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Bridging the Gap between Budgets & Reality

Oracle‟s Next Generation S&OP Solution

Gerald O’Sullivan Director Value Chain Planning

January 27, 2011


Agenda

• Business Case for Next Generation S&OP

• Oracle Solution Overview

• Solution Detail

– Executive S&OP Dashboard

– What-If Simulation

– S&OP Process Management

– Demand Management and New Product Introduction

– Supply Planning and Long-Term Capacity Planning

– Financial Planning

• Achieving Next Generation S&OP

• Summary

5


Adrian Gonzales

ARC Advisory Group“Past Performance is No Guarantee of Future Results: The Case for Innovative

Supply Chain Networks, Processes, and Technology” Nov 2010

Tomorrow‟s Supply Chain Leaders Will...

• "They will all view supply chain as a synchronized system, not

a fragmented collection of processes, functional groups, and IT

applications."

• "They will all make smarter decisions faster.―

• "They will collaborate and share networks with suppliers and

customers."

• ―They will all have flexible, adaptable, and scalable IT

systems.

Today‟s Value Chain is Complex…

Suppliers Customers

Innovation

Procurement

Human Capital Management

Va

lue

-Cre

atin

gA

ctiv

ities

Su

pp

ortin

gA

ctiv

itiesFinancial Management

• Geographically Distributed

• Dynamically Networked

• Increasingly Collaborative

• Product & Service Oriented

InboundLogistics

OperationsOutboundLogistics

Marketing& Sales

Service

Value Creation

7


“The successful business

executive is a forecaster first,

everything else follows”

Peter Bernstein„Against the Gods:

The Remarkable

Story of Risk‟

Predict

8


Align

“Vision without execution is

hallucination”

Thomas EdisonAmerican Inventor

9


“The world is changing very fast.

Big will not beat small anymore.

It will be the fast beating the slow.”

Rupert Murdoch

Chairman & CEO,

News Corporation

Adapt

Information is Critical to Create a Value Chain

• PREDICT Market Requirements and Risks

• ALIGN Operations to Business Goals

• ADAPT to Value Chain Disruptions

Information

Enables

You to…

PREDICT ALIGNADAPT

Value Chain Focus

InboundLogistics

OperationsOutboundLogistics

Marketing& Sales

Service

Undefined, Ambiguous Information

Corporate Objectives

Cross-LOB Programs

Disruptive Changes

External Processes & Information

Unplanned Scenarios


Agenda



• Solution Detail








• Summary

Oracle‟s Information-Driven Value Chain Platform….. Driving Best Practice

Value Chain

Planning and

Execution

CompleteThe broadest and

deepest SCM solution

on the market

ModularStart anywhere, go

anywhere; create value

where most needed

OpenDesigned as an open

platform for any ERP

or mix of ERPs

IntegratedCost-effectively expand

scope and leverage of

the solution

13

Achieve Benefits Incrementally

• Leverage single model as central starting point: focus on high value

• Plug-in new components incrementally: ―crawl, walk, run‖

• Re-configure without re-implementation: upgradeable modifications

SOLUTION PROCESS FULL SOLUTION

Value Chain Planning and

Execution


Execution


Execution


Execution


Execution

Achieving Next Generation S&OP is a JourneyOliver Wight S&OP Maturity Model

Mature Integrated Business Planning• Drives responsive optimization of the business in pursuit of business strategy• Continuous Reconciliation, managing gaps and alternative scenario planning

Integrated Business Planning• Rolling business management process including gap analysis versus strategy and focus on

competitive priorities• Integrated Reconciliation is the driver: business analysis provides underlying understanding, drives

improvement priorities and gap closing actions • Process frequently reshapes to meet changing organizational structure• Used to deploy and drive the value proposition

Capable S&OP• Process is established driving integrated operational and financial planning• Full suite of KPI’s to drive operational effectiveness, achieving 95%+ capability • Issues are identified and this is the decision making process• Annual budgeting process removed – S&OP numbers drive forward plans• Team working behaviors are demonstrated throughout the process

Foundation S&OP• All elements defined with correct accountability, KPI’s and structure• Focus is demand /supply tactical balancing• Initiate integrated supply chain KPI’s• Challenging behaviors but not yet working

Disconnected Management Processes• Traditional management meeting focused on the past• Annual budgeting process with poor basis for forward projections • Functional/silo management – few/unaligned objectives & measures• Defensive functional behaviors

Note: Model courtesy of Oliver Wight

Phase 1

Phase 2

Companies Should Focus on Next Generation S&OP

to Maximize Benefits

• Often owned by supply chain group

with limited involvement by others

• Focused on balancing supply and

demand

• Too much focus on explaining the past

• Standalone process not easily

integrated with operational planning

and execution

S&OP as Typically Implemented

• Cross-functional

• Focused on meeting overall corporate

goals in areas such as revenues,

costs, and service levels

• Forward looking

• Monitoring of corporate performance

linked with planning processes

allowing companies to drive decisions

into operations

Next Generation S&OP

Customers

Suppliers

Finance

Supply Chain

Sales

Marketing

R&D

Partners

Supply Chain Planning

Demand Planning

Sales & Operations Planning

Financial Planning & Goals

Strategic Planning

Collaborative Planning

Design Collaboration Sales Forecasts

Market Requirements

Business Plans

Sales Forecasts

New Product Launch

Product Life Cycle Plans

Product Forecasts

Promotion Plans

Forecast Collaboration

Product Requirements

Operating Plan

Excess & Obsolete

Inventory Exposure

Key Account Planning

Revenue Planning

SKU Rationalization

New Products Planning

Product Allocation

Profit Planning

Working Capital

Planning

Spreadsheets are Not Up to the Task of

Coordinating Complex Web of Planning Processes

Emerson Real-Time Sales & Operations Planning

SOLUTIONS

• Demantra Demand Management• Demantra AF&DM• Demantra RT S&OP • Advance Supply Chain Planning• Inventory Optimization

COMPANY OVERVIEW

• Emerson is a diversified global manufacturing & technology company offering a wide range of products & services in the areas of process management, climate technologies, network power, storage solutions, professional tools, appliance solutions, motor technologies, industrial automation.

• Revenue: $24.8B• 140,000 Employees

• 265 Manufacturing Sites

CHALLENGES/OPPORTUNITIES• Decentralized and non-formal S&OP Processes

• Manual & inconsistent forecasting process across sites.• Difficulty measuring forecast accuracy :SKU & Piece Part

• Forecasting performed qualitatively, without a solid statistical basis for decisions.

• Multiple Master Schedulers for the same product group; difficult to get global roll up view

• Communication of forecast decisions within and across sites was sporadic and typically not timely

• Each site is on a different legacy system• Lack of Forecast ownership: Marketing & Sales provide

dollarized annual amount as forecast• Lack of Global Visibility• No Bottoms up fcstng & reconciliation to upper levels

RESULTS

• Single Global Master Scheduler per Product Line

• Centralized Planning Process for Collaboration and Consensus.

• Demand Capture at Model and Options level for Independent and Dependent Demands

• Integrated Planning Process for the entire ‗Model Option Tree‘

• Enhanced Service Levels, Superior Forecast Accuracy

• 43% reduction in Inventory

Month 2008

VTech Builds a Consumer Driven Supply Chain with Oracle

CUSTOMER PERSPECTIVE

Demantra's solution allows us to collaborate with our

customers in a single, consistent planning environment

where changes in forecasts dynamically update

replenishment and shipment plans. This next generation

CPFR solution allows VTech to maintain its lead in the

consumer electronics business by delivering the highest

possible service levels, while reducing current inventory

levels.

- Nick Delany, Senior Vice President

VTech Telecommunication Products Business

COMPANY OVERVIEW

VTech is one of the world‘s largest suppliers of corded

and cordless phones and a leading supplier of

electronic learning products. Founded in 1976, VTech

manufacturers innovative, high quality consumer

electronics products, and distributes them to markets

worldwide in the most efficient manner.

RESULTS

• Increased order fill rate from 55% to over 95%• Increased inventory turns from 3x to 6x per year• Reduced logistics costs by 65%• Reduced retail compliance fines by 85%• Reduced price protection claims by 40%• Rapid time-to-benefit with implementation in 90 days

CHALLENGES/OPPORTUNITIES• Legacy systems a hodge-podge of incompatible

hardware and software• Inefficient planning and execution leading to rising

costs• Excess inventory; poor response to market

requirements

SOLUTIONS• Real-time Sales and Operations Planning

CUSTOMER PERSPECTIVE

We wanted to choose a player that would be in the game

for the long haul, so we looked at Oracle's investment in the

outsourcing model and its expertise in technology. Simply

put, Oracle provides us with the best technology available.”

- Tim Roessler ,CIO

User adoption happened very quickly, almost automatically,

we were surprised how easily it went with no complaints

from the field.

- James Dillon, Director Global Sales Operations and

Customer Service

COMPANY OVERVIEW

• Develop, manufacture and market high performance Chemical Mechanical Planarization (CMP) polishing slurries for advanced semiconductor devices

• #1 Supplier of CMP Slurries — Cabot Microelectronics believes it has approximately three times the annual revenue of the next largest CMP slurry competitor

• Industry: Chemicals • Employees: 1000 • Revenue: US$500M

CHALLENGES/OPPORTUNITIES

• AsiaPac customers increased to 71% in 2007 from 53% in 2002• 70% market share through technology leadership• CMP is an enabling technology• One of the fastest growing sectors in the semiconductor industry• Track record of profitable growth, despite semiconductor cycle• Pursuing multiple new market and product opportunities -

acquisitions

SOLUTIONS

• Demantra DM and RTSOP• Advanced Supply Chain Planning/CBO• Inventory Optimization• Global Order Promising• Hyperion Planning• All deployed OnDemand• OPM backbone

RESULTS

• Reduced Monthly forecasting cycle 48% from 21 to 11 days• Reduced Forecast error (MAPE) from 50% to 20% and falling• Full enterprise planning solution with Hyperion integration• Enabled live on-line consensus ability• Saved $2-$4 million in hardware and facility expenses (on

demand)• Saved $1 million in compensation costs (on demand)• Improved employee morale

Cabot Microelectronics Integrates

Value Chain Planning with Hyperion

5-Step S&OP Process

Most S&OP Solutions Simply Monitor Processes

Management Review

Product Review

Demand Review

Supply Review

Financial Review

Supporting Planning Processes

• Supply Planning

• Long-term Capacity Planning

• Financial Planning

• What-If Simulation

• S&OP Process Management

• Demand Management

Most S&OP software applications are standalone solutions limited to periodic monitoring of S&OP processes at a high level

Only Oracle links high level monitoring with operational planning applications, allowing companies to continuously monitor performance and drive decisions into operational planning

Note: Process steps based on Oliver Wight 5-Step Model

© 2008 Oracle Copyright, Proprietary & Confidential

Detailed

analysis and simulation

Only Oracle Links Performance Monitoring with

Operational Planning

Supply FinanceDemand

Executive S&OP Dashboard

Detailed Planner Workbenches

Real-Time S&OP

Executive S&OP Dashboard is core

application for Oracle S&OP process,

with tabs for Executive, Demand,

Supply, and Financial Review

Real-Time S&OP application provides

process management for integrated

demand, supply, and financial

planning

Individual planning applications for


• Supply Planning and Simulation

• Finance


Solution Spans Strategic, Tactical, and Operational

Issues

Operational

Events

Tactical

Decisions

Strategic

Decisions

• Track orders

• Track shipments

• Alert issues

• Balance capacity

• Rebalance

inventory

• Allocate products

• Shape demand

• Service levels

• Inventory policy

• Carrier contracts

• Product mix

• Supply network

sourcing

Continuous S&OP Process Execution


Agenda



• Solution Detail








• Summary

Dashboard Offers Visibility Across S&OP ProcessFour Tabs

Financial Review

Compare alternative

scenarios

Analyze key

planning metricsAnalyze profit

and loss

Evaluate supply

constraints

Link directly to

detailed planning

• Aggregate key

performance indicators

enable decision makers

to see the business

impact of plan

alternatives

• Analytics based on

planning data provides

forward looking view

• Drill-down for greater

detail and link to

planning applications

• Execute company-

specific planning

scenarios

Dashboard Monitors Key Metrics

Pre-Configured Views Accelerate Time to ValueMore than 300 KPIs to Choose From

• Executive Summary

• Top Difference –

Operating Plan and

Budget by Category

• Consensus Change by

Customer

• Consolidated Analysis

• Profit and Loss Statement

• Constrained Forecast

Comparison

• Budget Analysis

• KPI reports: Forecast

Accuracy; Customer

Service; Inventory and

Production

Executive Review Tab

• Demand Summary

• Top Absolute Difference –

Consensus and Budget by

Category

• Consensus Change by

Customer and Category

• Forecast Comparison

• Forecast Accuracy

(MAPE)

• Projected Backlog

• Consensus Tracking

• Forecast Scenario

Comparison

Demand Review Tab

• Supply Summary

• Bottom Demand Fill % by

Customer

• Supply Change by

Category

• Consolidated Analysis

• Demand Fill

• Production Plan

• Production Plan by

Organization

• Top Resource Utilization

by Organization

• Top Resource Utilization

• Top Supplier Item

Utilization

• Consolidated – Scenario

Comparison

Supply Review Tab

• Financial Summary

• Operating Plan and

Financial Forecast

Comparison

• Top % Difference -

Operating Plan and

Budget by Category

• Margin Difference by

Category

• Year-over-Year Financials

• Financial Forecast and

Budget Comparison

• Revenue / Cost / Margin

by Category /

Organization / Zone /

Customer

Financial Review Tab

Note: Above highlights just a sample of the available pre-configured views in each tab


Agenda



• Solution Detail








• Summary


Rapid What-If Simulations Generate Alternatives for

the S&OP Process

• Real-time supply simulations

– Support what-if scenario analysis to

identify alternatives for the Pre-S&OP

and Executive S&OP meetings

• Evaluate supply constraints

– Quickly and interactively simulate

impact of demand changes on the

supply picture

• Plans visible in Executive S&OP

Dashboard

Supply

Planning

Demand

Management

Rapid supply constraint simulations

Balance

Powerful Planning Application for Drilling into More

Detail on Simulations and Supply Plans

• Fast What-If Simulation

– Copy plans to sandbox to simulate impact of

changes

Demand increases, ECOs, shortages, etc.

Planning parameters with mass edits

– Compare plans at detailed and aggregate

levels

– Analyze constraints and exceptions

– Reduce/eliminate need for Excel

• Supply Planning

– Improve plans by considering material and

production constraints

– Real-time planning runs in minutes not hours

Incremental and complete plan regeneration


Agenda



• Solution Detail








• Summary


WebCenter Work Spaces Facilitate Collaboration

Among all Members of the S&OP team

• WebCenter work spaces to

collaborate on planning,

S&OP scenarios

– Group members

– Group calendar

– Group documents

– Group Wiki

• Unified work list

• Links to other VCP apps– Linked or embedded reports


Automated Consensus Planning Improves Plan Quality

and Acceptance

• Create consensus plan through continuous collaboration across sales, marketing, finance, supply chain and customers

– Continuously evaluate impacts of demand, supply, and financial decisions

– Maintains relationship between monetary values and supply chain units

• Each participant gets tailored view– Configurable worksheets

– Offline mode

• Combine top down business planning with precise bottom up forecasts

– Interactive simulation

• Automate process with workflow– Manage by exception

Sales

Mgrs

Sales: Plan by Product Line

Manufacturing: Plan by Plant

Sales Reps

Marketing: Plan by Region

Asia Americas

Finance: Budget in Dollars

Promotions

plan

Sales

forecast

Financial

planOperations

plan

Plant

Mgrs

Consensus

S&OP plan


Supply and Demand Balanced Profitably

• Visibility to logistics and production constraints in one number planning process

– Based on single demand plan

• Rapid Planning and Advanced Supply Chain Planning to evaluate supply constraints

– Interactively simulate impact of demand changes on the supply picture with a common presentation layer

• Strategic Network Optimization to evaluate capacity constraints

– What-if analysis of supply chain capacity and resource constraints


Configurable Worksheets, Automation, and Exception

Management Further Enhance Collaboration

• Configurable worksheets

– Display and edit information at any level

– Flexible graphics

– Color code areas of interest

• Automate reconciliation and

approval process

– Combine multiple inputs by defined rules

– Measure accuracy of each input

– Automate approvals

• Manage by exception– Automated exception handling

– Alerts and visual cues easily point to

important issues

– Document all assumptions with a

complete audit trail of decisions taken

Marketing

Sales Rep


Agenda



• Solution Detail








• Summary

Forecasts at the Lowest Level Provide the Most

Accurate Forecasts

• Demand history and causal factors

maintained at lowest level

• Forecasts done at lowest level

• Coefficients calculated and maintained

at the lowest level for which there is

demand history

• Forecasts and promotion predictions

reflect local, regional, product group

customer, time period, sensitivity, and

so on

• Approach yields most granular

analysis of demand for more accurate

forecasts

Product/Group

ItemItem Item

Item at a Customer

Item at a Customer/Ship-to A

Item at a Customer/Ship-to B

Demand history

Promotion Lift

Seasonality

Cannibalization

Other Causal Factors

Demand history

Promotion Lift

Seasonality

Cannibalization

Other Causal Factors

Per time period (week/day/month)


Automated New Product Forecasting Key to Including

Product Lifecycle Management in S&OP Process

• Improve forecast accuracy for new products

• Manage product life cycles in the S&OP process– Define and/or evaluate cannibalization of existing products on

revenue and inventory goals

– Determine optimal timing of product launches

– Align new product schedules to financial targets

– Adjust forecast based on actual demand

– Determine price breaks and promotions that can be leveraged

for sell-off or ramp-up

New Product C =

30% Product A +

70% Product B

Apply shapes, scaled

for volume and time

Re-scale base on

initial demand data

Model new item based

on past behavior of

other items with

similar attributes

CHAINING SHAPE MODELINGATTRIBUTE-BASED

FORECASTING

E&O Performance

Summary

Excess Performance

Details by Category

Obsolescence Performance

Details by Category

Analyze Excess and Obsolescence Associated with New Products Use What-If Simulation to Determine Best Phase-In Timing


Shape Demand with Integrated Promotion Planning

• Synchronizes sales, marketing, and supply

chain – Develop integrated strategies to adjust demand to

available supply

– Implement profitable sales and marketing strategies that

are feasible for supply chain to execute and check

availability of material and capacity to satisfy promotion

demand

– Leverage excess capacity to influence demand

• Predict the impact of marketing programs– Decompose lift to understand halo effects,

cannibalization, and consumer stock piling

• Simulate volume and profitability of future

promotions– Optimize promotional events based on goals and

constraints - profit, revenue, units, budget, timing, margin

– Perform what-if analysis to understand the impact of

varying promotional tactics

Predictive Trade Planning and Optimization


Agenda



• Solution Detail








• Summary

Oracle Supply Planning Spans Strategic and Tactical

Tactical

Supply

Plan

Network design and

inventory strategyTactical supply planning

Event-driven simulation

Business

Scenario Simulation

(strategic, tactical,

operational)

Supply network

Sourcing and

Postponement

strategy

Supply network

Sourcing and

Postponement

strategy

• Respond to changing markets and

product mix changes

• Adjust supply network while

preserving future growth

• Develop supply chain risk mitigation

strategies

• Plan your extended value chain with

holistic supply and distribution planning

• Improve demand fulfillment through

constrained order promising

• Improve production throughput with

plant level scheduling and monitoring

• Improve supply chain visibility through

collaboration with trading partners

• React quickly to supply chain events

• Empower planners with rapid what-if

scenario simulation

• Leverage embedded analytics in UI

for insightful analysis while making

rapid decisions

• Translate decisions in actions

Compare scenarios for decision making

Generate constrained forecast and balance

supply network

Publish working consensus forecast

Plan Capacity for Long-Term S&OP


Agenda



• Solution Detail








• Summary

Financial Planning – Financial plans reflect

operational realities

– Revenue forecast is based on bottom-up consensus operating forecast

– Top-down financial plan validated from bottom-up

S&OP– Operating plan aligned to financial

targets

– Revisions to revenue plan visible to sales and operations planning process

– Monetary to units translation continuously maintained to ensure plan changes are synchronized

Extend S&OP with Hyperion Integration Align Financial and Operations Planning


Agenda



• Solution Detail








• Summary

Oracle + Oliver Wight Working Together for a

Complete Solution

People Process Technology

Oracle Value Chain Planning implementation partners

+ +

• Executive S&OP education courses

• FastTrack S&OP business process transformation program

• Oracle software

• Software implementation services

+



―Leggett & Platt, Incorporated, together with Oracle and Oliver Wight,

was able to rapidly deploy Oracle S&OP and implement Demantra

across 19 unique business units across the globe. This three way

partnership, the flexibility of Oracle‘s Demantra, Oliver Wight‘s best

practice education and mentoring on the business processes, and

the engagement of Leggett & Platt business leaders will provide

Leggett & Platt with a solid foundation to leverage our supply chain

capabilities around the globe.‖

Randall Wood

Vice President, Leggett & Platt

Oracle and Oliver Wight Work Together

for Success at Leggett & Platt


Agenda



• Solution Detail








• Summary

SummaryHow Oracle Enables Next Generation S&OP

5-Step S&OP ProcessManagement

Review

Product Review

Demand Review

Supply Review

Financial Review

Supporting Planning Processes

• Supply Planning

• Long-Term Capacity Planning

• Financial Planning

• What-If Simulation

• S&OP Process Management


• Performance monitoring integrated with planning applications so that decisions

can be driven into operations

• Aligns value chain planning and operations with strategic financial plans and

budgets

• Built-in forward looking analytics so executives can see where the business is

heading and make informed decisions

• Rapid, robust, constrained and profit-optimized "what if" capabilities to enable

event-driven S&OP

50

Oracle provides the technology that

enables the people and processes

for today‘s companies become

tomorrow‘s Supply Chain Leaders