Steelwedge 2015 Agility Webinar Series: From Good to Great: The Business Case for Best-in-Class S&OP

1 © 2015 Steelwedge Software, Inc. Confidential.

From Good to Great: The

Business Case for

Advanced S&OP

Andrew McCall

Vice President

Customer Success


Getting to Value?

• Business Value: The Size of the Prize

• The Roadmap: Getting there rapidly

• Measuring Success: Tangible Results

• Case Study: How to Bring this all together


Performance of Best-in-Class Companies

• 15% -25% higher average Customer Service Levels

• Three times lower Cash-to-Cash cycles

• 35% greater forecast accuracy at the product family level

• 30% of Best-in-Class companies have increased their inventory

turns in the last six months as compared to 10% of All Others.

• Sixty percent (60%) of Best-in-Class companies have increased

their perfect order percentage to customers versus 20% of All

Others.

Source: Aberdeen Group


Another View: The Benefits of S&OP

Source: Supply Chain Insights

Recent Survey Question to 180 Respondents – What benefits have you received from your improvement efforts surrounding S&OP?


Value Levers

50-70% Reduction

15-30% Improvement

20%-25% Reduction

25% Reduction in

Stock-outs

1-2% Lift in Revenue

Typical Results

Our View


Why So Hard?

Given these results,

• Why do companies struggle to articulate the value?

• Why is it so difficult to build a business case to support S&OP

improvements?

• Why does the view persist that we don’t achieve these goals,

therefore the process doesn’t sustain?


Sustaining Value


A Question of Focus

• Process often starts in the supply chain, and gets focused on

Forecast Accuracy—not the results from a better forecast

• Competing Metrics—every project results in inventory reductions,

so we either double count, or don’t count at all

• Cross functional measures can be too difficult (fill rate/revenue lift

for instance) to attribute to one set of improvements

• Measures need to be more broad based


Balanced Score Card


Getting Specific About Value

S&OP, Metrics, Customer Experience, Inventory Op, Demand Planning, Strategic Sourcing

Why it is important

5 Value Questions

Growth

Profitability Efficiency Demand Planning Total Annual Conservative

Opportunity Estimate

Range

1. How do you

measure it?

$Revenue Gross Profit Asset Turnover Forecast

Accuracy

2. What is it today?

$7.1B (2013)

7.5% increase

based on $6.6B ’12

COGS $3.9B (2013)

45.9% Gross Margin

2.9% improvement

based on 43.0% in ‘12

Ratio 1.33

0.06 decreaseYOY

based on 1.39 in ‘12

Moves all the rest

(1% improvement

correlation 2%

improvement in Perfect

Order)

3. What would you

like it to be?

5% growth rate

assumption

2% target improvement

assumption

Target 1.43

5% Rev growth and 2%

asset optimization

assumption

4. Value of the

difference?

$357M $77M $107M (asset only) $541M

5. Value Over time ?

(3-5 years)

$1.0B – $1.7B

$3.9M-$7.7M $321M – $536M $1.6B - $2.7B

“Moving the needle”

just 5%-10% of the % above

Opportunity (% of a %)

$17.9M – $35.7M $2.1M-$6.5M $5.3M-$10.7M $___ X Factor ___

Multiplier for previous $27.0M – $54.2M

Annually

Opportunity monthly

(Cost of doing nothing each

month)

$1.4M – $3.0M $322K-$644K $446K-$893K $___ X Factor ___

Multiplier for previous

$2.3M - $4.5M

Monthly


Defining the Roadmap

Holistic End-State Vision

People, Process & Technology

Maturity Model

Defined evolution of capabilities

Value Releases

Anticipated Benefits at each stage

Executive Engagement

Development of a true “Management Operating System” for

Integrated Business Planning—not a silo process owned by a single domain


The Roadmap: Strategic Value Assessment

Overall Process Framework

Vision Assessment Road Map /

Maturity Model

Value & Measures

Theme: Training & Baseline

Data for Value

- Key S&OP Baseline

- Critical Success Factors

- Value Drivers

- Pain Points

- Follow Up/Clarification on Pre

Work & Data Requests

- Test Drive Planning

- Data Bin

Requirements

- Core Use Cases

- Value Driver & Pain

Point Examples

- Forecasting Validation

Data

Theme: Assessment

- Process Review for

- Demand

- Supply

- Pre-S&OP

- Executive S&OP

- Data Management

- Pipeline Management

- Master Data

- Landscape & Integration

- Financial Inputs to Value

Drivers

- Current Org Review

- R&R

- Process Ownership

Theme: Road Mapping

- End State Process Map

- What Does Good

Look Like?

- Key Components of End

State

- Industry Flavor

- Test Drive Linkage

- Implementation Strategy

- Process RACI

- Master Data Strategy

- Integration Strategy

- IT Landscape - Proposed

- Getting There

- Phasing

- Resources

- ROI Analysis (Cost/Benefit)

- Time To Benefit – Phasing

- Crawl, Walk, Run

- EVA & Linkage

- Key Enablers

Theme: Validation & Review

- Create SVA Roadmap

- Sponsor Walk Through

- Financial ROI Validation &

Acceptance

- Baseline

- Stretch Goals/ Upside

- SVA Output Document

- Executive Review

- Road Map Summary

- Test Drive

- Critical Success

Factors

- Business Case

Review

- Phased Actions

- 90 Day Play Book

- Mobilization

- Governance &

Budgeting

- Mid Term Planning

- Go Forward Decisions


Specific Vision

Assessment Maturity Model

Metrics & Results

Monitoring

Getting there


Measuring Success

• Define the right metrics

• Create a baseline that clearly outlines current state and

recent trend

• Establish targets

• Link desired improvements to the roadmap


Defining & Using Metrics

• Establish Strategic Goals

• Monitor Performance

• Measurable and quantifiable

• Linkage to responsibility

• Ensure metric is well-defined

1

5 * Source: Supply Chain Council

15


1

6

Attribute Strategy

Reliability (RL) Consistently getting the orders right, product meets

quality requirements

Responsiveness (RS) The consistent speed of providing products/services to

customers

Agility (AG) The ability to respond to changes in the market

(external influences)

Cost (CO) The cost associated with managing and operating the

supply chain

Assets (AM) The effectiveness in managing the supply chain’s

assets in support of fulfillment

Cu

sto

me

r In

tern

al

Performance Attributes*

16 * Source: Supply Chain Council

Question: What is/are the most important attributes to achieve your supply chain strategy?


Measuring Success

Create a baseline


Measuring Success

Receivables Net Sales Accounts Receivable (AR) Turns DSO

2013 $2,064,000,000 $232,270,000 8.886 41.075

2014 $1,783,000,000 $323,710,000 5.508 66.267

2015 $1,733,000,000 $483,030,000 3.588 101.735

Assumptions 105.0% 99.5%

(Projected) 2016 >> $1,819,650,000 $480,614,850 3.786 96.406

(Projected) 2016 >> Accounts Receivable (AR)

Improvement (%) 0.5%

Receivable Revenue $2,415,150

Inventory Turns Inventory Value COGS Turns DIO Inventory Increase

PY Inventory 2012 $146,520,000

2013 $122,280,000 $610,330,000 4.991 73.128 ($24,240,000)

2014 $152,720,000 $541,520,000 3.546 102.938 $30,440,000

2015 $163,880,000 $546,740,000 3.336 109.405 $11,160,000


(Projected) 2016 >> $163,060,600 $552,207,400 3.387 107.780

(Projected) 2016 >> Inventory Value COGS

Improvement (%) 0.5% 1.0%

Revenue $819,400 $5,467,400

Payables Inv Inc + COGS Accounts Payable (AP) Turns DPO

2013 $98,040,000 $52,150,000 0.532 686.186

2014 $183,160,000 $50,040,000 0.273 1335.999

2015 $175,040,000 $44,160,000 0.252 1446.775


(Projected) 2016 >> $175,040,000 $45,043,200 3.886 93.926

(Projected) 2016 >> COGS

Improvement (%) 2.0%

Payable Revenue $883,200

Cash Conversation Cycle DSO DIO DPO CCC

2015 101.735 109.405 1446.775 -1235.636

Opportunity 96.406 107.780 93.926 110.260

Improvement (%) Improvement ($)

Improve AR by: 0.5% $2,415,150

Improve Inventories by: 0.5% $819,400

Improve AP by: 2.0% $883,200

Improve COGS by: 1.0% $5,467,400

Total $9,585,150

Moving Needle 5.0% $479,258

Moving Needle 10.0% $958,515

Assumptions

Cash to Cash Cycle Data Input Tab


Measuring Success

5 Value Questions

Growth Profitability Efficiency Demand Planning Total Conservative

Opportunity Estimate

Range

1. How Do you Measure it? $ Rev Gross Profit Asset Turnover Forecast Accuracy

2. What is it Today? $ -0.05B (2015) -

2.8% Decrease

based on 1.79B

(2014)

COGS $1.19B

(2015) 68.5%

Gross Margin -

1.2% Decrease

based on 1.79B

(2014)

Ratio 0.29; -0.09

Deteriment YoY

based on 0.38 in

2015

3. What would like it to be? 5% Growth rate

assumption

2% Target

improvement

assumption

Target 5.89

Revenue growth 5%

and 2% asset

optimization

assumption

4. Value of the Difference $86.65M $10.94M $120.2M $217.79M

5. Value over time? $0.26B - $0.44B $32.81M - $54.68M $360.6M - $601M $0.66B - $1.09B

“Moving the needle” just

5%-10% of the % above

Opportunity (% of a %) $4.34M - $8.67M $0.55M - $1.1M $6.01M - $12.02M

$___ X Factor ___

Multiplier for previous $10.89M - $21.78M

Annually

Opportunity monthly

(Cost of doing nothing each

month) $0.37M - $0.73M $0.05M - $0.1M $0.51M - $1.01M

$___ X Factor ___

Multiplier for previous $0.91M - $1.82M

Monthly

IBP, S&OP, Sales Planning, Metrics, Customer Experience, Inventory Op, Demand Planning, Strategic Sourcing


Real Global Case Study: Prior Solution Status

Collaboration

Financial

Scenario

Management

Single Source

of Truth

Tedious mechanisms

to support financial

alignment and

executive reporting

Lack of Systemic

Flows and Analytics

lead to extensive

manual processes

Silo’d applications

Inability to process

and analyze daily

Point of Sale data

Manual, batch

oriented

communication

Retailers

EDI

Account

Manager

Sales

Manager

PoS Data

Finance

Manager Analysts

EXCEL

Forecast

Home

Grown

Applications

Executive

EXCEL

Disparate home grown systems and Excel files.

Lack of responsiveness, inaccurate data , inconsistencies


Measuring Success

• Define the right metrics

• Create a baseline that clearly outlines current state and

recent trend

• Establish targets

• Link desired improvements to the roadmap


Real Global Case Study: Vision of End State Planning

Collaboration

Financial

Scenario

Management

Single Source

of Truth

Financial alignment of

Plans

Comparison with

Budget

Proactive what-if scenario

analysis

Key Quarterly Metrics :

• Revenue, Gross Margin,

Channel & Own Inventory

Faster cross-

functional internal and

retailer collaboration

STEELWEDGE enabled collaborative planning (inter. & external),

improved responsiveness, integrated EPOS data & financials, and

the decommissioning of legacy systems and i2.

Real time Executive

dashboard

Drilldown, week /week

analysis

Projected Inventory,

Forecast Accuracy

reports

EDI

Account Manager

Sales

Manager

PoS Data

Forecast

Finance

Manager Analytics

Executive

Retailers

http://www.steelwedge.com/


Stage 1

Collaborative Demand Planning

Stage 2

Sales & Operations Planning

Stage 3

Decision Data Visibility

Stage 4

Demand Intelligence

Stage 5

Predictive and Prescriptive Analytics

Cloud Systemic Single Source Mobility Big Data

Statistics

Algorithms

What-if

Math

Real Global Case Study: Maturity Model

RETAILERS


Integrated systems, improved promotions management, EPOS data,

responsiveness, and greater channel visibility has provided

significant benefits.

Real Global Case Study: Results

Promotions

Inventory Driven

Costs

Excess &

Obsolescence

10% 8%

6%

Inventory

Reduction

5%


The Bottom Line

• Value: There is incredible value, as long as we measure it

correctly

• Roadmap: Define a clear end state, as well as the stages of

maturity to get there and the benefits associated at each

stage in order to sustain

• Measuring Success: KPI’s must link with strategic goals and

be focused on the outcome


Q&A Contact Us

Telephone: North America +1 (855) 980.8800

United Kingdom +44 (0)121.232.4668

Netherlands +31 (0)70.7999.288

Japan +813-6277-8521

Steelwedge 2015 Agility Webinar Series: From Good to Great: The Business Case for Best-in-Class S&OP

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Transcript of Steelwedge 2015 Agility Webinar Series: From Good to Great: The Business Case for Best-in-Class S&OP