executing strategy with s&op by andy coldrick

Ling Coldrick Partnership © Dick Ling and Andy Coldrick 2010

Executing Strategy with S&OP

by

Andy Coldrick

For the IE Group

January 28th, 2011


Agenda

• Alignment to Future Product Portfolio

• Alignment to Strategy

• Examples

• Implementation- ‘Top Down’ or ‘Right to Left’


S&OP“The Aligner”

Development Of S&OP

S&OP“The Reconciler” and

“Integrator”

Single Set of NumbersS&OP “The Unifier”

Implementation Sequence – ‘Left to Right’

Multiple Sets of Numbers

Reactive Execution


Sales and Operations PlanningLing/Coldrick Model

SENIOR BUSINESS

MANAGEMENT REVIEW

INTEGRATED RECONCILIATION

MANAGING THE

PORTFOLIO & NEW

ACTIVITIES

MANAGING SUPPLY

MANAGING DEMAND




“Integrator”




Reactive Execution

Strategic Agenda andFuture Portfolio

???

Development Of S&OP

Ling Coldrick Partnership © Dick Ling and Andy Coldrick 2010Ling Coldrick Partnership © Dick Ling and Andy Coldrick 2010

New to Us

New to the World

Line Exts & Promos

Existing Portfolio

2 YEARS 4 YEARS0

New to Us

Future Portfolio Model


New to Us

New to the World

Line Exts & Promos

Existing Portfolio

2 YEARS 4 YEARS0

New to Us

New to Us

2 YEARS 4 YEARS0

New to the World

Existing Portfolio

2 YEARS 4 YEARS0

Line Extensions & PromosNew to Us

Existing Portfolio

Which of the five portfolio models best describes your market segment, brand or

business unit?

5

4

3

2

1

Line Extension and Promos

2 YEARS 4 YEARS0

Existing Portfolio

Existing Portfolio

2 YEARS 4 YEARS0

Line Extensions & Promos

New to Us


Uncertainty by Portfolio Model

New to Us

2 YEARS 4 YEARS0

New to the World

Existing Portfolio

5

New to Us

New to the World

Line Exts & Promos

Existing Portfolio

2 YEARS 4 YEARS0

New to Us

4

2 YEARS 4 YEARS0


Existing Portfolio

2

1


2 YEARS 4 YEARS0

Existing Portfolio

3

Existing Portfolio

2 YEARS 4 YEARS0


Levels of Uncertainty

Portfolio Model


Scenario Planning by Portfolio Model

New to Us

2 YEARS 4 YEARS0

New to the World

Existing Portfolio

5

New to Us

New to the World

Line Exts & Promos

Existing Portfolio

2 YEARS 4 YEARS0

New to Us

4

2 YEARS 4 YEARS0


Existing Portfolio

2

1


2 YEARS 4 YEARS0

Existing Portfolio

3

Existing Portfolio

2 YEARS 4 YEARS0


Relevance of Scenario Planning

Portfolio Model


Executive Attention by Portfolio Model

New to Us

2 YEARS 4 YEARS0

New to the World

Existing Portfolio

5

New to Us

New to the World

Line Exts & Promos

Existing Portfolio

2 YEARS 4 YEARS0

New to Us

4

2 YEARS 4 YEARS0


Existing Portfolio

2

1


2 YEARS 4 YEARS0

Existing Portfolio

3

Existing Portfolio

2 YEARS 4 YEARS0


Executive Attention

Portfolio Model


Collaborative Culture by Portfolio Model

New to Us

2 YEARS 4 YEARS0

New to the World

Existing Portfolio

5

New to Us

New to the World

Line Exts & Promos

Existing Portfolio

2 YEARS 4 YEARS0

New to Us

4

2 YEARS 4 YEARS0


Existing Portfolio

2

1


2 YEARS 4 YEARS0

Existing Portfolio

3

Existing Portfolio

2 YEARS 4 YEARS0


Collaborative Culture

Portfolio Model


Strategic Marketing Influence on S&OP

New to Us

2 YEARS 4 YEARS0

New to the World

Existing Portfolio

5

New to Us

New to the World

Line Exts & Promos

Existing Portfolio

2 YEARS 4 YEARS0

New to Us

4

2 YEARS 4 YEARS0


Existing Portfolio

2

1


2 YEARS 4 YEARS0

Existing Portfolio

3

Existing Portfolio

2 YEARS 4 YEARS0


Strategic Marketing Influence

Portfolio Model


Influence of Strategic Marketing and Innovation on S&OP

SENIOR BUSINESS

MANAGEMENT REVIEW


MANAGING THE PORTFOLIO &

NEW ACTIVITIES

MANAGING SUPPLY

MANAGING DEMAND


Strategic Marketing and Innovation

Foresight vs. Forecast

• Strong Strategic Marketing Overlay (Top Down)

Lead vs. Lag Indicators i.e. Market Drivers vs. Market history

• Vodafone – Data market and Voice market

• Syngenta and Commodity Price

• LIG Powder-Free Surgeons Gloves

• Polyurethane vs. Latex

• PZ Cussons Foamburst vs. Bar or Liquid Soap


Strategic Marketing and Innovation (cont’d)

• Innovation Investment

1) Drive Growth, Invest

2) Proactive Defense, Optimize Cost

• Disciplined Management of Obsolescence and Cannibalization

(See Boston Matrix)


Every Business has a Strategy.It is either crafted or exists by default

• Strategy default in many businesses is or has been Operational Excellence.

• Yet Operational Excellence is not really a strategy. It is a necessary discipline and is a very important element of Cost Leadership.


Determinants of Relative Performance – Source: Michael Porter

• Assimilating, attaining, and extending

best practice

• Improving operational effectiveness is

necessary to achieving superior

profitability, but it is not sufficient

Strategic

Positioning

• Creating a unique and sustainable competitive position

If customers have no choice, it is not good for them

OperationalEffectiveness


Achieving minimum standards of operational effectiveness is a

‘License to Operate’


Strategy is about Choices and Trade-offs

• The Easy Choice is to Imitate Others

• All too often we get into Action Planning before we understand the Choices

The Difficult Choice is to be Different


Strategy ChoicesCost Leadership

Customer Relationships

Product / Service Differentiation

Virus Effect

Note: On line capability has given some businesses an opportunity for

differentiation through superior external linking with customers/suppliers

* Strategy- Create and Implement the Best Strategy for your Business, 2005 Harvard Business School Press


Where do you think you are now?


Different Strategies and Their Impact on S&OP


Cost Leadership and S&OP

Emphasis• DISCIPLINE• EFFICIENCY & EFFECTIVENESS• CLEARLY DEFINED ROLES &

RESPONSIBILITIES• RELENTLESS WASTE ELIMINATION• RESTRUCTURING

SENIOR BUSINESS

MANAGEMENT REVIEW (SBMR)

OR EXECUTIVE

S&OP


MANAGING THE PORTFOLIO & NEW ACTIVITIES

MANAGING SUPPLY

MANAGING DEMAND

Finance and Supply Driven

Objective: Lowest Cost

• SINGLE NUMBER APPROPRIATE• REDUCING LAYERS IN THE

ORGANIZATION


Customer Relationships and S&OP

SENIOR BUSINESS


OR EXECUTIVE

S&OP



MANAGING SUPPLY

MANAGING DEMAND

Finance, Sales & Marketing Driven

Objective: Revenue Growth

Emphasis• CUSTOMER AWARENESS• CUSTOMER RESPONSIVENESS• CUSTOMER EMPATHY• CHALLENGING STATUS QUO IN

SUPPLY

• RANGE OF NUMBERS• UNDERSTANDING ‘ODDS’


Platinum

Customer Segmentation

Profit

LO

HI

2

Drive growth, invest

“Responsive”

Gold

GoldSilver

Defence, optimise costs

“Efficient”

1

Strategic Importance

Grocery Retail

21st Century

This works

Morrisons Tesco

Sainsbury

Somerfields

Wilkinson

PoundStretcher

Waitrose

Marks & Spencer

UK Retail 2000-2003

Asda

Walmart


Product/Service Differentiation and S&OP

SENIOR BUSINESS


OR EXECUTIVE

S&OP



MANAGING SUPPLY

MANAGING DEMAND

Objective: Share and Margin Growth

Finance, Strategic Marketing and Sales Driven

• RANGE OF NUMBERS• UNDERSTANDING ‘ODDS’

Emphasis• CREATIVITY AND INNOVATION • PREMIUM BRANDS• PROJECT MANAGEMENT• COPING WITH 'UNCERTAINTY‘• IMPACT OF PRODUCT LIFE CYCLE

ON RESPONSE


Global Market Segmentation

Marketgrowth

Negative Positive

Market share

BelowX%

AboveX%

0%

CASH COWS

QUESTION MARKS

DOGS

$ £

STARS

2 1

Source: BCG and Michael Porter

1

2

Proactive defense, optimize costs

Drive growth,

invest


Strategic Focus Emphasis Focus Key Measurements

Cost Leadership •One set of numbers for supply •Volume•Cost•Minimize inventory

•Customer service•Forecast variability / stability•Asset utilisation•Cost•Inventory turns

Forecast Accuracy & Bias need to be measured in all cases, however the targets will be different – One Size Does Not Fit All

Customer Relationships

•Bottom up view from account managers•Sales planning•Impact of promotions•Macro overlay of customer segmentation.

•Volume•Revenue growth•Opportunities (Hi)•Risks (Lo)•Control inventory

•Customer retention / lifetime value•Revenue by customer / channel•Customer profitability•Inventory turns

Product Differentiation

•Strong strategic marketing overlay on bottom up view•Invest, growth vs defence•New activity prediction and risk management•Strong portfolio management

•Volume and profit•Opportunities (Hi)•Risks (Lo)•Manage inventory

•New products as % of profit / revenue•New Product-time to profit•Profit by brand / category•Brand health•Market share•Inventory turns

Impact of Strategic Focus on the S&OP Process


Portfolio Model Relationship to Strategy and Innovation

New to Us

2 YEARS 4 YEARS0

New to the World

Existing Portfolio

5

New to Us

New to the World

Line Exts & Promos

Existing Portfolio

2 YEARS 4 YEARS0

New to Us

4

2 YEARS 4 YEARS0


Existing Portfolio

21


2 YEARS 4 YEARS0

Existing Portfolio

3

Existing Portfolio

2 YEARS 4 YEARS0

Line Extensions & Promos

New to Us

Customer Relationships and S&OP

SENIOR BUSINESS MANAGEMENT REVIEW (SBMR) OR

EXECUTIVE S&OP



MANAGING SUPPLY

MANAGING DEMAND

Objective: Revenue Growth

Cost Leadership and S&OP

SENIOR BUSINESS MANAGEMENT REVIEW (SBMR)

OR EXECUTIVE S&OP



MANAGING SUPPLY

MANAGING DEMAND

Objective: Lowest Cost

Product/Service Differentiation and S&OP

SENIOR BUSINESS MANAGEMENT REVIEW (SBMR) OR

EXECUTIVE S&OP



MANAGING SUPPLY

MANAGING DEMAND

Objective: Share and Margin Growth

Innovation Influence

• Product Improvement• Process Optimization


• Customer Driven Enhancements• Existing Market Needs


• New Market Need• Existing Market Need


Syngenta Examples


Crop Protection – Strategy Update

● In 2004 (after merger was complete) we revised strategy to one of “profitable market share growth”

● We recognised that we needed a different operational delivery process to that used during merger

● We worked with Andy Coldrick to revise our S&OP process to meet this challenge

● It was not a re-implementation – S&OP served us well during merger. More a transfer of leadership and ownership to the total Business rather than being a Supply driven process. This was re-alignment

● But strategy change was not the only driver – S&OP was boring the commercial side of the business with “Supply” language and product issues.


Strategic AlignmentSyngenta’s 2005 projected Product Portfolio

We concluded between 2 and 3 post-merger in 2000

Our strategy was to drive us to at least 4 from 2005 and beyond

Existing Portfolio

2 YEARS 4 YEARS0


New to Us

New to the World

Line Exts & Promos

Existing Portfolio

2 YEARS 4 YEARS0

New to Us

New to Us

2 YEARS 4 YEARS0

Existing Portfolio

New to the World


2 YEARS 4 YEARS0

Existing Portfolio

5

43

2

1

Which of the five portfolio models most described the Syngenta business in 2005 and beyond? Which model most described the business after the merger in 2000?

2 YEARS 4 YEARS0


Existing Portfolio


And we had products all over the life cycle

NewNew

GrowthGrowth MatureMature

DeclineDecline

Product BCAGR 05-10: -6%

Product DCAGR 05-10: 7%

Product XCAGR 05-10: 50%

Product CCAGR 05-10: 4%

Product ACAGR 05-10: -5%

Product YCAGR 05-10: 56%

Product ZCAGR 05-10: N/A

ZZ Form.


We started with a simple Boston matrix to establish global segmentation – and

differentiated strategies

MarketgrowthNegative Positive

Market share

Below20%

Above20%

1

2

Proactive defence, optimise costs


0%

CASH COWS

QUESTION MARKSDOGS

$ £

STARS

2 1


Marketgrowth

Negative Positive

Market share

Below20%

Above20%

1

2



Comprise ~60% of total

market

•Lettuce Fungicides Region x

•Soybean Fungicides Spain

•Cereal Fungicides Region x

•Corn Herbicides/ Insecticide

•Region Y

•Cereal Herbicides Region x

•Beans Fungicides NAFTA•Fruit •Vegetables - Wallmart•Rice Russia

2 1

•Rape LATAM Herbicides•Peanut Insecticides Region x

Globally we segmented into strategic market sectors


Regional Businesses could add Market Sectors which are important to them – e.g. Asia

Market GrowthNegative Positive

Market Share

Below10%

Above10%

12

Fruits & Nuts Insecticides NEA ($0.7bn)

Bean Insecticides RoA ($0.2bn)

Bean Fungicides ($0.1bn)

Rice Herbicides ($0.3bn)

Pea Herbicides ($0.2bn)

Vegetables Insecticides ($0.4bn)

Vegetables Herbicides ($0.5bn)

Marrow Herbicides RoA($0.3bn)

Silk Insecticides ($0.4bn)

Oil Palm Herbicides NEA ($0.9bn)

Bean Fungicides NEA ($0.35bn)

Turf Golf Courses ($9.0bn)

NEA: North East Asia

RoA: Rest of Asia

Grape Insecticides ($0.7bn)

Seedy Treatment ($0.1bn)

• Global strategic market sectors

• Additional defined sectors

• Regional specific sectors

• Professional Products

1

2




As could countries – but these are only discussed locally -

market sectors as a basis for the S&OP discussions

Agenda: Country

•Local specific market sectors

•Additional market sectors (eg. Oilseed, Plantations)

•Regional market sectors (eg. Banana, Coffee, Tobacco)

Agenda: GSOP

•Global market sectors

•Any other market sectors with issues for decision

Country / SOP

Pre-GSOP

GSOP

RSOP

Agenda: RSOP/Pre-GSOP

•Global strategic market sectors

•Additional market sectors (eg. NSH, Oilseed, Plantations)

•Regional market sectors (eg. Banana, Coffee, Tobacco)

• Lettuce Fungicides Region x

• Soybean Fungicides Spain

• Cereal Fungicides Region x

• Corn Herbicides/ Insecticide

• Region Y

• Cereal Herbicides Region x

• Beans Fungicides NAFTA

• Fruit • Vegetables - Wallmart• Rice Russia

2 1

• Rape LATAM Herbicides

• Peanut Insecticides Region x

12















12















12















12















12















12















12
















Key benefits to Syngenta include…

● An S&OP process which helps to drive delivery of the strategy

● Provide regular feedback (sanity check) on the validity of the strategy by Strategic Market Sector

● Ensures continuity between the short term operational plan and the longer term strategic plan

● Continue to monitor and drive operational delivery in the current season

● Enable the behavioural change necessary to deliver transparency, share risk and drive growth

● Provide an integrated monthly business review process – a business led S&OP

...and we became market leader in crop protection in 2008...and we became market leader in crop protection in 2008


Moving forward…

● 2008 brought a step change in the Crop Protection market (sudden growth) and 2009 brought the financial crisis

● Once again the S&OP needed to evolve to meet these challenges

● We introduced - more forward looking market drivers- Refined the SMSs to focus more on crops- More competitor analysis

● The process is still strong

...and we are still market leader ...and we are still market leader


Breakthrough Implementation

‘Right to Left’ or ‘Top Down’


Sales and Operations PlanningLing/Coldrick Model

SENIOR BUSINESS

MANAGEMENT REVIEW


MANAGING THE

PORTFOLIO & NEW

ACTIVITIES

MANAGING SUPPLY

MANAGING DEMAND


Sales and Operations Planning

Ling/Coldrick Model

SENIOR BUSINESS

MANAGEMENT REVIEW

MANAGING THE PORTFOLIO &

NEW ACTIVITIES

MANAGING DEMAND

MANAGING SUPPLY





Development Of S&OP


“Integrator”




Reactive Execution


Breakthrough S&OPLing/Coldrick Model

1. SENIOR BUSINESS

MANAGEMENT REVIEW

2. INTEGRATED RECONCILIATION

3. MANAGING THE PORTFOLIO &

NEW ACTIVITIES

5. MANAGING SUPPLY

4. MANAGING DEMAND

Implementation ‘Right to Left’


DisjointedReconciling and

Integrating Different Views

Aligning to Business

Agenda and Strategy

Executing Strategy

Stages of S&OP Maturity


Assessment Guide to Executing Strategy using S&OP

• Group 1 Leadership and Behaviors• Seven Questions

• Group 2 Strategy and Financial Planning• Seven Questions

• Group 3 Senior Business Management Review or Executive S&OP• Three Questions

• Group 4 Integrated Reconciliation or Cross-functional Collaboration• Seven Questions

• Group 5 Managing the New Portfolio and Activities• Five Questions

• Group 6 Managing Demand• Six Questions

• Group 7 Managing Supply• Five Questions

Forty Questions Showing Different Stages of Maturity

*Note Sequence is ‘Top Down’ or ‘Right to Left’Assessment Guide is Available at www.lingcoldrick.com


Agree Business Strategies to Drive

S&OP

Agree Business Agenda for Senior Management

Align to Strategy and Future Portfolio

Investment in Skill Development

&Behaviour Change

• S&OP Leadership & Understanding• Understanding Impact of Behaviours

Learn By Doing

EARLYBENEFITS

Decide S&OP Leadership

Performance Management and

Scorecard

S&OP ImplementationLing Coldrick Approach

Scope Step 1Senior Business

Management Review

Scope Step 2Integrated

Reconciliation

Scope Required Output from Steps

3, 4, and 5 New Activities, Demand

and Supply

Finalize Agendas and Scope of Steps 3,4, and 5 New Activities, Demand and Supply

1 2 3 4 5 6

Understand Software Needs & Required Excel Spreadsheets

Understand Software Needs for Steps 1 and 2

Understand Software Needs for Steps 3,4,5

Enhance, Simplify, andIntegrate Software Needs

Integrate Software

Realizing and Executing Strategy



Orchestrating Success and Executing Strategy

Align

Reconcile and Integrate

Unify

Agree latest view

Execute Strategy

Aligning to Business Agenda and Strategy

Reconciling and Integrating

Implementation ‘Right to Left’


Challenges and Issues when Aligning S&OP to Strategic Intent

ChallengesWhat is the main strategic challenge?

Where and why does the current process not engage Executive Management?

What needs to change? Issues

Leadership Change and Style

Behaviors and Cross-functional Performance

Future View – Two Years as a Continuum

Scenario Analysis and Range of numbers with ‘Odds’


Ling Coldrick

www.lingcoldrick.com

Andy Coldrick

[email protected]

Tel: +1 508 439 3698

http://www.lingcoldrick.com/

mailto:[email protected]


Back-up Visuals


S&OP Progression (1993)

PHASE 1 PHASE 3PHASE 2

TIME/MONTHS

0 183 6 9 12 15

NEWPRODUCTS

INTEGRATEDNEW PRODUCTS

MARKETINGINVESTMENT PLANNING

ONEFAMILY

EXTENSIONTO ALL

FAMILIES

RECONCILESALES FORECAST

INTEGRATED SALES & MARKETING PROCESS

(DEMAND MANAGEMENT)

BUILDFINANCIALS

SUPPORT & RECONCILETO BUSINESS PLAN

CAPITAL EQUIPMENTPLANNING & BUDGETING

PERFORMANCEMEASURES

INTEGRATED PERFORMANCE MEAS.

FOR HEALTH CHECK

IMPACT OF CONTINUOUS IMPROVEMENT ON COMPETITIVE ADV.

ROUGH CUTRESOURCE PLANNING

BASIC'WHAT IF'S'

INTEGRATED'WHAT IF'S'

DESIGNSPREADSHEET & PC SOFTWARE

DATA COLLECTIONFROM EXISTING

SYSTEMS

ENHANCE DATACOLLECTION

PROCESS

SIMULATION &FLEXIBLE BUDGETING

DEVELOP GRAPHICPRESENTATIONS

INTEGRATED S&OP SOFTWARE W. SALES, NEW PRODUCT & SUPPLY PLNG.

NETWORK THES&OP PROCESS

LEARN BYDOING

INITIALEDUCATION

TASKFORCE

LEARN BYUSING

ONGOINGEDUCATION

BASICAGENDA

ASSESS-MENT

BRAINSTMSTRATEGY

RESTRUCTURE TIMING OFMEETINGS & REFINE AGENDA

STRATEGICDIRECTION

INTEGRATION

S&OPIS A

PROCESS

VISION

CUSTOMERFOCUS

TOTALLYINTEGRATED

BUSINESSPLANNINGPROCESS

SUPPLIER


SMS assumptions example eATAM3rd party sales $m BR 2005 2006 Growth $m Growth % 2007 Growth %

Bud/5yr Plan 46 63 17 37% 71 0Prev. LP 53 65 12 23%Current LP 53 71 18 34% 72 2%LP vs Prev LP Δ 0 5LP vs Bud/5Yr plan Δ 7 8

Drivers Assumptions 2006 Change initial

assumptions

$ Impact

vs. bud

Assumptions 2007 Implications for SYT

$ impact

vs. plan

Econ. Export markets & internal consumption drives an increase in both quantity and quality of production. Commodity prices do not limit production.

No change As 2006 As planned

Envir. Winter crop areas planting reduced due to drought to 60% of 2005

review??

Winter crop area recovers to long term average

As planned

Comp. …. have significant …, … consolidate a strong position and Generics intensify

No change Increasing competitive intensity also drives market growth

Need differentiated offers and focus on growth

Techn.

Continued increase in treated area and adoption of higher technology

No change Higher technology solutions introduced more widely

Intensify knowledge transfer & stimulate use

Trends

Objectives 2 year horizon:

Sales:

% MS:

Cumulative Sales $m BR

0

10

20

30

40

50

60

70

80

$m

Bud 2005 Actual 2005 (BR)Bud 2006 LP 20065YP 2007 LP 2007


Thoughts on differentiated response

● Business choice, not supply chain

• Net result must grow profitability• Responsiveness that answers customers needs

– Answering customer wants increases revenue, but decreases profits.

• Responsiveness is not free.• Responsive supply chains must be balanced with lower cost

supply chains.• Differentiated Response without KPI‘s is dangerous

– E.g. Cost to serve

• Differentiated choices must be managed through the S&OP• Global guidelines, regional accountability for delivery• Choices must be continually re-evaluated


Performance

Measures

LA

TAM

MB

R

AP

AC

RS

OP

EA

ME

RS

OP

Global

Supply

Chain

Meetings

SCTs

Country SOPS/ROPS

NA

FTA

RSO

P

Site and AI ROPS

Performance

Measures

Performance

Measures

GSOP

+pre-GSOP

...because Syngenta’s S&OP process operates multi-level

Global

Regional

Country

All over the 0-30 month horizon

Country SOPS/ROPS

Country SOPS/ROPS

Country SOPS/ROPS


Breakthrough S&OP Right to Left

Implementation – ‘Right To Left’

Align

Reconcile and Integrate

Unify

Agree latest view

Execute Strategy