A Key Component of Supply Chain Mastery

Profit, Sales & Operations Planning

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Globalization. Product proliferation. More multi-channel sales. Rising volatility in raw material costs. Increasing demand for customized products and experiences. Few could debate the ubiquity and complexity of these supply chain drivers Nor would many disagree that, as a result, there has been a huge increase in the number of supply-chain-related cost/benefit tradeoffs that companies need to consider. Moreover, these tradeoff decisions often involve financial variables that didn’t used to be part of the supply chain management equation. This means that many companies’ sales & operations planning (S&OP) models and processes must now go where few models and processes have gone before: to a place where supply chain decisions are guided by corporate profitability.

This is not to say that margin and profitability considerations weren’t previously part of most companies’ supply chain perspectives. Yet at most organizations, supply chain decision-making has tended to be dominated by unit- and volume-focused perspectives. Today, however, supply chain leaders must know how their decisions affect and control revenues and margins across the enterprise—how supply chain operations can dovetail most effectively with yield management. Simply put, companies need a more advanced approach to sales & operations planning.

The mission of this Accenture Point of View is to profile that process—an updated, more-bottom-line-driven methodology known as Profit, Sales & Operations Planning (PS&OP). Following is a look at what PS&OP

involves; how it supersedes, yet builds upon, traditional S&OP approaches; what advantages it offers to companies across multiple industries; and why it can help forward-thinking implementers in their quest for high performance.

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Today, supply chain leaders must know how their decisions affect and control revenues and margins across the enterprise—how supply chain operations can dovetail most effectively with yield management. Simply put, companies need a more advanced approach to sales & operations planning.

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The Why: Examining the PS&OP Opportunity

As noted earlier, sales & operations planning has historically been a unit- and volume-focused exercise. Revenue and profitability issues are acknowledged, but usually after the fact—once an execution-level decision has been made. Finance organizations are forced to react rather than act, which often provokes delays and/or adjustments. Consider a product shortage or allocation issue involving two customers. Traditional S&OP processes and technologies would likely treat the problem as an inventory allocation decision, rather than looking at the issue holistically (concurrently examining financial and logistical implications). In the traditional scenario, the larger customer would likely prevail because it contributes more to the manufacturer’s revenue—regardless of whether the customer contributes more or less from a margin perspective. However, a different conclusion might be reached if a Profit, Sales & Operations Planning process was applied. This is because PS&OP fully considers each customer’s relationship with the company’s bottom line: optimizing the balance

between profit and volume, as well as maximizing profit over time.

Another common problem is excess or constrained capacity. Standard S&OP processes rarely incorporate profitability implications into manufacturing decisions (e.g., cost/benefit tradeoffs for overtime or the fiscal impact of expedited freight). However, capacity can be an important planning lever—one that a PS&OP process fully supports. In fact, one of PS&OP’s great strengths is profitably allocating scarce capacity.

A third scenario might involve product lead times that vary due to multiple sourcing locations or transportation modes. With traditional sales & operations planning approaches, supply chain network lead times tend to be analyzed and considered only when physical changes are made (e.g., revising network configurations or adding/shuttering facilities). Lead times are rarely assessed on a day-to-day or week-to-week basis. Profit, Sales & Operations Planning can help companies regularly explore the financial impact of varying a product’s or product line’s lead times. PS&OP spans the complete

product life cycle, while tailoring recommendations to each stage.

In net, by upgrading from a traditional sales & operations planning capability to one of Profit, Sales & Operations Planning, companies can:

• Integrate unit/volume planning with financial/profitability planning (focusing core operational decisions around bottom-line results, while reducing operational and financial risk).

• Shape demand by considering production, inventory and distribution strategies across customers with varying demand characteristics and service-level requirements.

• Factor capacity and inventory constraints into decisions about promotional strategies and optimal price points using pricing elasticity.

• Incorporate a deeper operational and financial perspective through scenario-based modeling.

• Improve product life cycle decisions and asset/product utilization.

• Continuously and rapidly assess and refine profit/volume tradeoffs across products, channels and geographies.

PS&OP fully considers each customer’s relationship with the company’s bottom line.

Traditional decision-making processes often lack the ability to address customer demand profitably. One reason is the changing dynamics of balancing supply and demand. More cost/benefit tradeoff variables are involved, along with a greater need to quickly grasp the financial impact of key decisions.

Globalization has complicated the management of end-to-end supply chains. The number of sales channel/product/geography decision points has increased significantly. To respond effectively, companies must become leaner and more agile. They also must develop a deeper understanding of the relationship between operations and profitability.

Supply chain models across industries are changing. In the retail space, many companies are moving toward a limited inventory-ownership model: leveraging scale and access to consumers as their primary assets and pushing suppliers to take more ownership of inventory and replenishment. How well a supplier performs in this capacity (e.g., understanding connections among consumer demand, product performance and bottom-line profitability) often dictates how successful it is in this new role.

Consumers want more customized product offerings and buying experiences. Take Walmart’s “store of the community” initiative, which seeks to tailor the product mix and assortment of each store based on consumer demographics. Best Buy utilizes similar

Economic uncertainty has reduced many companies’ risk tolerance. As a result, the need has increased for comprehensive due diligence. PS&OP processes help generate the information needed to make this happen.

Products, technologies and market dynamics are evolving faster than ever. Companies must respond with agile geographic/channel strategies, new customer-development approaches, and flexible supply models that are built in to collaborative supplier relationships.

“buyer profiles” to drive store-level assortment and stocking decisions. With such complex store-level models, it is vital that upstream partners make smart, finance-based pricing, inventory and service choices.

New channels and customer preferences have led to a proliferation of products. However, many bigger retailers are pushing to trim product offerings and improve shelf profitability. This will require more account-specific merchandising plans and spur joint efforts between retailers and manufacturers to increase profitability. This puts enormous pressure on upstream manufacturers to balance supply and demand in the most cost-effective and profitable manner.

Companies need new business models and services that can help them maintain growth as various legacy products and services become commoditized. For example, members of the wireless communications carrier industry are evaluating future growth strategies to determine where they should focus (e.g., build out application and data services versus concentrate on network maintenance). These decisions must take into account the complete financial picture associated with each option.

Better analytical capabilities and tools are re-grading the playing field. New ways must be developed to analyze financial/profitability scenarios, such as gross margin improvement and working capital requirements.

Why PS&OP? And Why Now?

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The What: Understanding PS&OP

Think of Profit, Sales & Operations Planning as an integrated process environment where empowered stakeholders make business decisions that concurrently optimize sales, balance demand and supply, and maximize profits. PS&OP takes sales & operations planning to the next level by incorporating more financial modeling techniques, tools, skills and capabilities to create more-profitable operating decisions that can raise yield and revenue.

Given its broader scope and direct focus on profit, PS&OP is clearly different from traditional S&OP. Yet similarities remain: Both S&OP and PS&OP are iterative processes focused on integrating demand and supply planning for enterprise-level decision making and execution. Six of PS&OP’s

PS&OP takes sales & operations planning to the next level by incorporating more financial modeling techniques, tools, skills and capabilities to create more-profitable operating decisions that can raise yield and revenue.

most-critical components actually mirror those of traditional S&OP:

• Oneplan:Itisvitalthatallcontributing parties maintain, have access to, and measure performance based on the same plan and a single set of numbers.

• Cross-functionalteams:Representatives from marketing, finance, sales, manufacturing, supply chain and product development all must participate. Each role must be clearly understood.

• Accuratedata:Organizationsneedaccurate data to perform sensitivity analyses, build and assess multiple scenarios, and ensure precise performance measures.

• Optimalconsensus:Highdegreesofcommitment and agreement must be reached about expectations, authority and accountability.

• Explicitperformancemeasures: Both S&OP and PS&OP measures must be structured to appropriately align operational behaviors with company benefits.

• Useofanalyticaltools:Savvyuseofleading-edge technology is needed to maximize data visibility, make decisions and measure performance.

However, PS&OP adds an important new dimension because it focuses most intently on financially-based scenario modeling to create profitable outcomes. As shown in Figure 1, the PS&OP

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What sets PS&OP apart from traditional S&OP is that its focus is always on where or how the company can make the most profit and/or generate the most revenue.

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process extends core aspects of demand and supply planning to perform and evaluate scenarios related to capacity constraints, demand/supply changes and allocation priorities. The PS&OP cycle is enhanced by measuring financial and operational performance, and by aligning execution to control financial outcomes and profitability targeting.

PS&OP is set apart from traditional S&OP because the focus of PS&OP is always on where or how the company can make the most profit and/or generate the most market share. For example, when projecting margin and revenue outcomes, PS&OP scenarios consider not only price and quantity, but the relationship to capacity and inventory constraints. With PS&OP, financial decisions are continuously evaluated and updated based on the latest supply chain conditions.

Following are some of the ways that PS&OP enhances product life cycle planning, market life cycle planning, operational execution, and the organization as a whole.

Review performance and root cause

Discuss PS & OP scenarios

Agree on demand, supply, marketing & pricing plans

Collect and analyze Scenario results

Conduct preliminary S&OP activities

Develop agenda & distribute plans

PS&OP Probabilistic Scenario Modelling

Profitability scenarios •

Pricing scenarios •

Product/channel/ •geo mix scenarios

Capacity/ •manufacturing scenarios

Inventory cost •scenarios

Root cause of plan •to actuals

Demand shaping •opportunities

Demand Shaping Analytics

• Product/Geo/ Channel mix change scenarios

• Forecasts scenarios

• Pricing/promotion scenarios

Demand

Supply

Responsive Supply Analytics

• Cost adjustments

• Inventory availability

• Capacity scenarios

Modify plan

Communicate plan

Execute plan

Enhancements to product life cycle planning. PS&OP is designed to drive continuous financial reviews. Companies traditionally conduct profitability analyses during annual or quarterly planning cycles, or at the onset of large operations programs. However, few entities “re-review” the actual results of their profitability forecasts or seek to determine on an ongoing basis if the assumptions they have made are correct. One example of this differentiating capability is PS&OP’s overarching view of the complete product life cycle, including managing/balancing service levels and costs differently at each stage (Figure 2). Potential rewards in this case include fewer stock-outs at product launch; lower costs and higher margins throughout a product’s life; and reduced obsolescence costs or value erosion at the end of a product’s life.

Consider marketing analysis performed by a typical consumer goods company during a product launch—a time when financial considerations can easily become separated from supply chain

issues. During demand forecasting analysis, organizations need to understand the spread of new products based on factors such as innovation, imitation, market size, and pricing and promotional mechanisms. Profit, Sales & Operations Planning enhances this capability by helping companies:

• Assesspricingstrategiesbased on quantity, customer segment and locations.

• Simulatevariouscostscenariosby examining incremental costs for each strategy. For example, shifting production, producing additional inventory, or prioritizing manufacturing capacity based on product portfolio characteristics may also change the fixed and variable cost structure for each production strategy. Fixed and variable portions of promotional or advertising costs should be similarly considered as part of cost analysis.

•Maximizeprofitbyconsideringallvariable demand opportunities and supply costs when decisions are made or changed.

Traditional S&OP

Enhanced PS&OP

Figure 1. PS&OP integrates planning activities and scenario modeling for profitability into the end-to-end decision-making process

PS&OP

Business Planning• Sales revenue goals• Margin/profit goals• Geographic strategy

Marketing Planning• Brand/channel position and pricing• Brand/channel events/promotions calendar

Catagory Planning• Product mix/placement/pricing• Product lifecycle plan• Product sales forecasts

Demand Forecasting• Statistical demand forecast• Historical demand

Operations Planning• Order fulfillment• Merchandising

Supply Planning• Supply forecast• Replenishment plans• Lead time variability• Manufacturing throughput

Distribution Planning• Inventory deployment• Capacity constraints• Transport costs

Execute

Prepare

Conduct

Measure performance and profitability

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Enhancements to market life cycle planning. Every company experiences upturns and downturns. As shown in Figure 3, the challenge (and PS&OP’s contribution) involves planning, shaping and adjusting operations to maximize bottom-line performance. When times are good, for example, companies must manage their pricing and promotion strategies to determine where and how to make a finite number of products generate the most profit. With PS&OP, high demand and limited availability trigger a move to higher prices and higher margins for a particular segment and time period (a “yield management period”).

In challenging times, there is often a need to find price points that help sell what you have: driving sufficient revenue to cover variable costs (a "marginal economics period"). To make this happen, pricing and promotion strategies may be adjusted to accommodate expected margin erosion; production plans may change to cover drops in demand; and flexible operating

models are typically needed to reduce supply capacity and costs.

These events are generally tied to a specific combination of product, geography and sales channel, rather than across the entire business. For example, the last major downturn affected the technology industry most significantly, while the industrial sector experienced a new growth cycle. And since most companies service multiple industries across multiple product lines and geographies, the challenge is determining which combinations and permutations have the most profitable impact.

In any economy, Profit, Sales & Operations Planning capabilities offer significant value. During a recession, however, there is additional potential for adopters of PS&OP to minimize the damage, and to adroitly position themselves to move ahead when the storm abates. One reason is that PS&OP processes excel at blending demand, operational, financial and supply driver information to help hone a company’s

plan-source-make-deliver decisions. These characteristics obviously change according to existing market dynamics and the point a product or product line has reached in the market life cycle. Consider the following driver characteristics in the current (sputtering) economy and how they might be addressed by PS&OP:

• Demand drivers. Spending decreases; consumers become more sensitive to price than to value; more promotions cause margin erosion. To cope with these shifts, companies can leverage PS&OP to help shape demand through more creative pricing and the development of differentiated pricing strategies by customer segment.

• Operational drivers. Capital expenditures fall; stable inventory levels become harder to achieve; production is often pared down to align with reduced sales; pressure to contain variable costs increases; use of flexible/temporary workers grows, reflecting reduced demand. By performing continuous reviews of inventory, PS&OP can help reduce the number and impact of slow movers that increase the cost of capital.

Volume of Business

Time

Maximize

Introduce Retire

Optimize

Figure 2. Typical sales volume relationship along a product’s life cycle.

availability and time of order placement. Somewhat more advanced are “capable-to-promise” (CTP) approaches, which incorporate manufacturing and procurement capacity to determine when and how to fill an order. The most advanced state on this continuum is PS&OP, which focuses on “profitable to promise” (PTP). In this scenario, financial costs and pricing are incorporated to help a company determine if an order should or should not be filled based on the profit it generates.

Enhancements to the organization. Although PS&OP uses a structure that is similar to traditional S&OP, the fact that decision criteria and data analytics are focused on maximizing profit and minimizing cost means that different skillsets are required. Most of these capabilities reside in the finance organization—for example, the ability to analyze and review operations and operational decisions pertaining to factors such as revenue, profit margin, total cost of sale/ownership and return on invested capital. However,

• Working capital drivers. Focus on liquidity increases; cash-to-cash cycle times become more important; companies place more emphasis on return on assets and shareholder equity. PS&OP helps companies do a better job of managing excess inventory, which in turn releases cash for reinvestment in more-profitable areas of the company.

• Supply drivers. Pressure to renegotiate delivery and payment terms increases; companies work harder to shift ownership of inventory to suppliers; incentives increase to reduce supply variability. PS&OP provides the analytics and information needed to help companies decide which supply side activities have the most favorable impact on the bottom line.

Enhancements to operational execution. Traditional order fulfillment processes use a standard “available-to-promise” (ATP) approach to allocate and fill orders. This is normally based on a first-come-first–serve basis based on product

PS&OP Focus in an Economic Downturn:• Revisepricingandpromotionalstrategiestocontainmarginerosion• Managepressureonassetutilizationinlightoffallingdemand• Reduceproductionplansandcontainvariablecosts• Reconsiderpriceelasticitycurves•Emphasizefinancialmetricsfocusedonoperationalsurvival

PS&OP Focus in an Economic Upturn:• Integratedemandplanswithpricingandpromotionalstrategies• Determinehowbesttoutilizeconstrainedassetstosatisfydemand• Linkdynamicpricingtocustomersensitivitytomaximizeassetutilization• Emphasizefinancialmetricsfocusedonprofitability

Market Life Cycle

Bottomed-Out

Over-Heated

Upturn: Rising Expectations

Downturn: Contracting Demand

to optimize PS&OP, these skills and knowledge must be part of a cross-functional PS&OP team, as well as resident in the finance organization. In this context, financial and analytical skills should complement (not replace) operationally focused activities.

Moving an organization toward this model may require any combination of the following:

• Modifying the existing operating model to structure teams, individual roles and responsibilities.

• Training resources in financial modeling concepts and the associated impact on operations.

• Establishing new and more appropriate metrics for individual and organizational performance measures.

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Figure 3. PS&OP focus across the market life cycle.

Transition Period

The Where: PS&OP Scenarios in Various Industries

PS&OP has a broad applicability across a wide range of industries. Following are several examples.

Consumer goodsA key determinant of high performance for consumer goods companies is knowing how best to balance supply with dynamic demand, and how changing costs affect operating margins. The two issues are highly interrelated: Operating decisions are a consequence of planning for supply; respecting constraints; satisfying demand while reducing cost of goods sold; improving gross and operating margins; and maximizing assets. Some of the capabilities that PS&OP brings to this decision-making process include:

• Cost of goods sold (COGS) as a percent of sales. For consumer goods companies the average annual COGS as a percent of sales (currently about 47 percent1) has been increasing due to rising commodity costs. PS&OP offers new ways to contain these

costs through better forecasting, hedging, sourcing and inventory management practices.

• Selling, general and administrative (SG&A) expenses as a percent of sales. The industry’s mean SG&A as a percent of sales is approximately 25 percent2. Enhanced PS&OP capabilities have the potential to optimize trade promotions and advertising investments to generate higher sales.

• Inventory turnover. Inventory turns in consumer goods average about six per year3. PS&OP can help companies handle demand fluctuations more proactively through better point-of-sale-related collaboration with retailers.

• Profitability ratios. Two ratios—return on sales and return on assets—are an integral part of any PS&OP discussion in consumer goods. The mission is to understand how effectively a company is leveraging its assets to generate revenue.

Aerospace & defenseMajor aircraft manufacturers face complex planning challenges that PS&OP can help address. Manufacturing operations, for example, are typically incented to maximize asset use and smooth production/capacity; yet when planning horizons often reach a decade and products cost hundreds of millions of dollars, the cash flow implications are enormous. A PS&OP process allows manufacturing and planning organizations to explore tradeoff scenarios for leveraging available capacity, while yielding the most beneficial financial results. Moreover, arming the sales organization with information that balances supply chain and financial information helps sell available manufacturing capacity in the most productive manner.

A PS&OP process allows manufacturing and planning organizations to explore tradeoff scenarios for leveraging available capacity, while yielding the most beneficial financial results.

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PS&OP allows for more effective and efficient planning—even when an industry’s inventory is “virtual.”

Electronics and high-tech In electronics and high-tech (computers, mobile handsets, TVs, cameras, etc.) life cycles are often short and products depreciate rapidly. For this reason, cost and price must be monitored especially closely. Timing of component cost reductions (e.g., for chip sets) affects cost of goods sold, while price reductions in the retail channel impact revenue. Leveraging a PS&OP process can improve planning by aligning product life cycle costs and revenue more effectively. In addition to addressing intra-life-cycle complexities, PS&OP can improve EHT companies’ inter-life cycle planning—segueing smoothly and cost-effectively from retired to new products.

Media & entertainmentS&OP processes traditionally involve the planning of inventory and product volumes. However, media outlets such as Web sites and TV/radio stations also face planning challenges relative to their unique kind of inventory: advertising space. Planning advertising placement requires a deep understanding of financial implications.

For example, cost/benefit tradeoffs vary according to time of day and genre of programming. Contractual agreements with advertisers and the actual number of visitors/viewers drive additional complexity and variability. PS&OP allows for more effective and efficient planning—even when an industry’s inventory is “virtual.”

Oil and gas In the refined products supply chain, the goal of production planning is to maximize margin within the refineries. The key input to this process is the price forecast for commodities, a measure with exceptional price volatility. Thus the outlook for future prices drives a company’s decisions about hedging strategies (go long, go short) based on the supply chain’s own or “system” demand. In addition, crude oil, intermediates and refined products are so widely traded among players in the oil and gas supply chain that sources of supply and demand for these commodities are considered variables in the regular planning process. With PS&OP the scope and value of production planning can expand to

include more rigorous treatment of other external-to-refinery-production cost components, such as downstream distribution and commodity sourcing strategies.

Mining and metals In mining and metals, most products are commodities. Pricing is typically dictated by the market and products generally reside several tiers down the supply chain. As a result, there are few opportunities for industry players to truly shape demand, so control of supply (i.e., capacity) becomes a particularly critical lever. PS&OP can help by increasing companies’ ability to model the impact of capacity changes. This in turn allows them to understand how changing variables can affect supply and demand and thus influence the business’ financial performance. Better long-term decisions about network design, facility development and production planning are often the result.

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The How: Summarizing PS&OP’s Contribution to High Performance

In recent years, Accenture has performed extensive research into the nature and components of high performance: how an elite group of companies (roughly 10 percent across all industries) consistently outpace competitors in terms of efficiency, growth and profitability. In study after study, “supply chain mastery” has been identified as a key contributor to high performance: Most high-performance businesses expect their supply chains to contribute to growth.

Additional Accenture research on mastery in supply chain planning found that sophisticated, integrated sales, marketing and operations-planning processes are critical to

Even “planning masters” often lack the ability to shape demand and many do not consider price elasticity during the planning process. This underlies our concern that, although competent sales & operations planning is a vital base component of supply chain management, significant opportunities are often left on the table.

supply chain masters’ ability to sense, shape and respond to demand, and to collaborate effectively with partners. However, Accenture also found that even “planning masters” often lack the ability to shape demand, and many do not consider price elasticity during the planning process. This underlies our concern that, although sales & operations planning is a vital base component of supply chain management, significant opportunities are often left on the table. The bright side, of course, is that transforming S&OP processes to become more financially and profitability focused can drive greater bottom-line benefits. This is what Profit, Sales & Operations Planning is all about.

Transforming S&OP processes to become more financially and profitability focused can drive greater bottom-line benefits. This is what Profit, Sales & Operations Planning is all about.

In conclusion, consider the crucial dimensions of supply chain mastery identified by Accenture research, and how Profit, Sales & Operations Planning adds a layer of competence and reward that is rarely achieved with traditional sales & operations planning.

Dimension 1: The ability to manage product shortages and allocationsAs companies’ supply chains become more and more extended, fluctuations in demand, supplier variabilities and operational disruptions are more likely to result in product shortages. The priority thus becomes how best to satisfy customer demand with constrained supplies. PS&OP can help by providing a platform to analyze:

• Demand planning: Gathering and analyzing end-customer demand (base and incremental ) by category and location for future periods with a focus on shaping demand using profitable promotional and pricing strategies.

• Supply planning: Helping allocate existing inventory to the most profitable customers, while clarifying opportunities to back-order products for willing customers. Even if goods have not yet been produced, PS&OP can help consider how best to allocate available capacity to a company’s most profitable customers—again maximizing margins and realigning demand and supply.

Dimension 2: The ability to handle excess or constrained capacityRegardless of economic conditions, companies often are burdened by capacity and asset-utilization concerns. PS&OP users may have an advantage because of their superior ability to 1)

use pricing and promotional vehicles to lift demand without diluting margins and brand image and 2) deploy innovative marketing strategies or re-plan new product introductions that are adjusted to finalize aggregate demandplans.Upstream,thiswillimprove “excess supply planning” by aligning over-capacity with revised aggregate demand plans.

Dimension 3: The ability to optimize new product introductionsTraditional S&OP models may not support new product introductions to the fullest degree possible. As a result, decisions about new products may be dictated solely by the marketing organization using only high-level cost assumptions and generalized input from supply chain decision makers. A PS&OP process model can help improve the new product introduction process by:

PS&OP users often have an advantage because of their superior ability to use pricing and promotional vehicles to lift demand without diluting margins and brand image.

• Involvingthecompletebusinessindecisions about cost/benefit tradeoffs. Consider that new product launches require well-thought-out demand plans that are enacted by stages and tightly linked to production plans with clear inventory targets and margin goals. PS&OP provides a forum for collaborating on sales revenue and profit margin targets at different stages of a product’s life.

• Helping monitor and manage revenue growth and identifying opportunities to redirect or cannibalize older products and manufacturing capacity.

• Synchronizing new-product demand plans with aggregate supply plans, thus helping to accelerate time to market. The early-detection and mitigation capabilities that PS&OP offers can prevent sizeable margin losses and cash flow problems.

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The Bottom Line is the Bottom LineClearly, there is no shortage of ways that Profit, Sales & Operations Planning can broaden the scope and value of supply chain management. But when it comes to PS&OP, the bottom line must be top of mind: To help companies achieve and maintain high performance, today’s supply chain decisions must extend all the way from the store room to the board room and back—with a sharp focus on profitability all along the way. Profit, Sales & Operations Planning can help make that happen.

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With PS&OP, supply chains acquire a mechanism for critically reexamining supply chain cost/benefit tradeoffs associated with lead times.

Dimension 4: The ability to deal more efficiently with lead timesIn today’s multi-polar world, numerous products are multi-sourced, with logistical options that include various transportation modes and distribution models. Time (or lead time) is a key variable but its financial implications may not be fully considered. With PS&OP, supply chains acquire a mechanism for critically reexamining supply chain cost/benefit tradeoffs associated with lead times.

Dimension 5: The ability to streamline end-of-life managementManaging a product’s end of life from both a demand and supply perspective is key to achieving supply chain mastery. From a demand planning perspective, the kind of cross-functional collaboration that PS&OP makes possible is needed to identify non-performingproducts,rationalizeSKUsto reduce clutter, and align category and brand strategies. On the supply planning side, PS&OP can add value by re-drawing product mixes in aggregate production plans and financially assessing margin erosion associated with markdown costs, inventory carrying costs and disposal costs.

About the AuthorsMohammed Hajibashi is a Partner in Accenture’s Supply Chain Management Service Line. He leads the Supply Chain Planning Practice for North America and is the Global Profit, Sales, and Operations Planning Offering lead. Mohammed has 16 years of supply chain experience in global supply chain transformation, supply chain strategy, planning, fulfillment, and analytics. He has worked across the communication, high tech, consumer products, and retail industries. Based in Austin, he can be reached at mohammed.hajibashi@accenture.com

Arjun Mukherjee is a Senior Manager in the Accenture Supply Chain Management Service line. He leads the Forecast Optimization services for North America and has deep background in S&OP practices in Consumer packaged goods, durable goods and high tech industry. Arjun is based in Washington D.C and can be reached at Arjun.mukherjee@accenture.com.

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Steve Puricelli is a Senior Manager in Accenture’s Supply Chain Management Service Line. He has an extensive background in sales and operations planning including forecasting and production planning, both as a practitioner and a consultant. He has worked across the high tech, consumer packaged goods, aerospace & defense, and automotive industries. Based in San Francisco, he can be reached at steven.j.puricelli@accenture.com

Mary Rollman is a Senior Manager in Accenture’s Supply Chain Management Service Line and is currently the global Research and Development Lead for the Strategic Planning Services practice. She has an extensive background in supply chain planning and collaboration across several industries including retail, consumer package goods and pharmaceuticals. Mary is based in Washington DC and can be reached at mary.j.rollman@accenture.com

Radica Sipcic is a Senior Manager in Accenture’s Supply Chain Management Service Line and is the NA Public Service “Go-to-Market” Lead for the Profit, Sales, and Operations Planning Offering. She works with clients in government, consumer packaged goods, telecommunications, and high tech industries to improve their performance through supply chain strategy development, business process re-engineering and software solution implementation. Based in Reston, she can be reached at radica.sipcic@accenture.com.

About Accenture Supply Chain Management

About Accenture

The Accenture Supply Chain Management service line works with clients across a broad range of industries to develop and execute operational strategies that enable profitable growth in new and existing markets. Committed to helping clients achieve high performance through supply chain mastery, we combine global industry expertise and skills in supply chain strategy, sourcing and procurement, supply chain planning, manufacturing and design, fulfillment, and service management to help organizations transform their supply chain capabilities.

Accenture is a global management consulting, technology services and outsourcing company. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world’s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. With approximately 177,000 people serving clients in more than 120 countries, the company generated net revenues of US$21.58billionforthefiscalyearended Aug. 31, 2009. Its home page is www.accenture.com.

We collaborate with clients to implement innovative consulting and outsourcing solutions that align operating models to support business strategies, optimize global operations, enable profitable product launches, and enhance the skills and capabilities of the supply chain workforce. For more information, visit www.accenture.com/supplychain.

Copyright © 2009 Accenture All rights reserved.

Accenture, its logo, and High Performance Delivered are trademarks of Accenture.

References

1 Accenture research

2 Accenture research

3 Accenture research