presentation in chicago s&opie event version4

Supply Chain InsightsWhat Does Good Look Like?

Supply Chain Insights

BRICKSMatterThe Role of Supply Chains in Building Market-Driven Differentiation

LORA M. CECERE CHARLES W. CHASE JR.

BookPublishes in August

2012

Supply Chain Insights, LLC © 2012, p. 4

S&OP Challenge


Supply Chain Pain Points:All vs. Largest


IT Systems:Quantity


Is it any wonder…?


Years 1990-1994 1995-1999 2000-2004 2005-2009 2010-2012

RETAIL AVERAGE

17.05% 42.46% 12.89% 8.76% 5.15%

CPG AVERAGE

2.12% 0.84% 3.91% 7.26% 2.32%

FOOD CPG AVERAGE

3.68% 2.97% 8.13% 2.59% 4.27%

BEVERAGE CPG

AVERAGE12.87% 2.00% 9.59% 11.53% 4.92%

Year-over-Year Growth


My Bias


What’s in a name?

A rose by any other name would smell as

sweet.William Shakespeare


• Integrated business planning (IBP) refers to the technologies, applications and processes of connecting the planning function across the enterprise to improve organizational alignment and financial performance. IBP accurately represents a holistic model of the company in order to link strategic planning, and operational planning, with financial planning. By deploying a single model across the enterprise and leveraging the organization’s information assets, corporate executives, business unit heads and planning managers use IBP to evaluate plans and activities based on the true economic impact of each consideration.

• Sales and operations planning (S&OP) is an integrated business management process through which the executive/leadership team continually achieves focus, alignment and synchronization among all functions of the organization. The S&OP plan includes an updated sales plan, production plan, inventory plan, customer lead time (backlog) plan, new product development plan, strategic initiative plan and resulting financial plan. Plan frequency and planning horizon depend on the specifics of the industry. Short product life cycles and high demand volatility require a tighter S&OP planning as steadily consumed products. Done well, the S&OP process also enables effective supply chain management.

What Is In A Name?


Agenda

What is the Goal?

How do we make Decisions?

What do we Measure?


Common Practice Market-driven Focus

S Ask salesFocus on market drivers:How do we best shape demand?

& Direct integration to supplyDesign of the value chain to optimize trade-offs, minimize risk, balance cycles, and orchestrate demand

OP Manufacturing planTrade-offs between make, source and deliver

Getting to Letter Perfect

14


S&OP ProcessExistence, Goals & Processes


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

Source: Supply Chain Insights, LLC, 2012


A Supply Chain is a Complex System with Complex

Processes with Increasing Complexity


The Effective Frontier

Source: Supply Chain Insights, LLC, 2012


Value Network Strategy

Supply chain strategy

Business StrategyWhat are the right things to do to increase company value?

Value-network Supply Chain 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

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 ProcessHow do I do the right things right?

Source: Supply Chain Insights, LLC


Center of ExcellenceImportance vs. Performance


Agenda

What is the Goal?


What do we Measure?


CostVolumeGrowth

CEO

Chief Customer Officer

Chief Marketing Officer Sales

Account Teams

COO

VP of Supply Chain

Customer Service Procurement Logistics

CFO

CIO

VP of Manufacturing

Quality

Typical Organization


S&OP Process Operations


An Athlete Needs:

Source: Supply Chain Insights, LLC


Supply Chain Organization


The Need for Balance

S: Go-to-Market

Strategies

OP: Demand Orchestration

Commodity Strategies

Network Strategies: Make/Source & Deliver

Inventory: Form & Function

Competition

Market Drivers

&

Goal


S&OP Balance


What is Agility?


Agility Importance vs. Performance


Agility Today vs. Past


Agility Scenario Planning


Agenda

What is the Goal?


What do we Measure?


Benefits Received from S&OP Processes

▲ 2%

▲ 5-7%

▲ 3-7%

▲ 3-6%

▲ 3-6%

▼ 10-15%

▼ 2-8%


• Forecast accuracy• Inventory • Customer Service• Profit• Revenue

Measure


S&OP ProcessPlan Execution


Technology


2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 20110

100

200

300

400

500

600

700

Comparison of Revenue/Employee for the Period of 2000-2011

P&G Colgate Unilever Kimberly-Clark Nestle Kraft

Re

ve

nu

e/T

ho

us

an

ds

of

Em

plo

ye

eComparison of Revenue/Employee

for the Period of 2000-2011


2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 20110.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

Comparison of EBIT/Employee for the Period of 2000-2011

P&G Colgate Unilever Kimberly-Clark Nestle Kraft

EB

IT/E

mp

loy

ee

Comparison of EBIT/Employee for the Period of 2000-2011


2002 2003 2004 2005 2006 2007 2008 2009 201050

55

60

65

70

75

80

Consumer Products: Comparison of Days of InventoryP&G Colgate Unilever Nestle Kraft

Consumer Products: Comparison of Days of Inventory


2002 2003 2004 2005 2006 2007 2008 2009 2010 201140%

45%

50%

55%

60%

65%

70%

Consumer Products: Cost of Sales as a Percentage of Revenue

Unilever Kellogg Kraft General Mills Campbell Hershey P & G

Co

st

of

Sa

les

as

a %

of

Re

vn

ue

Consumer Products: Cost of Sales as a Percentage of Revenue


• Tried to get precise on inaccurate data.• Believed that the most efficient supply chain is

the most effective supply chain.• Built efficient chains, but not effective networks.• Focused inside-out, not outside-in.• Rewarded the urgent, not the important.

Historically, we have…

41


• What is the goal? • How do we make decisions?• What do we measure?

Ask the Right Questions

42


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 (3500 pageviews/month)

Twitter: lcecere 2900 followers. Rated as the top rated supply chain social network user.

Linkedin: linkedin.com/pub/lora-cecere/0/196/573 (2300 in the network)

presentation in chicago s&opie event version4

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