making sales and operations planning a truly collaborative process, dick ling

Ling Coldrick Partnership

Making Sales and Operations

Planning a Truly Collaborative

Process

Dick Ling

© D. Ling and A.Coldrick 2010

Sales & Operations Planning SummitCaesars Palace, Las Vegas, NV

January 28, 2011


How many people have picked up some good ideas at the

conference about improving the S&OP process?

© D.Ling and A.Coldrick 2010

Prioritize them

1 2 3 4 5 6 7

X X XX X X

JUST DO IT



Agenda

• Collaboration

• Integrated Reconciliation

• Scenario Planning



Why is it important that S&OP be collaborative?

© D. Ling and A.Coldrick 2010

Ling Coldrick Partnership © D.Ling and A.Coldrick 2010

1986

http://www.amazon.com/exec/obidos/tg/detail/-/0471132276/ref=lib_rd_next_2/102-4700022-8415344?v=glance&s=books&vi=reader&img=2


In the early days of S&OP development, we emphasized

leadership, all areas of the business being involved and managing at the aggregate

level(product families)



Why did we not emphasize Collaboration at that time?

• As a young boy I heard about the collaborators during World War Two and therefore the term did not resonate with me until recently.


S&OPMeeting

MANAGINGSUPPLY

MANAGINGDEMAND

Pre-S&OPMeeting

Original 5 Step S&OP

Process


GATHER

DATA

1984

SENIORBUSINESS

MANAGEMENTREVIEW

INTEGRATEDRECONCILIATION

WITH BUSINESS PLAN

MANAGING THEPORTFOLIO &

NEW ACTIVITIES

MANAGINGSUPPLY

MANAGINGDEMAND

Sales and Operations Planning

Ling/Coldrick Model

1993


SENIORBUSINESS

MANAGEMENTREVIEW


WITH BUSINESS PLAN


NEW ACTIVITIES

MANAGINGSUPPLY

MANAGINGDEMAND

This process will work best when it

is done in a truly collaborative way.


SENIORBUSINESS

MANAGEMENTREVIEW


WITH BUSINESS PLAN


NEW ACTIVITIES

MANAGINGSUPPLY

MANAGINGDEMAND

The secret is understanding &

implementing Integrated

Reconciliation.



Forces a cross-functional way of operating

and this requires collaboration

integrate /|inti|greite/ adj.

1. Combine parts into a whole; incorporate.

2. make into a whole by bringing all parts together; unify.

3. join with something else; made part of a larger unit; unite.

4. form into one whole; make entire; complete.

5. complete (imperfect thing), by addition of parts

reconcile /|rεk( )n|sail/ n.

1. make (two or more apparently conflicting things) compatible or

consistent with each other.

2. bring back to harmony; cause to be no longer at variance.

3. make consistent or congruous; bring to agreement.

4. harmonise, make compatible, show compatibility of by argument or in

practise (apparently conflicting facts, statements, qualities, actions of

one such with others)

5. bring into consonance or accord.

Integrated Reconciliation



Integrated Reconciliation will not work well in your Company

unless you either have or develop a collaborative culture



What needs reconciling?

• New directives from senior management

• New opportunities in the market place

• New product timing

• Deviations from the business plan

• Supply problems

• Any issue emerging from the monthly process



Who Makes up the Integrated Reconciliation Team

Who Needs to Collaborate?

• You need a leader or process owner of the Integrated Reconciliation process

• Leaders from finance, new product development, sales and marketing and supply chain

• Members from each area of the company who are needed to reach a consensus, make decisions and make recommendations on a path forward


OPTION 5

OPTION 4

OPTION 2

OPTION 1

OPTION 3

STRATEGY

GAP

OPTION 7

OPTION 8

OPTION 6

2 YEARS 5 YEARS0

LATEST VIEW

OPTION 9

MANAGINGNEW

ACTIVITIES

MANAGING

SUPPLY

MANAGINGDEMAND

MANAGEMENT BUSINESSREVIEW

Analysis/

Decisions

Required

Options/

Contingencies

Decision

Support

Interactive

Emerging

Issues

European Business Summary

Austria

Belgium

France

Germany

Greece

Holland

Ireland

Italy

Norway

Portugal

Spain

Switzerland

UKInventory KPIs 1-3 KPIs 4-6

Brand Y

Brand X

Major Assumptions (In ata)

Price rise q303 75% certain

Supply does not inclunewly

acquired plant Italy

Based on IRR total growth

of 8%…….

Major Changes thiiteration

Timing of price rise brought

forward by 3 weeks t Tesco

range review date

…….

Vulnerabilities and

Opportunities

Capacity constrained. If erises

by 12% stockouts occur qtr 3 03

Low stock position leads to

Emerging Issues and Gaps

Supply at near fullcapacity.

Overtime cannot uaranteat

Avezzano over Christmas

……

Decision Made in PreviousSteps

Low service rates will be erated

Reduce the bridge buying ading

price rise

……

Decisions Required – endations

& Costs

Phase marketing spend in 0bolster

demand through price rise.

Pull £1.5m in media from

qtr 4 03 to qtr 3 03

Brand Z

Europe - Total Business

68

980

378 370653169

1084 1060

17961687

0

200

400

600

800

1000

1200

1400

1600

1800

2000

02Actual 03CurrentView

03 LQR 03 Plan 04Forecast

03 Plan

$ MM's Gross MarginCOGS

European Rolling Quarterly Summary

245

96

245 245

98

245

9589 89 89 96 96

473468

425 430

270 274256 255 256

274285 274

0

50

100

150

200

250

300

350

400

450

500

CurrentView Q2

LGR Q2Plan Q2 CurrentView Q3

LQR Q3Plan Q3 CurrentView Q4


LQR Q1Plan Q1


Euro Total

Performance

MonitoringFinancial

Impact &

Analysis


WITH BUSINESS PLAN

What is the work of the Integrated Reconciliation team?



OPTION 5

OPTION 4

OPTION 2

OPTION 1

OPTION 3

STRATEGY

GAP

OPTION 7

OPTION 8

OPTION 6

2 YEARS 5 YEARS0

LATEST VIEW

OPTION 9

What is the work of the Integrated Reconciliation team?

MANAGINGNEW

ACTIVITIES

MANAGING

SUPPLY

MANAGINGDEMAND

•Review global performance outlook and differences

between business strategy, budget and forecast.

Reconcile gaps between new activities, demand,

supply and financial targets

•Highlight impact of changes (units and financials),

gaps, opportunities and major integration issues

over a 2 Year-end horizon

•Develop scenarios considering the

interdependencies and trade-offs that drive overall

business performance.

•Redirect issues that should have been resolved

elsewhere, in line with organisational

accountabilities

•Make recommendations and/or decisions for

alternatives with business impacts for each

•Elevate to senior management major issues and

opportunities still requiring resolution.

MANAGEMENT BUSINESSREVIEW

Analysis/

Decisions

Required

Options/

Contingencies

Decision

Support

Interactive

Emerging

Issues

European Business Summary

Austria

Belgium

France

Germany

Greece

Holland

Ireland

Italy

Norway

Portugal

Spain

Switzerland

UKInventory KPIs 1-3 KPIs 4-6

Brand Y

Brand X

Major Assumptions (In ata)

Price rise q303 75% certain

Supply does not inclunewly

acquired plant Italy

Based on IRR total growth

of 8%…….

Major Changes thiiteration

Timing of price rise brought

forward by 3 weeks t Tesco

range review date

…….

Vulnerabilities and

Opportunities

Capacity constrained. If erises

by 12% stockouts occur qtr 3 03

Low stock position leads to

Emerging Issues and Gaps

Supply at near fullcapacity.

Overtime cannot uaranteat

Avezzano over Christmas

……

Decision Made in PreviousSteps

Low service rates will be erated

Reduce the bridge buying ading

price rise

……

Decisions Required – endations

& Costs

Phase marketing spend in 0bolster

demand through price rise.

Pull £1.5m in media from

qtr 4 03 to qtr 3 03

Brand Z

Europe - Total Business

68

980

378 370653169

1084 1060

17961687

0

200

400

600

800

1000

1200

1400

1600

1800

2000

02Actual 03CurrentView

03 LQR 03 Plan 04Forecast

03 Plan


European Rolling Quarterly Summary

245

96

245 245

98

245

9589 89 89 96 96

473468

425 430

270 274256 255 256

274285 274

0

50

100

150

200

250

300

350

400

450

500

CurrentView Q2

LGR Q2Plan Q2 CurrentView Q3



LQR Q1Plan Q1


Euro Total

Performance

MonitoringFinancial

Impact &

Analysis


Air Traffic Control for Issues and Opportunities

To be effective the business needs to know where these

issues are and guide them into land for decisions in the

appropriate timing and sequence to minimise risk and

maximise business value.

All businesses have a range of issues and opportunities

‘in the air’ at any point in time moving at different

speed, at different altitude, in different directions.


The internet and teleconferencing capabilities available today make

this much easier to accomplish because there is no need for face

to face meetings



Preparing information for the Management Business Review

Volumes, Financials and the Story in One Sheet or Screen

Ongoing Planning Assumptions

Major Assumption Changes In this Cycle

Emerging Issues

Decisions made in Previous steps

Risks and Opportunities

Decisions Required

2/1/2011 Pg 23

Product Family: WIGITS I &IIWW Canto - Demand (FY06)

0

10

20

30

40

50

60

70

80

90

100

FY05 Shipments 20 44 26 43 28 35 29 25 35 20 43 37

FY06 July Demand Plan 27 7 6 31 31 32 26 19 61 29 69 92

FY06 June Finl. Forecast 22 22 22 27 27 28 21 21 21 47 48 48

Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep

*Actual

FY05 Shipments 385

FY06 July Demand Plan 430

FY06 June Finl. Forecast 354

WW Canto - Supply (FY06)

0

10

20

30

40

50

60

70

80

FGI Inventory 19 34 26 18 24 18 9 5 3 15 15 -9

FY05 Actual Build 35 55 31 21 26 34 30 34 33 26 31 43

FY06 August Supply Plan 28 22 2 19 39 25 17 15 63 41 69 68

Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep*Actual

Major Assumptions (In Data)1. Wigit II Launch schedule

US IVD Clearance –

estimated Sep 06

Japan Registration approved

to sell Canto II in August.

China and Taiwan

registration estimated by

end of FY07

2. Based on current inventory and

open purchase orders the

assumption is that the current

Wigit supply will satisfy current

demand of 48 units (Aug 06 to Aug

07). No additional demand can be

satisfied.

Major Changes this Cycle (In Data)

1. Last Month’s statement (Current

Wigit I Demand from July to August

07 is 45 units. No additional Wigit I

can be built based on material

availability.)

2. Europe increased Wigit II demand

by 16 units for the period of August

and September.

Risks and Opportunities (not in Data)1. High volume for Wigit lines still

causing serious constraints in test.

2. Chassis availability for Wigit II is still

an issue. Supplier concern about

meeting current requirements for

September.

Decisions Made During this Cycle 1. Strategy about Wigit II Demo units is

that new builds will take priority

unless otherwise defined by US Sales

and Marketing leadership.

Decisions Required -

Recommendations & Costs1. For the remaining Wigit II Demo units

we need to decide if additional material

be purchased for remanufacturing.

Emerging Issues and Gaps (in

Data)1. Wigit II mix is still not stable

and could create supply issues.

2. Production still unable to meet

plan. Production resources will

be stretched in September.

FY05 Actual Build 399

FY06 August Supply Plan 408

FY06 Ops Budget Plan 450

WW Canto - Demand & Supply (2 year end)

0

20

40

60

80

100

120

140

160

180

200

FY06 June Demand Plan 40 94 106 190 112 110 111 114

FY06 July Supply Plan 52 83 95 178 143 112 112 114

FY06 Jun Fin FC/FY07 Fin Pln 66 82 63 143 82 91 100 105

FY06 Q1 FY06 Q2 FY06 Q3 FY06 Q4 FY07 Q1 FY07 Q2 FY07 Q3 FY07 Q4

FY06 FY07

FY06 June Demand Plan 430 447

FY06 July Supply Plan 408 481

FY06 Jun Fin FC/FY07 Fin Pln 354 378

Canto A Regular,

185

Canto A RUO &

Refub, 34

Canto II Internal,

38

Canto II End

User (incl. Inv.),

173

FY06 WW Canto Demand Breakdown

Canto FY06

CA

2%

EU

45%

US

34%

AP

10%

JP

6%NLA

1%

SLA

2%

FY06

2 YEARS 4 YEARS0

2 YEARS 4 YEARS0

2 YEARS 4 YEARS0

Integrated Reconciliation will look quite different depending on which models you are

supporting

5

4

3

2

1

Line Extension and Promos

2 YEARS 4 YEARS0

Existing Portfolio

2 YEARS 4 YEARS0



Week 1 Week 2 Week 3 Week 4

GLOBAL

REGIONAL

(e.g. EUROPE)

COUNTRY

Your Organisational Structure will Shape your S&OP process

Activities that need to be managed and decisions that need to be taken GLOBALLY

Activities that need to be managed and decisions that need to be taken REGIONALLY

Activities that need to be managed and decisions that need to be taken LOCALLY



REG

ION

2 COUNTRY

NEW

PRODUCT

REVIEW

CO

UN

TRY

CU

STO

MER 8 SENIOR

MANAGEMENT

REVIEW

COUNTRY/

REGION

4 GLBL

DEMAND

REVIEW

3 COUNTRY

DEMAND

REVIEW

5 PLANT

SUPPLY

REVIEW

5 GLBL

SUPPLY

REVIEW

7 INTEGRATED

RECONCILIATION

(GLOBAL)

9 SENIOR

MANAGEMENT

REVIEW

GLOBAL

GLO

BAL

6 INTEGRATED

RECONCILIATION

(COUNTRY/REGION)

1 REGION NEW

PRODUCT

REVIEW

Example Global Model1 GLBL NEW

PRODUCT

REVIEW

4 REGION

DEMAND

REVIEW



The PROCESS and the PLAYERS must change as the business conditions

evolve



What will it take to enable the organization to do the

integrated reconciliation in a truly collaborative way?

The Question Is:



What will it take?

• Leadership

• Attitude

• Education

• People understanding the value

• Support tools

• Experience and results



Collaboration

• When people see that something better can result from sharing ideas and information and that is what is right for the company not who is right---Then and only then will the people be in collaboration mode



Extend Collaboration Beyond your Company, where it is appropiate

• Your Customers-CPFR

• Your Suppliers


2 YEARS 4 YEARS0

2 YEARS 4 YEARS0

2 YEARS 4 YEARS0

The more that there is uncertainty about the future the more you may need to do scenario

planning.

5

4

3

2

1

Line Extension and Promos

2 YEARS 4 YEARS0

Existing Portfolio

2 YEARS 4 YEARS0



What is Scenario Planning

• Scenario Planning involves testing business strategies against a limited number of alternative futures.

• It can be used to help develop the Strategic plan

• It can be used to help execute your strategic plan through the S&OP process

• We need a new set of tools in order to accomplish Scenario Planning



Developing Scenario’s

• What is your Strategic Plan?• What is your Business Plan?• How do you measure whether you are achieving

them?• What assumptions are supporting them?• What are the elements of your plans and

anticipated results that could be affected by change?

• How could we evaluate the results or these changes and see the possible results



When is Scenario Planning Needed

• When there are major issues in your ability to sell, produce or hit your financial targets

• When there are major opportunities that you would like to explore

• When there is much uncertainty in the market place



Using Scenarios in Strategic Planning

• Acquisition of a new business

• Entry into a brand new product line

• Entry into a brand new market

• Employing a dramatically new marketing approach

• Moving production offshore



Scenario Planning within S&OP Environment

• Changing timing of new product introduction

• Change in product life cycle

• Massive swing in demand - UP or Down

• Major supply problem

• Price change – UP or Down

• Major cost change – Up or Down

• Change in inventory strategy

• It probably isn’t needed every month



Scenario Planning

• Each scenario that you are exploring should therefore be defined by a set of assumptions in order to meet your business goals

• A different scenario would be to define a different set of assumptions



What are you trying to determine with each scenario?

• Will it solve the business plan problem or take advantage of an opportunity?

• What will it do to profitability?

• What will it do to market share?

• Can I accomplish it with my resources?

• Is the risk worth it?

• What did we learn from looking at these scenario?



Scenario Planning

• Scenario Planning does not make the decision for you, it gives you better information so that you can make a more informed decision in charting your future



New tools are finally emerging that will assist you with your

scenario planning


You can see the term starting to appear more in presentations and

in software vendors literature about their capabilities

Andy and I are collaborating with Portfolio Decisions in order to help them use their

powerful Scenario Planning software (which has been highly successful in the Oil

and Gas industry for 15 years) to operate in a Sales & Operations planning

environment with your S&OP data

© R.Ling and A.Coldrick 2010

Scenarios with Graphic Results

Source: Portfolio Decisions


Scenario Planning

• In the past the focus in scenario planning has been on optimization of resources

• In the future the focus will also be on new market scenarios in order to maximize business results

• There needs to be a better definition of scenario planning that is understood by all We are working on that



My Challenge to you

• Explore improving your Integrated reconciliation process.

• Adopt Collaboration as a way of life.

• Look at Scenario planning as a tool to help improve your decision making process.

• Obtain continuous improvement of your S&OP process through continuous assessment.



Ian Wilson

However good our research may be, we shall never escape from the ultimate dilemma that all our knowledge is about the past, and all our decisions are about the future



Making Better Decisions about the future and

setting direction is what Sales and operations planning is all about


Thank You


lingcoldrick.com

[email protected]@lingcoldrick.com

mailto:[email protected]