Progress
Improve
Communications
Problem
Solving
Assess
Progress
Problem
Prevention
Management
Bus. Review
Cycle 0
•
•
•
•
Cycle 1…
Cycle 4…
Proven implementation process
“Fast Track” implementation -- takes months, not years
Continuous improvement approach -- improve each cycle
Formal progress assessment points and documentation of results
© Oliver Wight International 2009
Cycle 7…
Document
Results
Tactical/
Strategic
Decision
Making
Cycle 9
Final Message … Simply Stated
1. S&OP/IBP is Organized Common
Sense
2. Implementing S&OP/IBP is worth the
effort
3. Companies that do S&OP/IBP well
make more money than those that
“Common sense is
don’t do it well
not so common”
Will Rogers
4. S&OP/IBP continues to evolve
5. S&OP/IBP is the industry best
practice model today
Key Words: “Organized” and “Integrated”
© Oliver Wight International 2009
Agenda
 Introductions
 Journey to Business Excellence:
Integrated Business Planning – Next Generation Sales &
Operations Planning by Terry Johnson
 Oracle Customer Success Stories
 Wrap up and Q&A
Oracle Value Chain Planning Solution
Service
Parts
Planning
Demand Signal
Repository
Global Order
Promising
Strategic
Network
Optimization
Production
Scheduling
Manufacturing
Operation
Center
Adv. Planning
Command
Center
RT Sales and
Operations
Planning
Collaborative
Planning
Rapid Planning
Advanced Supply
Chain Planning
Trade Promotion
Planning and
Optimization
Deductions and
Settlement
Management
Inventory Optimization
Planning
Complete ● Open ● Integrated ● Modular
38
Demand
Management and
Advanced
Forecasting
• Single source of truth
• Integrated with ERP
Synchronize Demand Signals - Sense & Shape
Leverage
Downstream Demand
Data of all types
Capture, Cleanse &
Harmonize Data
Leverage Data in
Downstream
Processes
Trade Management
POS
Demand Signal
Repository
Purchase
Orders
ASN
Warehouse
Withdrawals
Shipments
To Retailer
Network Optimization
DSR
Harmonize
Promotions Shelf Price
Aggregate
Geo- Campaign
Demo Calendar
Distribution Resource Planning
Validate
$
Trusted 3rd
Party Data
Interchange
Cleanse
Store
Inventory
Capture
Demand
Forecast
Demand Planning
Sales & Operations Planning
DC
Inventory
EDI-XML-GDSN
Inventory
Movement
Trade Optimization
Replenishment Planning
Transportation Management
Product Lifecycle Management
Weather
Loyalty
•39
Engage Managers With IBP Dashboards
KPIs for key decision makers
Compare alternative
business scenarios
Analyze profit
and loss
Analyze key
planning metrics
Link directly to
detailed planning
Evaluate supply
constraints
 Aggregate key
performance
indicators enable
decision makers to
see the business
impact of plan
alternatives
 Analytics based on
planning data
provides forward
looking view
 Drill-down for
greater detail and
link to planning
applications
 Execute companyspecific planning
scenarios
Oracle Integrated Business Planning
Provides critical link between operations, sales and finance
Performance
Management
Sales and Operations Planning
Sales
Forecast
Financials
Targets
Strategic
Network
Optimization
Demand
Management
Supply
Chain Planning
Inventory
Optimization
 Planning driven from key performance indicators to engage managers and
planners
 Aggregate roll up for financial reconciliation; supports $ to units
synchronization
 Workflow coordinates 9-step process and drives consensus process to gather
sales forecast and customer demand
 Works with Oracle ERP and legacy ERP applications
 What-if simulation to examine alternative plans
 Strategic supply chain analysis and inventory planning
Interactively Reconcile To Financial Plans
Review financial implications of operational plans
View Demand Plan and
Supply Plan translated into
revenue, cost and gross
margin by period
Compare consensus
forecast, constrained
forecast, and financial plan
Track YTD performance of
aggregate fiscal year
constrained forecast vs. budget
 Designed to
integrate with
financial planning
and budgeting
applications
 Supports top-down
and bottom-up plan
reconciliation
 Enables profitable
demand/supply
balancing to ensure
company goals are
achieved
Scenario Analysis Provides Alternatives
Simulate and analyze interactively
Optimized demand shaping
Profit-optimized supply scenarios
Compare scenarios for informed
decision making
 Powerful what-if
simulation
capability enables
alternative
scenarios to be
tested
 Assesses supply
chain capacity to
meet demand
changes
 Enables lowest
cost, most
profitable, best
customer service
level and other
scenarios to be
evaluated
Cost Volatility and Low Margin
Fierce Competition
Products becomes a commodity
Pressure on Product Life Cycle
Oracle VCP, Helping impact your TOP and BOTTOM line…
Customers Achieving Significant Benefits
Alcoa moved to a global demand and supply review greatly improving
their sales and operations planning process
Motorola achieved weekly sales and operations planning process that
incorporates demand and supply planning cycles to improve supply
chain responsiveness
Organic Valley streamlined sales planning, demand management and
operations planning to improve revenue and save $6M in trade spend
Zoran integrated supply/demand review in semiconductor industry
Baxter rolled global demand/supply plan across more than 90
countries
VTech reduced order fill rate from 55% to 95%, increase inventory
turns by 100%, reduced price protection claims by 40%
Kodak has aligned demand creation activities with critical components
to improve customer service
Wilton reduced inventories by 20% while improving customer service
Cabot MicroElectronics Achieves value
with VCP OnDemand
COMPANY OVERVIEW
• Develop, manufacture and market high performance Chemical
•
•
•
•
CUSTOMER PERSPECTIVE
Mechanical Planarization (CMP) polishing slurries for advanced
semiconductor devices
#1 Supplier of CMP Slurries — Cabot Microelectronics believes
it has approximately three times the annual revenue of the next
largest CMP slurry competitor
Industry: Chemicals
Employees: 1000
Revenue: US$500M
CHALLENGES/OPPORTUNITIES
• AsiaPac customers increased to 71% in 2007 from 53% in 2002
• 70% market share through technology leadership
• CMP is an enabling technology
• One of the fastest growing sectors in the semiconductor
industry
• Track record of profitable growth, despite semiconductor cycle
• Pursuing multiple new market and product opportunities acquisitions
SOLUTIONS
• Demantra DM and RTSOP
• Advanced Supply Chain Planning/CBO
• Inventory Optimization
• Global Order Promising
• Hyperion Planning
• All deployed OnDemand
• OPM backbone
Internal Use Only
Steve Gustafson – VCP North Central
“We wanted to choose a player that would be in
the game for the long haul, so we looked at
Oracle's investment in the outsourcing model
and its expertise in technology. Simply put,
Oracle provides us with the best technology
available." said Tim Roessler , CIO
“User adoption happened very quickly, almost
automatically, we were surprised how easily it
went with no complaints from the field” said
James Dillon Dir Global Sales Ops and
Customer Service
RESULTS
• Reduced Monthly forecasting cycle 48% from 21 to 11
days
• Reduced Forecast error (MAPE) from 50% to 20% and
•
•
•
•
•
falling
Full enterprise planning solution with Hyperion
integration
Enabled live on-line consensus ability
Saved $2-$4 million in hardware and facility expenses
(on demand)
Saved $1 million in compensation costs (on demand)
Improved employee morale
July 2009
Emerson Real-Time Sales & Operations Planning
COMPANY OVERVIEW
• Emerson is a diversified global manufacturing & technology
company offering a wide range of products & services in the
areas of process management, climate technologies,
network power, storage solutions, professional tools,
appliance solutions, motor technologies, industrial
automation.
• Revenue: $24.8B
• 140,000 Employees
• 265 Manufacturing Sites
CHALLENGES/OPPORTUNITIES
SOLUTIONS
• Demantra Demand Management
• Demantra AF&DM
• Demantra RT S&OP
• Demantra Predictive Trade
Planning (PTP)
• Decentralized and non-formal S&OP Processes
RESULTS
• Manual & inconsistent forecasting process across sites.
• Single Global Master Scheduler per
• Difficulty measuring forecast accuracy :SKU & Piece Part
• Forecasting performed qualitatively, without a solid
statistical basis for decisions.
• Multiple Master Schedulers for the same product group;
difficult to get global roll up view
•
•
• Communication of forecast decisions within and across
sites was sporadic and typically not timely
• Each site is on a different legacy system
• Lack of Forecast ownership: Marketing & Sales provide
dollarized annual amount as forecast
• Lack of Global Visibility
• No Bottoms up fcstng & reconciliation to upper levels
•
•
•
Product Line
Centralized Planning Process for
Collaboration and Consensus.
Demand Capture at Model and
Options level for Independent and
Dependent Demands
Integrated Planning Process for the
entire ‘Model Option Tree’
Enhanced Service Levels, Superior
Forecast Accuracy
43% reduction in Inventory
Month 2008
General Parts, Inc./CARQUEST
COMPANY OVERVIEW
•
•
•
•
•
Industry: Aftermarket Auto Parts Distribution
Annual Revenue: US $2.4 Billion
Employees: 23,000
ERP: EBS
CARQUEST Auto Parts is the premier supplier of
replacement products, accessories, supplies and equipment
for virtually all makes of automobiles, as well as light and
heavy-duty trucks, off-road equipment, buses, recreational
vehicles and agricultural equipment. Additionally, it distributes
and sell tools, equipment, chemicals, paint and accessories.
CHALLENGES/OPPORTUNITIES
•
•
•
Reduce inventory cost
Increase revenue (avoid lost sales)
Improve customer service
SOLUTIONS
•
•
•
•
•
•
•
Demantra Demand Management (DM)
Advance Forecast Demand Modeling (AFDM)
Real Time Sales and Operations Planning (RT-SOP)
Advanced Supply Chain Planning (ASCP)
Constraint Based Optimization (CBO)
Inventory Optimization (IO)
Strategic Network Optimization (SNO)
Internal Use Only
Content Provided by [insert name]
CUSTOMER PERSPECTIVE
“Oracle’s Value Chain Planning has
enabled CARQUEST to get to the Holy
Grail of Supply Chain-Improve service &
sales while reducing inventory .”
- David Collier, Director of Demand
Planning
RESULTS
•
•
•
Reduced inventory nby $20
Million
Expect to reduce obsolete
inventory sat store level an
average of $200,000 per store
Identified opportunity to add high
velocity items at the store level an
average of $100,000 per store
Month 2008
World Class Value Chain Solutions
Complete ● Open ● Integrated
●
Modular ● Flexible
Optimization
Optimize inventory holdings and
deploy inventory networks
Use advanced statistics and causal
factors
Real-Time Sales and Operations
Planning
Optimize networks and sourcing
decisions
Optimize networks and sourcing
decisions
Collaborate with customers
Collaborate with customers
Constraint based supply chain
planning
Constraint based supply chain
planning
Executive dashboards and reporting
Executive dashboards and reporting
Manage rolling forecasts
Manage rolling forecasts
Collaborate with all constituents
on one number
Collaborate with all constituents
on one number
Collaborate with all constituents
on one number
Use basic statistics, alerts, and
seeded worksheets
Use basic statistics, alerts, and
seeded worksheets
Use basic statistics, alerts, and
seeded worksheets
Deploy fast MRP across multiple
ERP instances
Deploy fast MRP across multiple
ERP instances
Deploy fast MRP across multiple
ERP instances
From less complex to best in class
Competitive Necessity
Competitive Advantage
Evolve at your own pace to a best in class solution
Efficiency
Manage rolling forecasts
Effectiveness
Focus on return on assets
Incremental Value
Eliminate
spreadsheets
Focus on return on assets
Key Takeaways
• Value Chain Planning implementation is a journey, not a project –
each phase has its own short time to value, but one should have a
long term vision.
• Where to start – Focus on the highest bang for your buck within
each BU/Region and don’t wait for ERP Implementation or upgrade
• Pick your critical “green” KPIs – one cannot be perfect at all
measures – which KPIs defines you as a company, and meet your
strategy?
• Create transparency between All departments, Sales, Marketing,
Finance, and SC and align your Supply with your Opportunities
Questions And Comments
Learn More about VCP
www.oracle.com/goto/vcp
Thank you!
Please contact us with questions at:
Gerald.osullivan@oracle.com
T.johnson@oliverwight.com
Thank You
Provide Business Card to Draw for Complimentary Book:
Enterprise Sales and Operations Planning
Five Copies To Give Away
© Oliver Wight International 2009
Oliver Wight Copyright
This Information Is The Property Of Oliver Wight
International And May Not Be Modified,
Reproduced, Distributed Or Utilized In Any Manner
In Whole Or In Part, Without The Express Prior
Written Permission Of Oliver Wight International.
© Oliver Wight International 2010 All rights reserved. This
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