ie conference september142011
DESCRIPTION
Presentation given at the September 14th S&OP IE event.TRANSCRIPT
S&OP: The Top Ten
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Lora Cecere, PartnerSeptember 2011
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Let’s start with 9
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#9: What do I avoid?
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One number forecasting
You don’t need a technology.
80% is good enough.
Standardize: One solution provider is all you need.
Supply chains are moving so fast they don’t have time to plan.
Real-time S&OP is needed.
A COOKIE-CUTTER approach can work.
The Market Myths6
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#8: How do I get started?
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What is the goal? How do you achieve the right
balance between demand and supply?
How do you make decisions? How does your organization
measure success? How do you tie S&OP planning to
execution?
The Right Questions8
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Goal Evolution9
1985: Deliver a Feasible Plan for Operations
1995: Match Demand with Supply
2005: Demand Driven
2011: Market Driven
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Lots of Options10
Enterprise Resource Planning
Expansionists
Advanced Planning System
Traditionalists
Business Intelligence Reformers
Enrichment Vendors
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#7: What are the barriers? Pitfalls?
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Supply chain strategy
Business strategyWhat are the right things to do to increase company value?
Value-network strategyWhat are the right ways to support the business strategy?
What are the right trade-offs between value drivers for each value network?Right productplatforms
Design the supply response
Build organizational systems and manage talent
Align supply relationships
Building Value Networks
Align demandrelationships
Effective Supply Networks
Execution of buy-side strategies
Continuous Improvement
Capabilities RequiredSupply Chain Network Design
Design Networks
Innovation Methodologies
Demand Networks
Joint Value Creation Strategies
Business Process
How do I do the right things right?
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2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 201035
45
55
65
75
85
95
Days of Working Capital
Household Products ChemicalPharma Average
Data Source: CFO Magazine
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2004 2005 2006 2007 2008 2009 20100
10
20
30
40
50
60
70
Days of Working Capital Across the Food Manufacturing Value Chain
Grocery Retailers Food ManufacturersPackaging and Containers
Data Source: CFO Magazine
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#6: What is the ROI?
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Benefits received from S&OP processesWhat benefits have you received from your work with S&OP processes?
57%
32%
50%
34%
36%
32%
Improving forecast accuracy
Transportation and warehouse management
Reduction of inventory
30%Improvements in the perfect order
59%Increasing revenue
Improving new product launch
42%Improving asset utilization
38%Determining outsourced manufacturing
Determining procurement requirements
Capital planning and asset management
10-15%
2%
5-7%
2-8%
3-7%
3-6%
3-6%
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Stage 1:Goal: A
Feasible Plan
ROI: 9-12 Months
Late Adopter Deployments
Stage 2:Goal: Match Demand with
Supply
ROI: 6-9 MonthsMajority of Current
Deployments
Stage 3: Goal: Drive the Most Profitable
Response
ROI: 3-6 monthsLess than 20% of
Deployments
Stage 4:Demand-
Driven Supply Chains
ROI: Less than 3 Months
Less than 5% of Deployments
Stage 5: Goal: Market-Driven Value
Networks
ROI: Within the Month
Less than 2% of Deployments
Increasing ROI
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The Reason: Commodity Price Pressure
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Jan-
97
Jan-
98
Jan-
99
Jan-
00
Jan-
01
Jan-
02
Jan-
03
Jan-
04
Jan-
05
Jan-
06
Jan-
07
Jan-
08
Jan-
09
Jan-
10
Jan-
110.00
50.00
100.00
150.00
200.00
250.00
300.00
350.00
400.00
Corn (metric Ton)Wheat (metric Ton)Coffee, Robusta (Pound)Sugar (Pound)Beef (Pound)Crude Oil (Barrel)
Source: Index Mundi
$/LB
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#5: What is the right frequency, duration and granularity of planning?
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Value: Price, trade incentives, new products, services, freshness, responsiveness
Variety: Configurations, items, platforms, components, brands, processing technologies
Velocity: Lead-times, order to delivery, inventory turns, time to market
Volatility: Demand, inventory, schedules, reliability, yields
Volume: Plants, warehouses, distribution centers/points, product flow
What drives Variability?
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Focus22
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#4: What is the Best Reporting Structure?
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CostVolumeGrowth
Alignment of metrics: Typical organization
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CEO
Chief Customer
Officer
Chief Marketing
OfficerSales
Account Teams
COO
VP of Supply Chain
Customer Service
Procurement Logistics
CFO
CIO
VP of Manufacturi
ng
Quality
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Managing Bias and Error25
Reports to Sales
Reports to Marketing
Reports to Manufacturing
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#3: Do I need a Technology?
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Goal
A feasible plan • Model the network• Recognize and respect
constraints• Gain plan visibility
Match demand with supply
• What-if analysis• Multi-tier inventory analysis• Network design
Deliver the most profitable Plan
• Demand translation• Supply orchestration• Optimize financial drivers
Demand-driven • Sense channel demand• Shape demand• Drive the most profitable
response
Market-driven • Sense buy and sell-side market conditions
• Bi-directionally orchestrate demand
The Stages27
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#2: Who does it Best?
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Leaders sensed Market Changes 5X Faster
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Leaders (6%)
Sensed Market
Changes 2 Months
Corrected Supply
Chain in 3 Months
Followers
(47%)
Sensed Market
Changes in 4 Months
Corrected Supply
Chain by 6 Months
Laggards
(47%)
Sensed Market
Changes in 6 Months
Corrected Supply
Chain in 15 Months
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#1: What does Good Look Like?
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Aligning for balance31
S: Go-to-Market
Strategies
OP: Demand Orchestratio
n
Commodity Strategies
Network Strategies:
Make/Source & Deliver
Inventory: Form & Function
Competition
Market Drivers
&
Goal
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Definitions
Letter
Common Practice
Optimal Practice
S Ask sales Focus on market drivers:How do we best shape demand?
& Direct integration to supply
Design of the value chain to optimize trade-offs, minimize risk, balance cycles, and orchestrate demand
OP Manufacturing plan Trade-offs between make, source and deliver
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Value Planning
Focus on continuous improvement
• Forecast-Value Add Analysis
• True North
Focus on what is important in YOUR business
Move horizontal and outside-in
What is the roadmap?33
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About Us
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Altimeter Group is a research insights group providing
companies with a pragmatic approach to understanding
disruptive technologies. We have four areas of focus:
Leadership and Management, Customer Strategy,
Enterprise Strategy, and Innovation and Design.
Visit us at http://www.altimetergroup.com or contact
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Lora [email protected]
Blog:www. supplychainshaman.com
Twitter: lcecere
Linkedin: linkedin.com/pub/lora-
cecere/0/196/573
Thank you
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