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Transcript of © Oliver Wight International 2007 Going Global with Sales and Operations Planning.
© Oliver Wight International 2007
Going Global withSales and Operations Planning
© Oliver Wight International 2007
Topics
Introduction Making the Choice to go Global Reasons for Going Global Global New Product Development Global Demand Global Supply Inter-regional Supply Management Global Financials and Inventory Management Global Executive S&OP and Cultural
Considerations Design Guidance Q&A
© Oliver Wight International 2007 EAME 0367-01
IntroductionThe Sales and Operations Planning Process
© Oliver Wight International 2007
STRATEGYBUSINESS PLANPERFORMANCE
DEMANDREVIEW
SUPPLYREVIEW
PRODUCTMANAGEMENT
REVIEW
MANAGEMENTBUSINESSREVIEW
S&OP Process Cycle
IC330
Overview of Steps In the Process
© Oliver Wight International 2007
Sales & Operations Planning
Sales and Operations Planning is a formal process led by Senior Management that, on a monthly basis, evaluates time-phased projections for New Products, Demand, Supply, and the resulting Financials for the next 18-24 months
It is a Decision-Making process to ensure that the business plans in all functions and geographies are aligned and in support of the company/division strategy
The objective of S&OP is to reach consensus on a single operating plan, which members of the executive team hold themselves accountable, and allocates critical resources to most effectively and profitably meet customers’ needs
Business Management Ownership Speak The Truth Rolling Monthly Planning One set of operating numbers Simplification - Focus on Changes
Commitment and regular participation from executive staff Common Goals across all participants
Guiding Principles
Keys to Success
Business Process Simplification New Product Execution Focus on the Customer Planning vs. Firefighting Revenue, Market Share, Margin, Customer Service, Cash-flow
Benefits
PV974/003
© Oliver Wight International 2007
Definitions for “Global”
Global – Encompassing more than one geography. Typically this means the entire world, but we can use it to refer to multiple geographic spans of control
Geographies (or Regions) – A geographic entity which has a leadership team with functional responsibilities
Inter-Regional Sourcing – Supply Management which goes across geographies but is within the overall corporate entity.
© Oliver Wight International 2007
STRATEGYBUSINESS PLANPERFORMANCE
DEMANDREVIEW
SUPPLYREVIEW
PRODUCTMANAGEMENT
REVIEW
MANAGEMENTBUSINESSREVIEW
S&OP Process Cycle
IC330
© Oliver Wight International 2007 EAME 1028a
Region
Global
weeksweeksweeks
Plants
5. PLANTSUPPLYREVIEW
2. REGIONALPRODUCTREVIEW
3. COUNTRY/ REGIONALDEMANDREVIEW
4. GLOBALDEMANDREVIEW
5B. GLOBALSUPPLYREVIEW
7. GlobalReconciliation
6. RegionalReconciliation
1. GLOBAL
PRODUCTREVIEW
9. MANAGEMENT BUSINESS REVIEW GLOBAL/CATEGORY
8. MANAGEMENT BUSINESS REVIEW
(REGION)
S&OP Process Cycle – Global Environment
© Oliver Wight International 2007 EAME 0367-01
Making the Choice to Go GlobalDefining the Value
© Oliver Wight International 2007
Choosing to Go Global
Start with the question –Why do we want run S&OP globally? Utilization of Assets? Complete Financial View? It’s how we run the business?
What are the benefits to your company?
© Oliver Wight International 2007
Global Manufacturing Benefits
Better utilization and balancing of plants
130%
50%
90%
60%
40%85%
70%
80%
45%95%95%
90%
90%
© Oliver Wight International 2007
Financial Benefits
Plant selection based on system economics Remember to use “Total Delivered Cost”:
Distribution Costs can offset any manufacturing costs benefits.
Identifying and managing future capital requirements
Supports make vs. buy decisions if outside suppliers are an option
Global Inventory Management
Sell it by showing the money!
© Oliver Wight International 2007
Organizational Considerations
Before Going Global, look at how the organization operates. Is the business organized by geography or
product line? Where do the P&L Responsibilities lie? Are manufacturing and sourcing done
regionally or globally? How much of the manufactured product is
moved between geographies?
Align the process with how you operate
© Oliver Wight International 2007
Different Global Models
We have to define what is “Global” Demand is global if business operates as
one unit across all geographies Supply is global if products are supplied
by only one plant or supplier. Supply may be global if sourcing can be
changed based on changes in economics If the business needs a consolidated
view or a forum to reconcile issues between geographic business units, a final Global S&OP meeting may be required.
Go global only where you need to
© Oliver Wight International 2007 EAME 0367-01
Global New Product / New Activity Management
© Oliver Wight International 2007
Global New Product/New Activity
QUESTIONS TO GET STARTED
Question 1: Who sets the growth targets for the business?
Question 2: Who decides which New Products are developed?
Question 3: Are there global initiatives that utilize local resources?
© Oliver Wight International 2007
Globally Centralized
AmericasImplementation
AsiaImplementation
EuropeImplementation
Global DevelopmentTeam
Decentralized
AmericasDevelopment
AsiaDevelopment
EuropeDevelopment
New Product Organizational Structures
Works best when: Development Costs are
High, and Developed Products can be
sold across regions. Product Customization is
minimal Technical Service is a small
part of the selling process
Works best when: Development Costs are Low, and Product are regionally specific
Products are developed for
specific Customers or Applications
Technical Service is a large part of the business value proposition
© Oliver Wight International 2007
S&OP Cycles
SupplyReview
Key Initiatives Review
Executive S&OPReview
Demand Review
Finance, Reconciliation, and Executive
Preparation
SupplyReview
Key Initiatives Review
Executive S&OPReview
Global Demand Review
Finance, Reconciliation, and Executive
Preparation Americas Demand Review Europe
Demand Review
Key Initiatives Review
Decentralized
AmericasDevelopment
AsiaDevelopment
EuropeDevelopment
Globally Centralized
AmericasImplementation
AsiaImplementation
EuropeImplementation
Global DevelopmentTeam
© Oliver Wight International 2007 EAME 0367-01
Global Demand Management
© Oliver Wight International 2007
Global Demand
Works best for businesses that operate globally and sell globally or regionally.
Question: Will you regularly perform Demand Control globally? If yes, then you need to have a global meeting for this.
© Oliver Wight International 2007
Globally Centralized
Americas Inputsand Review
Asia Inputsand Review
Europe Inputsand Review
Global DemandTeam
Globally Consolidated
AmericasDemand Process
AsiaDemand Process
EuropeDemand Process
Global DemandManager
Demand Organizational Structures
Works best when: Functional Leadership is
Global Products and Product
offering are the same in all regions
Limited offering with few SKU’s
Works best when: Each region has functional
leaders Products and Product offering
are regionally different Broad Offering with many SKU’s
© Oliver Wight International 2007
S&OP Cycles
Globally Centralized
Americas Inputsand Review
Asia Inputsand Review
Europe Inputsand Review
Global DemandTeam
Globally Consolidated
AmericasDemand Process
AsiaDemand Process
EuropeDemand Process
Global DemandManager
SupplyReview
Key Initiatives Review
Executive S&OPReview
Demand Review
Finance, Reconciliation, and Executive
Preparation
SupplyReview
Key Initiatives Review
Executive S&OPReview
Global Demand Review
Finance, Reconciliation, and Executive
Preparation Americas Demand Review Europe
Demand Review
© Oliver Wight International 2007 EAME 0367-01
Global Supply Management
© Oliver Wight International 2007
Global Supply
Question: How are manufacturing and sourcing aligned with geographic markets? Plants tend to support one region: Global
Supply manages System Capacity and Inter-Regional Sourcing; Geographies manage Utilization, Balancing, Capital Investments, and Master Production Scheduling
Plants support multiple regions: Global Supply manages Utilization, Balancing, Capital Investments, and Master Production Scheduling.
© Oliver Wight International 2007
Plants support one region
Plants support multiple regions
Supply Structures
Supply Management and Master Scheduling are done at a regional level
Plants can belong to the regional General Manager
Capacity balancing is done globally, over a longer time horizon
Inter-regional sourcing is facilitated globally, managed between geographic partners
Supply Management is done globally, Master Scheduling may be done globally as well.
Plants do not belong to regional General Manager
Capacity balancing is done over the longer horizon and within the MPS
Inter-regional sourcing is managed within the MPS at the global level
© Oliver Wight International 2007
S&OP Cycles
Plants support one region
Plants support multiple regions
Global SupplyReview
Key Initiatives Review
Executive S&OPReview
Demand Review
Finance, Reconciliation, and Executive
Preparation
Regional SupplyReview
Key Initiatives Review
Executive S&OPReview
Demand Review
Finance, Reconciliation, and Executive
Preparation
Inter-Regional Supply
Reconciliation
© Oliver Wight International 2007 EAME 0367-01
Inter-regional Supply Management
© Oliver Wight International 2007
Consider total costs of inter-regional sourcing
Inter-regional Management
What criteria do we use to select inter-regionally sourced items? Total Delivered Cost? Volume and Stability of Demand? Match with Supply Capabilities? Ability to fulfill Quality and Regulatory
requirements?
© Oliver Wight International 2007
Inter-regional Management
Who should determine which customers we serve when supply is constrained?
© Oliver Wight International 2007
Inter-regional Management
The process must allow the Commercial functions to drive priorities. This is easy to do if the product lines are
managed globally. If the Global Commercial leader is also the
business leader, you don’t want to have every allocation decided by the leader: Set and enforce policy for setting inter-
regional prioritization Set ground rules for the conflict resolution
process
© Oliver Wight International 2007
Inter-regional Management Process
Cover these bases: Data. To make sourcing decisions, need to
have:Variable Manufacturing CostsDistribution Costs Inventory Valuations (for Inventory Carrying
Costs)Tax Rates
You may also need to look at Transfer Pricing, Cash Liberation Laws, and Tax Implications and Opportunities.
© Oliver Wight International 2007
Foundation of the Process is Trust
Inter-regional Management Process
People are the critical element Cross Cultural Communication may be challenging.
One tactic is minimize the people involved in order to allow them to build relationships.
Have the people meet face to face and work together. Data and systems can facilitate communication
Have a single data set for communication. Use your ERP if possible.
Map your master data between regions so that communication is clear. Better yet, have global master data.
Process Rules must be established Agree on time fences and change processes up front.
© Oliver Wight International 2007
Inter-regional S&OP Cycle
Regional SupplyReview
Key Initiatives Review
Executive S&OPReview
Demand Review
Finance, Reconciliation, and
Executive Preparation
Inter-Regional Supply Review
© Oliver Wight International 2007
Inter-regional Reconciliation Meeting
Typical agenda would include: Performance Metrics: Internal Fill Rates,
Time Fence Violations Plan Changes: Demand and Supply Reconciliation and Allocation Process areas requiring improvement Issues to elevate
Participants Global Facilitator Regional Demand/Supply Representatives
© Oliver Wight International 2007 EAME 0367-01
Global Financials and Inventory Management
© Oliver Wight International 2007
SupplyReview
Key Initiatives Review
Global S&OPReview
Demand Review
Europe Finance/ S&OP
Meetings
Americas Finance/ S&OP
Meetings
Asia Finance/ S&OP
Meetings
Global Financial Consolidation
and Preparation
Global Financials
A purely global process uses the standard process flow.
When the business is regionally managed, we need a consolidation step prior to Executive S&OP.
© Oliver Wight International 2007
SupplyReview
Key Initiatives Review
Global S&OPReview
Demand Review
Europe Finance/ S&OP
Meetings
Americas Finance/ S&OP
Meetings
Asia Finance/ S&OP
Meetings
Global Financial Consolidation
and Preparation
Global Financials
Purposes of the Consolidation step include: Creating a consolidated financial view Resolving inter-regional resource issues
prior to the Executive meeting Preparing issues to be elevated to the
Executives
© Oliver Wight International 2007
Global Inventory Management
Who determines what is in inventory?
Who determines how much inventory we can afford?
© Oliver Wight International 2007
Global Inventory Management - Centralized
Global Inventory Drivers tend to be financial more than operational.
Global Inventory Management works well with a highly centralized S&OP management structure. Need real-time visibility of the global
inventory for this to work well.
© Oliver Wight International 2007
Global Inventory Management - Decentralized
If inventory is regionally managed, you want a standardized approach to determining inventory requirements.
Global S&OP will validate the calculated results, but the mix should be managed within each region.
© Oliver Wight International 2007 EAME 0367-01
Global Executive S&OP Meeting
© Oliver Wight International 2007
Standard Executive S&OP Agenda
Opening Comments (GM) Summary of Business (Business Directors) Performance Measures Financial Review (CFO) Review Assumptions and Vulnerabilities Family by Family Review with Decisions New Product Special Projects Review of Responsibilities (GM) Self Assessment Closing Comments (GM)
© Oliver Wight International 2007
Global Executive S&OP Meeting Agenda
Opening Comments (President) Summary of Business (Regional Business
Leaders) Performance Measures Financial Review (CFO) Issue Resolution Review of Global Projects (Functional Project
Leaders) Decisions (President) Review of Responsibilities (President) Self Assessment Closing Comments (President)
© Oliver Wight International 2007
Potential Pitfalls of Going Global
Does the Organizational Structure support planning and control at a global level?
Does the central planning group have the political power to enforce their plans?
Do the reward systems support global plans or locally controlled plans?
© Oliver Wight International 2007
Cultural Considerations
While the principles and activities of planning are the same globally, communication is different in multiple cultures.
Best way to overcome cultural differences is for people to meet each other and work on a project together.
Facilitation may be necessary.
© Oliver Wight International 2007 EAME 0367-01
Design Guidance
© Oliver Wight International 2007
Where Do The Following Activities Occur ?
Level 3
Region / Global
Level 2
Region / Country Grouping / Business Sector
Level 1
Customer / Country /Market
StrategicReview
FinancialConsolidation
SupplyDemandNew ActivityDevelopment
IC1690
© Oliver Wight International 2007
FinancingCompetitionAcquisitions
HoldingCompany/
HQ
Primary Manufacture
Original Research andDevelopment
Level 3
Region / Global
Competition
AcquisitionBusiness
Unit
Packaging
Distribution
Multi-National
Customers
Brand Development
Level 2
Region / Country Grouping / Business Sector
CustomersIn
Country
ProductAdditions
Level 1
Customer / Country /Market
StrategicReview
FinancialConsolidation
SupplyDemandNew ActivityDevelopment
Where Do The Following Activities Occur ?
Example Company
IC1700
© Oliver Wight International 2007
P&L toNet Income
GlobalBusiness
Unit
ManufactureSite
Selection
Global Growth
Validation
Original Research andDevelopment
Level 3
Region / Global
P&L toContribution
RegionalBusiness
UnitExecution
Multi-National
Customers
New ProductSelection
Level 2
Region / Country Grouping / Business Sector
CustomersIn
CountryTech Service
Level 1
Customer / Country /Market
StrategicReview
FinancialConsolidation
SupplyDemandNew ActivityDevelopment
Where Do The Following Activities Occur ?
Example Company 2
IC1700
© Oliver Wight International 2007
Regions
Global
weeksweeksweeks
Plant/Country
Level
4. REGIONALDEMAND/PRICE
REVIEWS
5. GLOBALDEMANDREVIEW
6. GLOBALSUPPLY/OPS
REVIEW
1. GLOBAL NEW
PRODUCTREVIEW
8. MANAGEMENT BUSINESS REVIEW GLOBAL/FUNCTION
Reconcile24 mo
7. Global Financial Outlook Updated/Issues Addressed – RegionConstraints
2. REGIONAL
New Product
New BusinessREVIEW
3. Sub-RegionDemand/Price
REVIEW
RegionalDirector’sSign-Off OnDemand View
Gap Closers
Gap Closers
Constraints &Issues
© Oliver Wight International 2007
Business FullP&L
FullBusiness
Original Research andDevelopment
Level 3
Region / Global
SBU FullP&LSBUSBU SupplySBU DemandSBU R&D
Level 2
Region / Country Grouping / Business Sector
BU Demand
Level 1
Customer / Country /Market
StrategicReview
FinancialConsolidation
SupplyDemandNew ActivityDevelopment
Where Do The Following Activities Occur ?
Example Company 3: Multiple SBU’s
IC1700
© Oliver Wight International 2007
Business Director
Level
Total Business
weeksweeksweeks
Business
Manager Level
4. SBUDEMAND/PRICE
REVIEWS
1. NEWPRODUCT/GROWTHREVIEW
9. MANAGEMENT BUSINESS REVIEW GLOBAL/FUNCTION
Reconcile24 mo
8. SBU Financial Outlook
2. SBUNew
ProductNew
BusinessREVIEW
3. BU Demand/Price
REVIEW
Diversified Business Analogy
Plan
Plan
EAME 1028c
5. SBUSUPPLY/OPS
REVIEWS
6. Business Financial Outlook
7. SBU MANAGEMENT
BUSINESS REVIEW
© Oliver Wight International 2007
Summary
Global S&OP adds complexity, so: Go Global where there is clear value. Be able to articulate the value. Design the organizational structure to support
Global Management.OR
Design the process in alignment with the current organizational structure.
People are the critical element in a successful process.
Data and Systems are the process enablers. As with any complex process, simple and clear
policy is essential.
© Oliver Wight International 2007
Q&A