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© StrataBridge 2012
02.07.2012
The S&OP Control Paradox: Folly in a Volatile World
© StrataBridge 2012 © StrataBridge 2012
e S&OP Control Paradox: Folly in a Volatile World? (or Babbage’s Analytical Engine in an iPad World?)
© StrataBridge 2012
Some Structure & Thought-Provokers
The Case for ‘Agility’ • So, what’s Agility anyway… and ‘VUCA’? • It’s a ‘VUCA’ World… Some Insights • Most companies are compounding the situation
Contending with ‘VUCA’ • The ‘Growth ⇆ Control Paradox’ • Underneath it all… Three Laws • An Architecture for Growth against a ‘VUCA’ Backdrop
‘Joined-up Decision-Making’ for Growth • Where are you on the ‘Control ⇆ Growth’ Spectrum? • Some Implications and Questions for Decision-Making
© StrataBridge 2012 © StrataBridge 2012
What’s in a name?
© StrataBridge 2012
VUC Some Insights…
It’s a ‘VUCA’ World…?
COMPLEXITY
UNCERTAINTY
VOLATILITY
A AMBIGUITY
© StrataBridge 2012
© StrataBridge 2012
Beyond the Human impact…
Massive disruption on both sides of the Demand and Supply sides of the economic equation, amplified by an increasingly interconnected world…
Some Insights… It’s a (naturally) ‘VUCA’ World…
© StrataBridge 2012
© StrataBridge 2012
‘04 ‘06 ‘10 ‘08 ‘12 ‘03 ‘05 ‘07 ‘09 ‘11
20.00
60.00
50.00
40.00
30.00
100.00
90.00
80.00
70.00
110.00
120.00
130.00
140.00
‘94 ‘96 ‘00 ‘98 ‘02 ‘95 ‘97 ‘99 ‘01
Brent Crude
$/Barrel
Source: FT.com
‘VUCA’ – It’s amplifying… Some Insights…
© StrataBridge 2012
© StrataBridge 2012
Dairy
‘04 ‘06 ‘10 ‘08 ‘12 ‘03 ‘05 ‘07 ‘09 ‘11 ‘94 ‘96 ‘00 ‘98 ‘02 ‘95 ‘97 ‘99 ‘01
100
300
250
200
150
400
350
50 Oil
Meat
Cereals Food
Sugar
Price"Index
(2003=100)
Source: Centre for Security Studies"
– ETH Zurich
‘VUCA’ – It’s ‘Everywhere’… Some Insights…
© StrataBridge 2012
© StrataBridge 2012 © StrataBridge - 2010
There are many drivers; 20th Century Technology Adoption…
Source: Karl Hartig/WSJ
Television Radio
Telephone Computer
Some Insights…
© StrataBridge 2012 © StrataBridge - 2010
Television Radio
Telephone Computer
Some Insights… The Context When S&OP Was Developed
© StrataBridge 2012
Some Insights…
78% 8% �
61% �of companies plan �to increase their Innovation spending......�
of CEOs expect their innovations will lead to significant new revenue opportunities over the next three years
Source: PwC, 14th Annual Global CEO Survey, 2011
The Internal Drive for Growth
...while only��
plan to decrease it ��
Innovation 2010 – BCG Report – April 2010�
© StrataBridge 2012
Some Insights…
13% 13%
13%
10%
15% 19%
14%
21%
23%
20%
17%
30%
11%
14%
15%
37% 38%
20%
29%
10%
14%
17%
0 2007 2008 2009 2010 2011
10
20
30
40%
Increased share in existing markets New product/service developments New geographic markets Mergers and acquisitions New joint ventures and/or strategic alliances
CEO’s are turning to new product and service development for Growth Percentage of CEO’s on the main opportunity to grow their business in the next 12 months
Source: PwC, 14th Annual Global CEO Survey, 2011
© StrataBridge 2012
How Common is Joined-Up Behaviour?
– Only 37% said they had a clear understanding of what their organisation was trying to achieve and why.
– Only one in five was enthusiastic about the goals of their team and organisation. – Only one in five said that they had a clear line of sight between their tasks and the
goals of their team and organisation. – Only 15% felt that their organisation fully enabled them to execute key goals. – Only 20% fully trusted the organisation they worked for.
The 8th Habit: From Effectiveness to Greatness November 2004 Simon & Schuster
Stephen Covey in his book The 8th Habit, describes a poll of 23,000 employees drawn from a number of companies and industries. Here are the findings:
Or, put another way…
Some Insights…
© StrataBridge 2012
Only 4 of the 11 players would know which goal is
theirs
Only 2 would care
Only 2 would know what position they play and what
they are supposed to do
And all but 2 players would, in some way, be competing
against their own team members rather than the
opposition
© StrataBridge - 2012
© StrataBridge 2012
‘VUCA’ – How is it for you?
Are you experiencing, or can you see the early signals of, 'VUCA' in your external environment?
Does your strategy call for increasing degrees of 'new stuff' - new products, new services, new channels, new markets/territories, new technologies, etc?
Yes 89%
Yes 91%
No 11%
No 9%
© StrataBridge 2012
‘VUCA’ – How is it for you?
© StrataBridge 2012
Are you experiencing, or can you see the early signals of, 'VUCA' in your external environment?
Does your strategy call for increasing degrees of 'new stuff' - new products, new services, new channels, new markets/territories, new technologies, etc?
Yes
Yes
No
No
You can check your e-mail now or be filling-in your expense form or something else useful… Keep improving what you’re doing and you’ll be fine! (Or will you?)
© StrataBridge 2012
‘VUCA’ – How is it for you? Are you experiencing, or can you see the early signals of, 'VUCA' in your external environment?
Does your strategy call for increasing degrees of 'new stuff' - new products, new services, new channels, new markets/territories, new technologies, etc?
Yes
Yes
No
No
You’ve obviously got some work to do, but as it stands you can dictate the pace… Make sure your strategy takes advantage of this; it won’t last forever!
© StrataBridge 2012
‘VUCA’ – How is it for you? Are you experiencing, or can you see the early signals of, 'VUCA' in your external environment?
Does your strategy call for increasing degrees of 'new stuff' - new products, new services, new channels, new markets/territories, new technologies, etc?
Yes
Yes
No
No
Wake-up! To quote Jack Welch: “When the rate of change on the outside exceeds the rate of change on the inside, the end is in sight”
© StrataBridge 2012
‘VUCA’ – How is it for you? Are you experiencing, or can you see the early signals of, 'VUCA' in your external environment?
Does your strategy call for increasing degrees of 'new stuff' - new products, new services, new channels, new markets/territories, new technologies, etc?
Yes
Yes
No
No
It’s time to review our strategic and operational planning and decision-making processes for ‘design overreach’. We’re in danger of taking them past the limits of what they were designed for!
© StrataBridge 2012 © StrataBridge 2012
Some Structure & Thought-Provokers
The Case for ‘Agility’ • So, what’s Agility anyway… and ‘VUCA’? • It’s a ‘VUCA’ World… Some Insights • Most companies are compounding the situation
Contending with ‘VUCA’ • The ‘Growth ⇆ Control Paradox’ • Underneath it all… Three Laws • An Architecture for Growth against a ‘VUCA’ Backdrop
‘Joined-up Decision-Making’ for Growth • Where are you on the ‘Control ⇆ Growth’ Spectrum? • Some Implications and Questions for Decision-Making
© StrataBridge 2012
Contending with ‘VUCA’ The Growth Paradox…
The Pursuit of ‘Growth’
The creation of new value for customers and shareholders, driving the need for new stuff – new products, new services, new markets, new business models, etc. – by definition, increasingly different from what we currently do…
The Desire for ‘Control’
The focus on continuously tightening the grip on how we do things today – driving predictability and productivity by
fine-tuning our knowledge of, and control over, our existing business portfolio – products, customers, channels, etc.
© StrataBridge 2012
Underneath it All"3 Fundamental Laws that have shaped the StrataBridge approach…
The Law of PERSPECTIVE
The Law of ENTROPY
The Law of CHANGE No matter how hard you resist or deny it, things are going to change, often unpredictably so
It all depends on ‘where you are coming from’
Unless energy is expended to counter it, things become random, break-down, over time
© StrataBridge 2012
Clear decision rights, integrated processes and
routines to enact strategy
Joined-up"Decision"Making
An Architecture for Strategy Development, Deployment & Delivery… Against a VUCA Backdrop
‘Big C’"Capability
Laws,"Principles"
& Balances
dialog
ue a
roun
d st
rate
gic c
hoice
s at
all l
evels
Serie
s of q
uest
ions/
conv
ersa
tions
to st
ruct
ure
effec
tive
on-g
oing
Strategic Dialogue
Strategy ‘Toolkit’
Strategic Direction
Long Term Plan (e.g. 5-10 Years) – Context, fundamental choices and boundaries, combining clarity about where you are going and flexibility about how to get there
© StrataBridge 2012 © StrataBridge 2012
Some Structure & Thought-Provokers
The Case for ‘Agility’ • So, what’s Agility anyway… and ‘VUCA’? • It’s a ‘VUCA’ World… Some Insights • Most companies are compounding the situation
Contending with ‘VUCA’ • The ‘Growth ⇆ Control Paradox’ • Underneath it all… Three Laws • An Architecture for Growth against a ‘VUCA’ Backdrop
‘Joined-up Decision-Making’ for Growth • Where are you on the ‘Control ⇆ Growth’ Spectrum? • Some Implications and Questions for Decision-Making
© StrataBridge 2012 © StrataBridge 2012 © StrataBridge 2012
C
o
n
t
r
o
l
G
r
o
w
t
h
Striking the ‘Right Balance’?
In general, how would you rank your organisational DNA on the 'Control-Growth
Spectrum’? 1 2 3 4 5 4% 42% 34% 19% 1%
13% 67%
21%
More 'Control’ More 'Growth’
About right
What do you need to strike the right balance to deliver your strategy and desired business
results?
© StrataBridge 2012 © StrataBridge 2012
‘VUCA’ and Growth Drivers?
‘Control ⇆ Growth’ Balance?
Key questions to provide a platform for Agility Joined-up Decision-making
Right Conversations?
Right Capabilities?
Pace, Experimentation and ‘Learning-by-doing’?
Does ‘VUCA’ represent a strategic threat or opportunity in"our environment and do we understand our drivers of growth? Are are these reflected in our Strategy, Tactics and underpinning Assumptions and Plans?
Are we ‘wired’ for Control or Growth? Are our internal mindsets, processes, routines and behaviours synchonised with our external realities?
Do our decision-making processes and forums ask the right questions, bring together the right perspectives from across the business, and generate insight and
coherent actions?
Do we have explicit development actions building organisational capability – Capability with a ‘Big C’ – to develop agility and use ‘VUCA’ to our advantage?
Are we countering ‘VUCA’ with vision, understanding, clarity and agility, and accelerating results through an aggressive transition, rapid experimentation and
‘learning-by-doing’?
© StrataBridge 2012
Chris Turner mobile: +44 7802 252 003 e-mail: chris.turner@stratabridge.com web: www.stratabridge.com
© 2012 Steelwedge Software, Inc. Confidential. 28
Plan. Perform. Profit.
02.07.2012
The S&OP Control Paradox: Folly in a Volatile World
© 2012 Steelwedge Software, Inc. Confidential. 29
Plan. Perform. Profit.
Agility Measured in time (e.g., Order to Delivery lead-time)
Agile Characteristics Market Driven Bias Toward Information Over Inventory Low Inventory Levels Collaborative relations with trading partners
“The Triple –A Supply Chain responds to short term changes in supply and demand more quickly”
Dr. Hau Lee Thoma Professor of Operations, Graduate School of Business, Stanford University
© 2012 Steelwedge Software, Inc. Confidential. 30
Plan. Perform. Profit.
Typical: Extended Lead Time = Reduced Agility
Enterprise
Customers
Suppliers
Extended Lead Time
Info Raw & WIP
Info Info FG
Excess Inventory
Excess Inventory
Lack of External
Collaboration
Not Demand Driven
Plan Driven Inventory
Vs. Demand
© 2012 Steelwedge Software, Inc. Confidential. 31
Plan. Perform. Profit.
Suppliers
Enterprise
Improved Agility
Raw & WIP FG
Being Market Driven With Improved Information Flow Reduced Inventory and Lead Time Reduced Lead Time = Increased Agility
Reduced Carrying Costs and Expedited
Logistics
Increased Revenue and
Fill Rate
Reduced Inventory
Customers
Improved Information Flow
© 2012 Steelwedge Software, Inc. Confidential. 32
Plan. Perform. Profit.
Flexibility Rapidly change processes based on market events
• Short term flexibility – Can be obtained through better execution – Limited ability to respond in a strategic manner – S&OP has smaller role
• Long term flexibility – Can be obtained through better strategic and operational planning – Provides ability to execute new strategies and programs – S&OP has major role
© 2012 Steelwedge Software, Inc. Confidential. 33
Plan. Perform. Profit. 33
Agility and Flexibility Metrics are Integral to Best-in-Class Performance
Source: Steelwedge/Accenture value assessment
© 2012 Steelwedge Software, Inc. Confidential. 34
Plan. Perform. Profit.
Steelwedge: Business Agility Starts Here Integrated Business Planning platform Supply chain “shock absorbers” to react, respond, recalibrate
Collaborative S&OP solution: single view of demand, supply, finance, partners
Powers “What if” scenario modeling
Cloud-based: fast, elastic, value
Trusted across Global 1000
Singular, obsessive focus
© 2012 Steelwedge Software, Inc. Confidential. 35
Plan. Perform. Profit.
Executive S&OP Final S&OP Plan
Business Strategy Scenarios S&OP Finance
Executive S&OP
Final Consensus Plan Final Supply Plan
Statistical Forecast
Marketing Marketing Plan
Sales Management Sales Plan
Finance Revenue Plan
Demand Planning Demand Plan
S&OP Sales
S&OP Ops
Procurement Procurement Plan
Finance Inventory Investment
Inventory Inventory Plan
Sourcing Allocation Plan
Production Rough Cut Capacity
Financial Forecast Operating Budget M&A Strategy Capital Investment
S&OP Collaboration Customer
Forecast Supplier
Commit Plan
Consensus Unconstrained
Forecast
All Business Aspects Integrated
© 2012 Steelwedge Software, Inc. Confidential. 36
Plan. Perform. Profit.
Executive S&OP Final S&OP Plan
Business Strategy Scenarios S&OP Finance
Executive S&OP
Final Consensus Plan Final Supply Plan
Statistical Forecast
Marketing Marketing Plan
Sales Management Sales Plan
Finance Revenue Plan
Demand Planning Demand Plan
S&OP Sales
S&OP Ops
Procurement Procurement Plan
Finance Inventory Investment
Inventory Inventory Plan
Sourcing Allocation Plan
Production Rough Cut Capacity
Financial Forecast Operating Budget M&A Strategy Capital Investment
S&OP Collaboration Customer
Forecast Supplier
Commit Plan
Consensus Unconstrained
Forecast
All Business Aspects Integrated
Finance Market
Product
Demand
Market Supply
Supply
Capacity
Executive Planning & Scenarios
© 2012 Steelwedge Software, Inc. Confidential. 37
Plan. Perform. Profit.
Improve Agility and Flexibility Focus on What Matters Understand Complexity and Its Impacts
Volatility
Imp
ac
t
Statistical Forecast with
Exception Monitoring
Collaboration with
Exception Monitoring
Stocking Strategy: Min/Max, Safety Stock, etc. with Exception Monitoring
© 2012 Steelwedge Software, Inc. Confidential. 38
Plan. Perform. Profit.
Demand Planning Policy Steelwedge Policy Analysis Tools
© 2012 Steelwedge Software, Inc. Confidential. 39
Plan. Perform. Profit.
Steelwedge Test Drive
Why Test Drive Live System = Real User Input = Real Proof Point Validate Requirements Assumptions (Customer & SW) Validate Data Health and Availability (Customer & SW)
What is a Test Drive Compass Express “Best Practices” platform hosted by SW One time data load 8 hours of Hands-on Training
Optional: Integrated Planning Assessment / Design workshop
© 2012 Steelwedge Software, Inc. Confidential. 40
Plan. Perform. Profit.
Ed Lewis Ed Lewis joined Steelwedge in 2009 and brings over twenty years of leadership experience providing sales and operations planning and supply chain solution design, development and implementation. Prior to Steelwedge, Ed was CEO and President of Amitive, Inc (acquired by GXS) which he founded in 2004. Under his direction the company grew from start-up to a leading SaaS supply chain synchronization and execution provider controlling complex supply chains around the globe. Prior to launching Amitive, Ed designed and implemented global SCM solutions for numerous companies, including Mitsui & Co., as a Sales and Operations Executive and consultant. Ed holds a Juris Doctorate from Western State University, College of Law. The Steelwedge Solution Steelwedge, like our name, is a powerful, yet simple tool. The company is a pioneer in delivering cloud-based Integrated Business Planning (IBP.) Steelwedge Sales and Operations Planning (S&OP) solutions supercharge well-established, but complex collaborative planning processes that balance demand and supply, enable "what-if" scenario planning connecting operations with business strategy and financial performance. Our robust Integrated Business Planning Platform extends the value of customers' investments. Large global enterprises, including five of the Fortune 100, trust Steelwedge to provide a clear line of sight from plan to performance to profit across demand, supply and finance systems. This visibility, in turn, empowers more agile "what if" scenario testing and decision-making to minimize confusion, maximize efficiency and optimize profit in even the most volatile business environment.
© StrataBridge 2012
A Brief Introduction… …Chris Turner Co-founder of StrataBridge, Chris works with a range of clients worldwide, across industry sectors, on strategy development, innovation and integrated decision making. A highly respected facilitator, Chris has a unique ability to understand and simplify complex business issues and opportunities and translate these into action. He has worked with leadership teams around the world, helping them to articulate, share and realise their strategies through aligning the organisation, integrating decision making and capability building.
Chris’s long-term client relationships are built on his ability to balance the delivery of fast results with sustainability, and Chris’s clients include Anheuser-Busch, Bakehouse, Coca-Cola, Compass Minerals, Mars, Mass Mart SA, PZ Cussons, SC Johnson, Shell. …StrataBridge StrataBridge is a boutique consulting firm that specialises in advising fast-moving, brand led organisations on strategy, innovation and operations.
StrataBridge help create and develop the relevant thinking, processes, capabilities and behaviours to allow organisations to bridge the gap between where they are and where they want to be. In short, we connect the dots between hard and soft organisational issues to create the bridge between a client’s real world and their ideal world. Chris can be reached at: e | chris.turner@stratabridge.com m | +44 7802 252 003 o | +44 1277 633 433 w | www.stratabridge.com
© 2012 Steelwedge Software, Inc. Confidential. 42
Plan. Perform. Profit.
Thank You