Download - Presentation with Jim Prescott of Sonoco Products on S&OP at CSCMP in San Antonio on September 23rd
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Improving Sales and Operations Planning
Lora Cecere, CEO and Founder of Supply Chain Insights
Jim Prescott, Sonoco Products
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Speakers
Lora Cecere CEO and Founder of Supply Chain Insights
Jim PrescottDirector- Industrial Supply Chain N.A. at Sonoco Products
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Agenda
• Defining Supply Chain Excellence in S&OP• Delivering Excellence in S&OP• Wrap-up
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S&OP ProcessExistence, Goals & Processes
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The Need for Balance
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Form Function
Raw Cycle Stock
Semi-finished Goods Safety Stock
Finished Goods In-transit Inventories
Seasonal Inventories
Promotional Inventories
Slow and obsolete
Form and Function of Inventory
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S&OP Balance
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Need for Agility
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Agility Importance vs. Performance
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Common Practice Market-driven Focus
S Ask salesFocus on market drivers:How do we best shape demand?
& Direct integration to supplyDesign of the value chain to optimize trade-offs, minimize risk, balance cycles, and orchestrate demand
OP Manufacturing planTrade-offs between make, source and deliver
Getting to Letter Perfect
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S&OP Evolution
Manufacturing-Driven
Deliver a Feasible Plan for OperationsMatch Demand with
Supply
Sales Driven
Match Demandwith Supply
Business-planning Driven
Maximize Profitability
Demand Driven
Maximize Opportunity Sense
andShape
Demand
Market Driven
Maximize Opportunity and Mitigate Risk. Orchestrate
DemandMarket to Market
Greater Benefit• Growth• Resilience• Efficiency
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Functions of Center of Excellence
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Center of Excellence
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Challenges
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Talent
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Talent Issues
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CostVolumeGrowth
CEO
Chief Customer Officer
Chief Marketing Officer Sales
Account Teams
COO
VP of Supply Chain
Customer
Service
Procurement
Logistics
CFO
CIO
VP of Manufacturing
Quality
Typical Organization
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S&OP Challenge
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S&OP Barriers
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S&OP ProcessPlan Execution
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Benefits
Source: Supply Chain Insights, 2012What benefits have you received from your work with S&OP processes?
Increasing revenue
Improving forecast accuracy
Reduction of inventory
Improving asset utilization
Determining outsourced manufacturing
Determining procurement requirements
Improving new product launch
Transportation and warehouse management
Capital planning and asset management
Improvements in the perfect order
59%
57%
50%
42%
38%
36%
34%
32%
32%
30%
▲ 2%
▲ 5-7%
▲ 3-7%
▲ 3-6%
▲ 3-6%
▼ 10-15%
▼ 2-8%
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Case Study
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Inventory Turns vs.
Operating Margin (2000-2012)
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Sonoco is a Global Packaging Company
• Founded in 1899, Sonoco is a $4.8 billion global provider of consumer packaging, industrial products, protective packaging and packaging supply chain services.
• With more than 19,600 employees working in more than 340 operations in 34 countries, we serve some of the world’s best-known brands in some 85 nations.
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S&OP was a Part of a Larger Transformation Effort
Conflicts between disciplined planning and agile response• Traditional production to a forecast with set lead time
agreements with customers (and suppliers) • Demand driven pull, short lead time processes emphasized
in lean supply chains
Sonoco Products has blended the use of forecast based supply chain practices with demand pull processes to create agile supply chains • Collaborative demand management • Sales & Operations Planning (S&OP) • Lean transformation and cash/ cost optimization
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DISCIPLINE Paper must have Forward, Demand Based planning for Operational Efficiency
AGILITY Conversion must build to order with short lead times and high service levels
Paper Manufacturing
ConvertingTubes & Cores
Composite Cans
Industrial Products - Supply Chain
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Each Supply Chain Type has a set of Practices to Consider early in the Innovation Process
• Push/ Optimization Supply Chains– Link into the S&OP process– Demand, Inventory, Capacity loading all planned in advance
• Pull/ Agile Supply Chains – Late Stage Customization (at or near the customer)– Pre-staged Inventory (VMI/SMI)– Integrated Raw Material Planning
• Composite supply chains (Elements of Push/Pull)– Raw material Planning/ MRP– Collaborative Planning/ Inventory Risk pooling– Integrated information flows
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Sonoco’s S&OP Timeline
• 2006: – Paper Division Leadership Chartered S&OP initiative
• 2007: – Engaged Oliver Wight – Leadership training– Process design / manual volume projections and supply planning
• 2009: – Implemented Logility Demand Planner
• 2011: – Implemented Logility Inventory Planner
• 2013: – Optimizing Supply across the manufacturing network for lowest cost of supply
• 2014: – Initiated regular forecast accuracy metrics and field sales review of forecasts
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Leadership Sponsorship
• Aimed at Important Business Objectives - address the pain– Working Capital - addressed reduction in free cash flow -
every leader has WC Objectives– Productivity - diminishing returns from traditional cost
improvement so supply chain optimization was key improvement target
– Perfect Order - Customers do not see Sonoco service levels as differentiating, started measuring in 2007
• Paper was the initial division to implement S&OP– Progressive General Manager saw the value– Paper is traditional “push process” that would benefit– High impact division that serves 3 other Sonoco divisions as well
as external customers
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Change Management Elements Required
• Active Leadership Sponsorship– S&OP must deliver important business results
• External Expertise – “Don’t know what you don’t know”
• Capable People– People working in silos; must now work cross functionally– Educate and address the WIIFM
• Good Data– It all starts with an unbiased demand picture
– Data must be presented clearly – systems solution required– Product family structure design, solid inventory management,
manufacturing capability/reliability are critical to success
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S&OP is a data driven process
• Sonoco started with the data available– As the process matured, we “outgrew” our spreadsheet demand forecast
process• Spreadsheets could not properly disaggregate family level forecasts into the by
plant, by customer, by SKU, by sales territories needed to support good decisions at all levels
• Needed the better statistical analysis provided by the Logility application
– Each S&OP step needed the ability to see data in a way that made sense• But one source of truth (the common data set) was critical to success
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S&OP Ongoing Success Factors
• Ongoing routine S&OP meetings… set calendar• Structured meeting agendas• Establishing TRUST in the numbers and people from
various departments – Cross-functional participation, including Finance
– Participants empowered to make decisions
– Pre-work to support meeting inputs
• An unbiased baseline forecast to start the process - Where Logility helped
• Supply chain facilitates the process, but each function owns their step
• A separate process to manage daily execution is a must
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Forecast Analysis and Accuracy by Submarket
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Evaluating statistical demand forecasts
Accuracy measured for -1 and -3 month forecasts
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Demand Review: By Sub-Market
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Current Forecast/wkApproved Forecast/wkActual/wk
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Capacity Load Analysis
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Supply Planning: Rough Cut Capacity By Paper Machine
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Demand and Supply reviewed weekly
Tracking production to planned supply and budget
Tracking demand and fulfillment to forecast and budget
Tracking inventory control performance
Integrating S&OP into Management Cycle
10,500
12,500
14,500
16,500
18,500
20,500
22,500
24,500
26,500
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53
Paper Division Total Tons Ordered 2012 to Present
2012 To ta l 2013 Forecast Est Ttl Pe riod End 2013 To ta l Nomina l Cap
-
200
400
600
800
1,000
1,200
1,400
1,600
1,800
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53
Trade and Corrflex Linerboard Order Trend2012 to Present
2012 Line rboa rd Est Ttl L inerboard Wkly Linerboard 2013 Fcst 2013 Line rboa rd
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
11,000
12,000
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53
Trade Total Order Trend 2012 to Present
2012 Ttl Trade Est Ttl Trade 2013 Trade Fcst Period End 2013 Ttl Trade
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
Total Internal Orders 2012 to Present
2012 To ta l Internal Est Total Internal 2013 In te rnal Fcst Period End 2013 To ta l Internal
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S&OP Impact in Push and Pull Supply Chains
• Conversion (Pull from End Customer)– Many customers, short 2-3 day order fulfillment lead time– Inventories concentrated on raw materials with primarily make to
order FG– Postponement strategy with many small facilities close to
customer– Forecast effort is on raw materials to prepare supplier– MAPE on raw material demand averages ~5-10%
• Paper (Push from Forecast)– Runs integration process through monthly S&OP cycle– Integrates input from 3 internal divisions and external sales– Operates a forecast based push process for asset optimization– Each mill tracked weekly on Perfect Order performance– ABC categorization for inventory strategy & lead time promise
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Cash & Customer – so how are we doing?
Perfect Order = (On time %) * (in full %) * (Invoice Accuracy %)
As demand has filled plant capacity,
perfect order performance has suffered
and expedited freight has increased
Cash Gap improved 12 days (full year average) between Dec05 and Mar10 New challenge since 2010… CPG companies driving from net 30 to Net 45607590105120 days
Now ~92%
2005 2006 2007 2008 2009 2010 2011 20120
10
20
30
40
50
60
Cash Gap Days
-23%-12 days
12 Turns Inventory
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Key Takeaways
Lean pull systems are most effective in combination with data driven, disciplined supply chain practices - Push Pull integration• S&OP provides the cross functional process to make
decisions based on the best demand information available• Demand Management is critical to prepare to meet
customer requirements– Customer information must be supported by statistical view
of Demand– There is too much data and the world moves too fast to
manage with spreadsheets
• Lean pull systems provide the response capability to deal with the remaining error
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2013 Analysis of Sonoco vs Peers by REL (producer of the annual CFO Magazine benchmark survey)
In 2005, Sonoco was 3rd Quartile in Cash Performance among its Containers and Packaging Peers
Since beginning work on Cash Gap, it has moved to top Quartile in cash performance and Number One in Inventory Days performance
While reducing inventory, Perfect Order has continually improved
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Delivering on the Promise
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Business Pain
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Metrics That Matter
• Lora Cecere’s 2nd book: Metrics That Matter
• To publish in Fall 2014
http://tinyurl.com/metricsthatmatter
Pre-orders available on Amazon:
#sciwebinar
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About Lora Cecere
• Founder of Supply Chain Insights
• Invited to be a “LinkedIn Influencer”
• Invited to write a guest blog for Forbes
• Author of 2 books: Bricks Matter (2012) and Metrics That Matter (to publish Fall of 2014)
• 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.
Contact Information: • Email: [email protected]• Blog: www.supplychainshaman.com (6000 pageviews/month)• Forbes: http://www.forbes.com/search/?q=lora+cecere• Twitter: lcecere (4800 followers)• LinkedIn: linkedin.com/pub/lora-cecere/0/196/573 (7000 in the network)
#sciwebinar
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