Getting S&OP to work 12 building blocks for process design and implementation

EyeOn PID 2017

Rotterdam, 5 October 2017

S&OP and IBM as decision making processes

Process designed around decisions

Demand/Supply balancing at the basis

Integrated planning:-strategy, tactical, execution-financial & volume

Driven by business leaders

“S&OP is a set of decision-making processes to balance demand and supply, to integrate financial planning and operational planning, and to link high level strategic plans with day-to-day operations.”

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S&OP Maturity stages

Increasing horizontal and vertical integration

S&OP

Chaotic S&OP

• Unstructured• Scattered ICT landscape• No or scattered metrics• No collaboration

Supply Chain S&OP

• Balancing Supply / Demand• Supply Chain driven• Volumes• Local processes• Ownership in Supply Chain

or Operations

Financial S&OP

• Formalized S&OP process• Sequential• Optimizing financials as well

as volumes• Operational planning input

for q*p / LE / Rolling forecast

Integrated Business Management

• Aligned demand supply plan, proactive, profit optimization

• Suitable frequency of decision making

• Integral profitability• Customers and suppliers

integrated in process• Concurrent rather than

sequential

A framework to configure your process

Organizational readinessBalance demand & supply Integrated planningProcess designed around decisions

AGILE SUPPLY

ENRICHMENT

EVENT PLANNING

BUSINESS-LEADER DRIVEN

ONE PLAN

STRATEGY EXECUTION

ANALYTICS

DECISION-DRIVEN

SUPPORTIVE DATA & TOOLS

CONTINUOUS IMPROVEMENT

COLLABORATIVE BEHAVIOR

PLANNING COMPETENCE

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S&OP is a process where we make decisions

CONTINUOUS IMPROVEMENTAGILE SUPPLY BUSINESS-LEADER DRIVENANALYTICS

COLLABORATIVE BEHAVIORENRICHMENT ONE PLANDECISION-DRIVEN

PLANNING COMPETENCEEVENT PLANNING STRATEGY EXECUTIONSUPPORTIVE DATA & TOOLS

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S&OP is about balancing demand & supply

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CONTINUOUS IMPROVEMENTAGILE SUPPLY BUSINESS-LEADER DRIVENANALYTICS

COLLABORATIVE BEHAVIORENRICHMENT ONE PLANDECISION-DRIVEN

PLANNING COMPETENCEEVENT PLANNING STRATEGY EXECUTIONSUPPORTIVE DATA & TOOLS

S&OP is about integrated planning – horizontally and vertically

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CONTINUOUS IMPROVEMENTAGILE SUPPLY BUSINESS-LEADER DRIVENANALYTICS

COLLABORATIVE BEHAVIORENRICHMENT ONE PLANDECISION-DRIVEN

PLANNING COMPETENCEEVENT PLANNING STRATEGY EXECUTIONSUPPORTIVE DATA & TOOLS

S&OP –Organizational aspects

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CONTINUOUS IMPROVEMENTAGILE SUPPLY BUSINESS-LEADER DRIVENANALYTICS

COLLABORATIVE BEHAVIORENRICHMENT ONE PLANDECISION-DRIVEN

PLANNING COMPETENCEEVENT PLANNING STRATEGY EXECUTIONSUPPORTIVE DATA & TOOLS

PERFORMANCE

How to use Building Blocks for a successful S&OP (re)design

Internal Environment

External Environment

S&OP Design-Objectives-Process-Tool support-…

S&OP execution-Analysis

-Behavior-Decisions

-…

Implementation Gap

Configuration

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Mentimeter question 1

– How would you rate your S&OP maturity?

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S&OP

Chaotic S&OP

• Unstructured• Scattered ICT landscape• No or scattered metrics• No collaboration

Supply Chain S&OP

• Balancing Supply / Demand• Supply Chain driven• Volumes• Local processes• Ownership in Supply Chain

or Operations

Financial S&OP

• Formalized S&OP process• Sequential• Optimizing financials as well

as volumes• Operational planning input

for q*p / LE / Rolling forecast

Integrated Business Management

• Aligned demand supply plan, proactive, profit optimization

• Suitable frequency of decision making

• Integral profitability• Customers and suppliers

integrated in process• Concurrent rather than

sequential

Mentimeter question 2

– Indicate 1-3 building blocks that are major contributors to the success of S&OP in your organization

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Mentimeter question 3

– Indicate 3 building blocks that you think should to be improved in the S&OP process in your organization

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Configure your process: season to taste!

CONTINUOUS IMPROVEMENTAGILE SUPPLY BUSINESS-LEADER DRIVENANALYTICS

COLLABORATIVE BEHAVIORENRICHMENT ONE PLANDECISION-DRIVEN

PLANNING COMPETENCEEVENT PLANNING STRATEGY EXECUTIONSUPPORTIVE DATA & TOOLS

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Supportive data & tools

✓ Prepare information according to decision items on the agenda

✓ Differentiated level of aggregation (per horizon)

✓ Work on master data where possible, arrange for data cleaning where necessary

✓ Automated or optimized data collection processes

✓ Improve E2E visibility within the company (in case of complex structures)

✓ Improve E2E visibility across the chain (in case of high interdependency)

✓ Use tools that enable fit-for-purpose information processing, simulation and scenario building

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How to tackle

? Discussions about the data

? Back-and-forth between meetings

? Extreme effort to prepare for a cycle

? Lack of trust in the quality of decisions

? Disconnected view

? Excel hell: Lack of suitable support from the system

? Errors in the underlying data

? Difficult to build scenarios and simulate

Problem symptoms

One plan

✓ Integrate planning processes across disciplines (horizontal alignment with shared underlying assumptions)

✓ Integrate the input and output of these planning processes; enable to move between aggregation levels where needed

✓ Financial forecast is updated and discussed as part of S&OP

✓ Financial plan = financial forecast + risks and opps

✓ Remove focus from calendar year only (rolling forecast)

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How to tackle

? No alignment between plans (silo’s)

? Unclear financial outlooks

? Inability to monetize tactical plans

? Decision tracks on S&OP topics outside the S&OP process

? Lack of outlook on proper horizon

? Running out of budget near end of year

Problem symptoms

Strategy execution

✓ Separate target setting and action setting: remove budgeting from the forecasting process

✓ Aim for gap-closing actions that act upon the difference between budget / target and actuals / forecast

✓ Scenario-based evaluations against strategic outcomes

✓ Put controls on the focus of the process: evaluate time spent on business vs. supply chain decisions, and short-term vs mid/long term

✓ Structured handover of responsibilities between teams on different horizons, incl. joint operationalization of strategy to the tactical level (business plans, sourcing, expansion markets etc.) including timing

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How to tackle

? Strategical level and tactical level are disconnected

? Out-of-control top management

? Gaming

? Keep focusing on details

? Keep focusing on short term

? Keep focusing on operational or supply chain decisions instead of business decisions

? ‘Blindness’ outside preferred scenario, no fallback options or plan

? Target-seeking forecast

Problem symptoms

Collaborative behavior

✓ Cross-functional approach: take people with a collaborative mindset that supports decision making and organize them in teams with decision making authority

✓ Behavioral management: clear guidelines and priorities on content and process; coaching (especially leadership level), controls on appropriate behavior (for example escalation acceptance only with a plan attached)

✓ Communication plan & execution: continuous effort that promotes 2-way communication instead of implementing from the top or the sideline

✓ Balanced relative-to-market incentives in line with holistic objectives (business and behavioral) to prevent ‘gaming’

✓ Promote information transparency and information sharing

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How to tackle

? Reluctance to collaborate

? Blaming culture

? Not-my-problem

? No responsibility

? Individual agenda’s

? Incoherence in used formats and interpretation of numbers, KPIs, etc.

? Disconnected overall objectives

? “We didn’t know that…”

Problem symptoms

Enjoy your gift...

1. Take the box to your office

2. Separate the blocks you want to work on first

3. Use them daily as your favourite coasters

4. Forecast the tear and wear of your coasters and align your planning accordingly

5. Celebrate success and proceed with the next selection

6. Repeat until business is happy

And do get in touch when you want a sparring partner!

• The Netherlands : Marco van Alfen marco.vanalfen@eyeon.nl +31 (0)6 2240 5945

• Belgium : Luc Van Wouwe luc.vanwouwe@eyeon.eu +32 (0) 478 87 2189

• UK and Ireland : Sabu Sheikh sabu.sheikh@eyeon.eu +44 78 182 50 870

• Switzerland : Jean-David Risson jean-david.risson@eyeon.eu +41 78 776 2788

• Other countries: Menno Bruggeling menno.bruggeling@eyeon.nl +31 (0)6 4736 5442

Ready to take your next steps? Want to read more?Visit us at www.eyeon.nl

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EyeOn reports Planning excellence Accelerated improvement

– Forecasting Benchmark

– S&OP benchmark

– Fast Forecast scan

– Inventory Management scan

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