© oliver wight international 2007 going global with sales and operations planning

© Oliver Wight International 2007

Going Global withSales and Operations Planning


Topics

Introduction Making the Choice to go Global Reasons for Going Global Global New Product Development Global Demand Global Supply Inter-regional Supply Management Global Financials and Inventory Management Global Executive S&OP and Cultural

Considerations Design Guidance Q&A

© Oliver Wight International 2007 EAME 0367-01

IntroductionThe Sales and Operations Planning Process


STRATEGYBUSINESS PLANPERFORMANCE

DEMANDREVIEW

SUPPLYREVIEW

PRODUCTMANAGEMENT

REVIEW

MANAGEMENTBUSINESSREVIEW

S&OP Process Cycle

IC330

Overview of Steps In the Process


Sales & Operations Planning

Sales and Operations Planning is a formal process led by Senior Management that, on a monthly basis, evaluates time-phased projections for New Products, Demand, Supply, and the resulting Financials for the next 18-24 months

It is a Decision-Making process to ensure that the business plans in all functions and geographies are aligned and in support of the company/division strategy

The objective of S&OP is to reach consensus on a single operating plan, which members of the executive team hold themselves accountable, and allocates critical resources to most effectively and profitably meet customers’ needs

Business Management Ownership Speak The Truth Rolling Monthly Planning One set of operating numbers Simplification - Focus on Changes

Commitment and regular participation from executive staff Common Goals across all participants

Guiding Principles

Keys to Success

Business Process Simplification New Product Execution Focus on the Customer Planning vs. Firefighting Revenue, Market Share, Margin, Customer Service, Cash-flow

Benefits

PV974/003


Definitions for “Global”

Global – Encompassing more than one geography. Typically this means the entire world, but we can use it to refer to multiple geographic spans of control

Geographies (or Regions) – A geographic entity which has a leadership team with functional responsibilities

Inter-Regional Sourcing – Supply Management which goes across geographies but is within the overall corporate entity.


STRATEGYBUSINESS PLANPERFORMANCE

DEMANDREVIEW

SUPPLYREVIEW

PRODUCTMANAGEMENT

REVIEW

MANAGEMENTBUSINESSREVIEW

S&OP Process Cycle

IC330

© Oliver Wight International 2007 EAME 1028a

Region

Global

weeksweeksweeks

Plants

5. PLANTSUPPLYREVIEW

2. REGIONALPRODUCTREVIEW

3. COUNTRY/ REGIONALDEMANDREVIEW

4. GLOBALDEMANDREVIEW

5B. GLOBALSUPPLYREVIEW

7. GlobalReconciliation

6. RegionalReconciliation

1. GLOBAL

PRODUCTREVIEW

9. MANAGEMENT BUSINESS REVIEW GLOBAL/CATEGORY

8. MANAGEMENT BUSINESS REVIEW

(REGION)

S&OP Process Cycle – Global Environment


Making the Choice to Go GlobalDefining the Value


Choosing to Go Global

Start with the question –Why do we want run S&OP globally? Utilization of Assets? Complete Financial View? It’s how we run the business?

What are the benefits to your company?


Global Manufacturing Benefits

Better utilization and balancing of plants

130%

50%

90%

60%

40%85%

70%

80%

45%95%95%

90%

90%


Financial Benefits

Plant selection based on system economics Remember to use “Total Delivered Cost”:

Distribution Costs can offset any manufacturing costs benefits.

Identifying and managing future capital requirements

Supports make vs. buy decisions if outside suppliers are an option

Global Inventory Management

Sell it by showing the money!


Organizational Considerations

Before Going Global, look at how the organization operates. Is the business organized by geography or

product line? Where do the P&L Responsibilities lie? Are manufacturing and sourcing done

regionally or globally? How much of the manufactured product is

moved between geographies?

Align the process with how you operate


Different Global Models

We have to define what is “Global” Demand is global if business operates as

one unit across all geographies Supply is global if products are supplied

by only one plant or supplier. Supply may be global if sourcing can be

changed based on changes in economics If the business needs a consolidated

view or a forum to reconcile issues between geographic business units, a final Global S&OP meeting may be required.

Go global only where you need to


Global New Product / New Activity Management


Global New Product/New Activity

QUESTIONS TO GET STARTED

Question 1: Who sets the growth targets for the business?

Question 2: Who decides which New Products are developed?

Question 3: Are there global initiatives that utilize local resources?


Globally Centralized

AmericasImplementation

AsiaImplementation

EuropeImplementation

Global DevelopmentTeam

Decentralized

AmericasDevelopment

AsiaDevelopment

EuropeDevelopment

New Product Organizational Structures

Works best when: Development Costs are

High, and Developed Products can be

sold across regions. Product Customization is

minimal Technical Service is a small

part of the selling process

Works best when: Development Costs are Low, and Product are regionally specific

Products are developed for

specific Customers or Applications

Technical Service is a large part of the business value proposition


S&OP Cycles

SupplyReview

Key Initiatives Review

Executive S&OPReview

Demand Review

Finance, Reconciliation, and Executive

Preparation

SupplyReview



Global Demand Review


Preparation Americas Demand Review Europe

Demand Review


Decentralized

AmericasDevelopment

AsiaDevelopment

EuropeDevelopment


AmericasImplementation

AsiaImplementation

EuropeImplementation

Global DevelopmentTeam


Global Demand Management


Global Demand

Works best for businesses that operate globally and sell globally or regionally.

Question: Will you regularly perform Demand Control globally? If yes, then you need to have a global meeting for this.



Americas Inputsand Review

Asia Inputsand Review

Europe Inputsand Review

Global DemandTeam

Globally Consolidated

AmericasDemand Process

AsiaDemand Process

EuropeDemand Process

Global DemandManager

Demand Organizational Structures

Works best when: Functional Leadership is

Global Products and Product

offering are the same in all regions

Limited offering with few SKU’s

Works best when: Each region has functional

leaders Products and Product offering

are regionally different Broad Offering with many SKU’s


S&OP Cycles


Americas Inputsand Review

Asia Inputsand Review

Europe Inputsand Review

Global DemandTeam

Globally Consolidated

AmericasDemand Process

AsiaDemand Process

EuropeDemand Process

Global DemandManager

SupplyReview



Demand Review


Preparation

SupplyReview



Global Demand Review


Preparation Americas Demand Review Europe

Demand Review


Global Supply Management


Global Supply

Question: How are manufacturing and sourcing aligned with geographic markets? Plants tend to support one region: Global

Supply manages System Capacity and Inter-Regional Sourcing; Geographies manage Utilization, Balancing, Capital Investments, and Master Production Scheduling

Plants support multiple regions: Global Supply manages Utilization, Balancing, Capital Investments, and Master Production Scheduling.


Plants support one region

Plants support multiple regions

Supply Structures

Supply Management and Master Scheduling are done at a regional level

Plants can belong to the regional General Manager

Capacity balancing is done globally, over a longer time horizon

Inter-regional sourcing is facilitated globally, managed between geographic partners

Supply Management is done globally, Master Scheduling may be done globally as well.

Plants do not belong to regional General Manager

Capacity balancing is done over the longer horizon and within the MPS

Inter-regional sourcing is managed within the MPS at the global level


S&OP Cycles

Plants support one region

Plants support multiple regions

Global SupplyReview



Demand Review


Preparation

Regional SupplyReview



Demand Review


Preparation

Inter-Regional Supply

Reconciliation


Inter-regional Supply Management


Consider total costs of inter-regional sourcing

Inter-regional Management

What criteria do we use to select inter-regionally sourced items? Total Delivered Cost? Volume and Stability of Demand? Match with Supply Capabilities? Ability to fulfill Quality and Regulatory

requirements?



Who should determine which customers we serve when supply is constrained?



The process must allow the Commercial functions to drive priorities. This is easy to do if the product lines are

managed globally. If the Global Commercial leader is also the

business leader, you don’t want to have every allocation decided by the leader: Set and enforce policy for setting inter-

regional prioritization Set ground rules for the conflict resolution

process


Inter-regional Management Process

Cover these bases: Data. To make sourcing decisions, need to

have:Variable Manufacturing CostsDistribution Costs Inventory Valuations (for Inventory Carrying

Costs)Tax Rates

You may also need to look at Transfer Pricing, Cash Liberation Laws, and Tax Implications and Opportunities.


Foundation of the Process is Trust

Inter-regional Management Process

People are the critical element Cross Cultural Communication may be challenging.

One tactic is minimize the people involved in order to allow them to build relationships.

Have the people meet face to face and work together. Data and systems can facilitate communication

Have a single data set for communication. Use your ERP if possible.

Map your master data between regions so that communication is clear. Better yet, have global master data.

Process Rules must be established Agree on time fences and change processes up front.


Inter-regional S&OP Cycle

Regional SupplyReview



Demand Review

Finance, Reconciliation, and

Executive Preparation

Inter-Regional Supply Review


Inter-regional Reconciliation Meeting

Typical agenda would include: Performance Metrics: Internal Fill Rates,

Time Fence Violations Plan Changes: Demand and Supply Reconciliation and Allocation Process areas requiring improvement Issues to elevate

Participants Global Facilitator Regional Demand/Supply Representatives


Global Financials and Inventory Management


SupplyReview


Global S&OPReview

Demand Review

Europe Finance/ S&OP

Meetings

Americas Finance/ S&OP

Meetings

Asia Finance/ S&OP

Meetings

Global Financial Consolidation

and Preparation

Global Financials

A purely global process uses the standard process flow.

When the business is regionally managed, we need a consolidation step prior to Executive S&OP.


SupplyReview


Global S&OPReview

Demand Review

Europe Finance/ S&OP

Meetings

Americas Finance/ S&OP

Meetings

Asia Finance/ S&OP

Meetings

Global Financial Consolidation

and Preparation

Global Financials

Purposes of the Consolidation step include: Creating a consolidated financial view Resolving inter-regional resource issues

prior to the Executive meeting Preparing issues to be elevated to the

Executives


Global Inventory Management

Who determines what is in inventory?

Who determines how much inventory we can afford?


Global Inventory Management - Centralized

Global Inventory Drivers tend to be financial more than operational.

Global Inventory Management works well with a highly centralized S&OP management structure. Need real-time visibility of the global

inventory for this to work well.


Global Inventory Management - Decentralized

If inventory is regionally managed, you want a standardized approach to determining inventory requirements.

Global S&OP will validate the calculated results, but the mix should be managed within each region.


Global Executive S&OP Meeting


Standard Executive S&OP Agenda

Opening Comments (GM) Summary of Business (Business Directors) Performance Measures Financial Review (CFO) Review Assumptions and Vulnerabilities Family by Family Review with Decisions New Product Special Projects Review of Responsibilities (GM) Self Assessment Closing Comments (GM)


Global Executive S&OP Meeting Agenda

Opening Comments (President) Summary of Business (Regional Business

Leaders) Performance Measures Financial Review (CFO) Issue Resolution Review of Global Projects (Functional Project

Leaders) Decisions (President) Review of Responsibilities (President) Self Assessment Closing Comments (President)


Potential Pitfalls of Going Global

Does the Organizational Structure support planning and control at a global level?

Does the central planning group have the political power to enforce their plans?

Do the reward systems support global plans or locally controlled plans?


Cultural Considerations

While the principles and activities of planning are the same globally, communication is different in multiple cultures.

Best way to overcome cultural differences is for people to meet each other and work on a project together.

Facilitation may be necessary.


Design Guidance


Where Do The Following Activities Occur ?

Level 3

Region / Global

Level 2

Region / Country Grouping / Business Sector

Level 1

Customer / Country /Market

StrategicReview

FinancialConsolidation

SupplyDemandNew ActivityDevelopment

IC1690


FinancingCompetitionAcquisitions

HoldingCompany/

HQ

Primary Manufacture

Original Research andDevelopment

Level 3

Region / Global

Competition

AcquisitionBusiness

Unit

Packaging

Distribution

Multi-National

Customers

Brand Development

Level 2


CustomersIn

Country

ProductAdditions

Level 1


StrategicReview




Example Company

IC1700


P&L toNet Income

GlobalBusiness

Unit

ManufactureSite

Selection

Global Growth

Validation


Level 3

Region / Global

P&L toContribution

RegionalBusiness

UnitExecution

Multi-National

Customers

New ProductSelection

Level 2


CustomersIn

CountryTech Service

Level 1


StrategicReview




Example Company 2

IC1700


Regions

Global

weeksweeksweeks

Plant/Country

Level

4. REGIONALDEMAND/PRICE

REVIEWS

5. GLOBALDEMANDREVIEW

6. GLOBALSUPPLY/OPS

REVIEW

1. GLOBAL NEW

PRODUCTREVIEW

8. MANAGEMENT BUSINESS REVIEW GLOBAL/FUNCTION

Reconcile24 mo

7. Global Financial Outlook Updated/Issues Addressed – RegionConstraints

2. REGIONAL

New Product

New BusinessREVIEW

3. Sub-RegionDemand/Price

REVIEW

RegionalDirector’sSign-Off OnDemand View

Gap Closers

Gap Closers

Constraints &Issues


Business FullP&L

FullBusiness


Level 3

Region / Global

SBU FullP&LSBUSBU SupplySBU DemandSBU R&D

Level 2


BU Demand

Level 1


StrategicReview




Example Company 3: Multiple SBU’s

IC1700


Business Director

Level

Total Business

weeksweeksweeks

Business

Manager Level

4. SBUDEMAND/PRICE

REVIEWS

1. NEWPRODUCT/GROWTHREVIEW

9. MANAGEMENT BUSINESS REVIEW GLOBAL/FUNCTION

Reconcile24 mo

8. SBU Financial Outlook

2. SBUNew

ProductNew

BusinessREVIEW

3. BU Demand/Price

REVIEW

Diversified Business Analogy

Plan

Plan

EAME 1028c

5. SBUSUPPLY/OPS

REVIEWS

6. Business Financial Outlook

7. SBU MANAGEMENT

BUSINESS REVIEW


Summary

Global S&OP adds complexity, so: Go Global where there is clear value. Be able to articulate the value. Design the organizational structure to support

Global Management.OR

Design the process in alignment with the current organizational structure.

People are the critical element in a successful process.

Data and Systems are the process enablers. As with any complex process, simple and clear

policy is essential.


Q&A

© oliver wight international 2007 going global with sales and operations planning

Documents

global supply review

global product review

global demand review

global global encompassing

oliver wight international

global reconciliation

global reasons

global start