how agile is your business? new research on agility trends

How Agile is Your Business?

Presenters: Lora Cecere & Nari ViswanathanMay 15, 2012

How S&OP Drives Agility

Research ResultsMarch-April 2012

Supply Chain Insights

p. 3Supply Chain Insights, LLC © 2012

• Today, S&OP landscapes are more complex. It is not a bell curve. The average company now has five S&OP processes. Eight years ago there was one.

• Today, a company is 5X more likely to have a supply chain center of excellence than eight years ago. However, there is still a large gap in the effectiveness of S&OP.

• 90% of companies surveyed believe that a mature S&OP improves agility. However, only 13% of companies have effectively tied S&OP planning to execution.

Key Findings


An Athlete Needs:

Strength

Flexibility Balance

And so does a supply chain….


Agenda

Overview & Demographics

What is Agility?

Increasing Complexity of S&OP

So What? Who Cares?


WHY WHAT• OBJECTIVE: To assess the importance of

supply chain agility and tactics used to improve agility and to understand the role of S&OP in driving agility in organizations.

• HYPOTHESIS: The greater the complexity of the supply chain, the more important it is to have a mature S&OP process.

• Survey topics included:• Supply chain organization definition• Agility definition and techniques• S&OP process details and impact on agility

WHEN & HOW WHO• Online interviews were conducted between

March 22 – April 9, 2012.

• Respondents were recruited via email Steelwedge.

• 117 business leaders, primarily Managers and above.

• Across over 50 companies in 13+ industry groups (primarily Food & Beverage, Make to Order Discrete, Consumer Packaged Goods, and High Tech & Electronics).

• 62% from Process industries, and 34% from Discrete manufacturers.

Study Overview


≤1000

27%

1001-5000

26%

5001-15,000

22%

Over 15,000

25%

47% from Companies with Over 5K Employees

Who Was Surveyed?Industry, Company Size & Title

Base: Total Sample (117)Q2. Which industry grouping best defines your company? Please select the one that best applies.Q3. What is the size of your company, in terms of number of employees? Your best estimate is fine.Q4. Which of the following best describes your current position? Please select the one that best applies.

Food and Beverage

Make to Order Discrete

Consumer Packaged Goods

High Tech and Electronics

Chemical - Industrial

Chemical - Specialty

Pharmaceuticals

Medical Devices

Oil and Gas

Fashion Apparel

Commodity Apparel and Footwear

Retail - Convenience

Retail - Specialty

Other

18%

18%

11%

11%

9%

9%

9%

4%

3%

2%

1%

1%

1%

4%

From 13+ Industry Groups

Vice Pres-ident

Senior Director

DirectorManagerInternal consultant

5%11%

25%

47%

12%

88% Managers & Above

62% Process vs. 34% Discrete


Supply Chain Planning (Supply)

Supply Chain Planning (Demand)

Inventory

Deliver (Distribution)

Transportation

Source (Procurement)

Make (Manufacturing)

Customer Service

80%

72%

63%

56%

52%

51%

38%

37%

Functions Reporting Through Supply Chain

Who Was Surveyed? Supply Chain Organization

Base: Total Sample (117)Q5. Please tell us how you define your company’s supply chain organization by selecting which function(s) report through the supply chain organization. Please select all that apply.Q7. To whom does your supply chain organization report? Q6. How would you characterize your company’s supply chain?

Chief Operating Officer

Gen Mgr of Business Unit

Leader of Manufacturing

Chief Financial Officer

Head of Procurement

Chief Information Officer

43%

26%

12%

9%

3%

2%

Supply Chain Leader

69% Profit Center

Managers

58%26%

12%3%

Supply Chain DefinitionNot Sure

Configure to Order

Build to Order

Build to

Stock


Yes 87%

No 10%

Not sure 3%

Have a Sales & Operations Planning Process

S&OP ProcessExistence & Processes

Base: Total Sample (117) Q17. Does your company have a Sales and Operations Planning (S&OP) process? A S&OP process is a tactical planning process to forecast sales and plan operations.Base: Have a S&OP process (102)Q18. Which one of the following best defines the goal of your current S&OP process? Q19. How many distinct S&OP processes does your company currently have? Your best estimate is fine. OPEN-ENDED

1 2 3 4 5 More than 5

27%14%

20%12% 9%

19%

# Distinct S&OP Processes5 S&OP processes on average

59% have 3+ processes


Definition of best practices for process

Definition of supply chain metrics

Supply chain planning

Inventory strategies

Facilitation of horizontal processes, like S&OP

Evaluation of new technologies

Network design

Establishment of goals

Supplier development

Other

90%

82%

77%

74%

72%

69%

69%

51%

18%

3%

Primary Functions of Center of Excellence

Yes 64%

No 30%

Not sure 2%

Center of Excellence

Center of Excellence

Base: Total Sample (61)Q8. Does your company have a supply chain center of excellence – in other words, a dedicated team focused on improving supply chain process excellence?Base: Have Center of Excellence (39)Q9. What are the primary functions of your supply chain’s center of excellence? Please select all that apply.

6 functions of the center of excellence on average


Center of ExcellenceImportance vs. Performance

Base: Have Center of Excellence & Particular Function (varies by function) *CAUTION: SMALL BASE SIZE Q10. For each of the following functions of the supply chain center of excellence, how important is it to your overall company? SCALE: 7=Extremely important – 1=Not at all importantQ11. For these same functions, how would you rate your company’s performance? SCALE: 7=Excellent– 1=Poor

-70%

-60%

-50%

-40%

-30%

-20%

-10%

0%

82%77% 74%

66%62%

57% 58%52%

21%

43% 44%

34%28%

20%

42%

30%

-61%

-33%-30% -31%

-34%-37%

-16%

-22%

Importance vs. PerformanceImportance (6-7) Performance (6-7) Gap (Perf - Impt)

NOTE: Supplier Development is not shown because not enough respondents report it is a function of their supply chain center of excellence

Base: Have

function 28* 30 27* 32 29* 35 19* 27*


How balanced is your S&OP Process?

• Big OP and little s• Big S and little op• We are balanced

Audience Question


Agenda


What is Agility?


So What? Who Cares?


What is Agility?

Base: Total Sample (117)Q11. How would you define what it means for your company’s supply chain to be “agile”? Please select the one that fits best.

49%

38%

10%3%

How Define Supply Chain “Agility”Shorter supply

cyclesFlexibility to make and deliver whatever is

ordered

Ability to adapt to

variations in demand and

supply

Most Mature Definition:Ability to recalibrate plans in the face of market, de-

mand and supply volatility and deliver the same or

comparable cost, quality and customer service


Importance Performance

89%

27%

5%

32%

6%

40%

Agility Importance vs. Performance (7-Point Scale)

Low (1-3)

Middle (4)

High (5-7)

Agility Importance vs. Performance

Base: Total Sample (117)Q12. How important is it for your company’s supply chain to be “agile” in 2012? Please base your answer on however your company defines agility. SCALE: 1=Not at all important, 7 = Extremely importantQ13. How would you currently rate your company’s supply chain in terms of being “agile”? SCALE: 1=Not at all agile, 7 = Extremely agile

Agility Performance is

62 % Points Lower than Importance


Importance of S&OP Process for Agility

Base: Have a S&OP process (102)Q22. How important do you think your S&OP process is to improving the agility of your supply chain?

28%

42%

20%

7%3%

Importance of S&OP Process to Agility

Not important (1-3)

(4)

(5)

(6)

Extremely important (7)

90% Important


How well can you plan and build scenarios to plan for agility today?• Works well. My system lets me easily build

what-if scenarios.• Area for improvement. I can plan, but I

cannot easily build what if scenarios.

Audience Question


Agenda


What is Agility?


So What? Who Cares?

S&OP Evolution

Manufacturing-Driven

Deliver a Feasible Plan for Operations

Match Demand with Supply

Sales Driven

Match Demandwith Supply

Business-planning Driven

Maximize Profitability

Demand Driven

Maximize Opportunity Sense and

Shape Demand

Market Driven

Maximize Opportunity and Mitigate Risk. Orchestrate

DemandMarket to Market

Greater Benefit• Growth• Resilience• Efficiency


Match demand with supply

Maximize opportunity and mitigate risk

Develop a feasible plan

Determine the most profitable plan

Other (please specify)

43%

32%

14%

8%

3%

43%

37%

7%

9%

4%

41%

19%

33%

7%

0%

S&OP Goal by Supply Chain Leader

Other*GM or COOTotal

S&OP GoalBy Supply Chain Leader

Base: Have a S&OP process -- Total (102), Supply Chain Leader is GM or COO (70), Other (27) – *CAUTION: SMALL BASE SIZEQ18. Which one of the following best defines the goal of your current S&OP process?

Most Mature Goal


What is Agility? By S&OP Goal

Base: Max Opp/Min Risk (33), Other (69)Q11. How would you define what it means for your company’s supply chain to be “agile”? Please select the one that fits best.

Ability of the supply chain to recalibrate plans in the face of market, demand and supply volatility and de-liver the same or comparable cost, quality and cus-

tomer service

Ability to adapt the supply chain to variations in demand and supply

Flexibility to make and deliver whatever is ordered

Shorter supply cycles

64%

30%

3%

3%

48%

41%

10%

1%

Agility Definition by S&OP Goal

Other S&OP Goal

Mature S&OP Goal (Maximize Opportunity, Mit-igate Risk)

Most Ma-ture Defini-

tion


S&OP Plan Execution

Base: Have a S&OP process (102)Q25. After your S&OP plan is generated, how is it executed? Please pick the one that describes it best.

Execution is not connected to S&OP plan

We try to execute the S&OP plan, but hardly do in practice

We execute the S&OP plan most of the time

We execute the S&OP plan nearly all of the time

We monitor market events and adjust to S&OP plan within limits

9%

25%

35%

19%

13%

S&OP Plan Execution

Sense & Respond


Better visibility of market events due to improved S&OP decision making

Improved demand forecasting

Lean manufacturing

Use of channel data to sense demand (decrease demand latency)

Vendor managed inventory (VMI)

Inventory postponement

Manufacturing products closer to market

Change in transportation modes

Supplier managed inventory (SMI)

Ability to speed up new product launch process to be more responsive to customers

Other

Not sure

32%

28%

15%

5%

3%

3%

3%

3%

1%

1%

3%

4%

Primary Technique to Improve Agility

Top 3 Technique

s

Agility Techniques

Base: Total Sample (117)Q15. What is the primary technique your company currently uses to improve supply chain agility?


Better visibility of market events due to improved S&OP decision making

Improved demand forecasting

Lean manufacturing

Use of channel data to sense demand (decrease demand latency)

Vendor managed inventory (VMI)

49%

19%

12%

2%

2%

17%

37%

17%

8%

5%

Top 5 Techniques to Improve Agility by Agility Definition

Other Mature Agility Definition

Top 5 Agility Techniques By Agility Definition

Base: Mature Agility Definition (Same Cost, Quality & Customer Service Given Variable Supply & Demand) (57), Other Agility Definition (60)Q15. What is the primary technique your company currently uses to improve supply chain agility?

Mature Agility = Same Cost, Quality & Customer Service Given Variable Supply & Demand


Supply Chain Agility Challenges (Open-Ended Verbatim Responses)• S&OP does not report into the Supply Chain structure. It maintains an independent force for impartial

influencing of Demand, Supply and Finance• S&OP is only happening in the markets and not on a global level. We are operating a federated

organizational model. Therefore we have numerous processes in place today.• Plan S&OP according to your best possible effort in line with your manufacturing capacity and logistic

support• We have currently put the S&OP process on hold due to implementing a new ERP process and most

people do not physically have the time. However in the mean time we are in the process of re vamping the process to move up one more level.

• We are a telecommunications provider. We don't manufacture in a traditional sense, so supply chain (other than the procurement of mobile handsets and network equipment) doesn't occur. Matching supply to demand is not based on a linear one-to-one relationship between units sold matched to units consumed. The BOM is complex and statistical only. In saying that, we operate a robust S&OP process to try to match network and other resources to the products we sell. Questions about S&OP vs. agility are difficult to answer in our context.

• We're investigating new sales forecasting software for installation in 2013. Ours no longer meets our needs.

• The challenge in maturing a customer base/market to enable effective forecasting is a significant challenge in moving S&OP maturity - we are typically a second tier supplier

Agility Challenges & Efforts

Base: Total Sample (117)Q26. Is there anything else that you think we should know about your supply chain and your company’s efforts to make it more agile? OPEN-ENDED


What is your largest challenge in building an agile S&OP?• Understanding and support by the executive team• Clarity of a supply chain strategy and supply chain

excellence• The role of finance and the budget• Availability of skilled resources• Technologies that support the process

Audience Question


Agenda


What is Agility?


So What? Who Cares?


• Today, S&OP landscapes are more complex. It is not a bell curve. The average company now has five S&OP processes. Eight years ago there was one.

• Today, a company is 5X more likely to have a supply chain center of excellence than eight years ago. However, there is still a large gap in the effectiveness of S&OP.

• 90% of companies surveyed believe that a mature S&OP improves agility. However, only 13% of companies have effectively tied S&OP planning to execution.

Key Findings


Who is Lora?

• Founder of Supply Chain Insights

• 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.


Where do you find Lora?

Contact Information: [email protected]

Blog: www.supplychainshaman.com (over 6000 pageviews/month)

Twitter: lcecere 2950 followers. Rated as the top rated supply chain social network user.

Linkedin: linkedin.com/pub/lora-cecere/0/196/573 (2450 in the network)

Q&A

May 15, 2012

how agile is your business? new research on agility trends

Technology

supply chain agility

supply chain planning

complexity ofthe supply

supply chainorganization

current sop process

mature sop process

sop process details

complexity of sop