Gaining Value from Integrated Business Planning (Sales ... · - 3 - A Definition of Integrated...

Gaining Value from

Integrated Business Planning

(Sales & Operations Planning)

- 2 -

1. S&OP or IBP – What’s Right For You?

2. Large or Small Organisations – What’s The Difference?

3. Implementing S&OP/IBP – What’s In It For You?

4. How Can ISCM Assist Your Organisation?

Contents

- 3 -

A Definition of Integrated Business Planning

• A process led by senior management that evaluates and revises time-

phased projections for demand, supply, product and portfolio

changes, strategic projects, and the resulting financial plans. This is

done at the aggregate level on a monthly basis, typically over a 24-

month or greater rolling planning horizon.

• A decision-making process that realigns the tactical plans for all

business functions in all geographies to support the company's

strategies, business goals, and targets.

• A primary objective of Integrated Business Planning is to reach

consensus on a single operating plan to which executives of the

management team hold themselves accountable and allocate the

critical resources of people, equipment, materials, time, and money to

most effectively satisfy customers in a profitable way.

Oliver Wight Group

- 4 -

Production Plan Daily sequencing Operational

Scheduling Capacity Plan

A typical planning environment …

Annual Monthly Fortnightly/Weekly Daily

Individual area

targets Demand Plan

Inventory Targets Supply Plan Warehouse

Replenishment Customer Delivery

Annual budget Cash Flow Plan

Sa

les

S

up

ply

P

rod

uc

tio

n

Fin

an

ce

Customer Orders

Cash Payments &

Receipts

Marketing Plan New Product

Introduction Plan

Inn

ov

ati

on

Orders based on

supply availability

rather than customer

needs

Annual strategic

planning may include

all sectors

Little consideration of

sales forecast;

replenishments based

on capacities

Work flow based on

setup times and shift

arrangements

Financial processes

based on availability of

funds and financial

year considerations

Customer orders &

deliveries usually not

integrated into planning

New product

introductions &

withdrawals poorly

coordinated with Supply

- 5 -

A refined planning environment …

Production Plan Daily sequencing Operational

Scheduling Capacity Plan

Annual Monthly Fortnightly/Weekly Daily

Individual area

targets Demand Plan

Inventory Targets Supply Plan Warehouse

Replenishment Customer Delivery

Annual budget Cash Flow Plan

Sa

les

S

up

ply

P

rod

uc

tio

n

Fin

an

ce

Customer Orders

Cash Payments &

Receipts

Marketing Plan New Product

Introduction Plan

Inn

ov

ati

on

An

nu

al S

tra

teg

ic P

lan

nin

g

Sa

les

& O

pe

rati

on

s

Pla

nn

ing

Inte

gra

ted

Bu

sin

es

s P

lan

nin

g

- 6 -

The differences between S&OP and IBP

Most organisations start with S&OP, then eventually

transition to full IBP

Feature S&OP IBP

Demand Planning

Supply Planning

Production Planning

Financial Planning

Strategic Planning

Product Innovation

Simulation & Modelling

Resource Project Planning

- 7 -

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00

10.00 Sales ($) Region 1

Region 2

Region 3

Total

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00 Production (t)

Plant 1

Plant 2

Plant 3

Total

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00

10.00 Inventory ($)

Store 1

Store 2

Total

0.00

1.00

2.00

3.00

4.00

5.00

6.00 Raw Material Spend ($)

Plant 1

Plant 2

Plant 3

Total

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

1.80

2.00 Transport ($)

Plant 1

Plant 2

Plant 3

Total

0.00

0.50

1.00

1.50

2.00

2.50

3.00 Cash Flow ($)

Total

Christmas

shutdown

Increased summer sales forecast necessitates

production expansion (+0.48tM)

Summer

Buildup

Decreased sales forecast (-$1.1M) due to pre-

summer lull, but still trending up

IBP – Bringing Together Various Business Plans

Transport slightly down (-$0.22M) due to increased

production and reduced sales

Raw material spend slightly up (+$0.6M) due to

production expansion

Cash flow significantly down (-$1.51M) due to

reduced sales and increased raw materials

Inventory up (+$0.2M) due to reduced sales and

increased production

- 8 -





Contents

- 9 -

The difference between S&OP in large and small/medium organisations is in its implementation, not its concept …

In principle:

NOTHING

In practice:

Lack of specialist people

Entrepreneurial v Disciplined

Lack of S&OP experience

Lack of systems

Lack of funding for training

Separation of functions

Pull on executive time

Seat of the pants mentality

Over emphasis on history

- 10 -

The size and what you use to get there doesn’t really matter … the end point is the same

Seat of the pants

Tacho

Speedo

GPS

Tacho

Speedo

GPS

Telemetry

Radio

- 11 -

Who manages the S&OP environment?

Honest Broker

Sales

Marketing

Finance

Production

Development

Supply Chain

The S&OP Coordinator is a multi-

skilled juggler undertaking the

‘Honest Broker’ role:

Coordinates inputs

Arranges meetings

Chairs meetings

Prepares minutes

Perceived neutrality

- 12 -

S&OP Coordinator is a multi-skilled juggler …

Honest Broker

Sales

Marketing

Finance

Production

Development

Supply Chain

The person:

Works at many levels

Retains confidentially

Earns respect

Understands business

Understands the processes

Skilled coordinator & chairman

- 13 -

… aligning competing interests …

Activity Predominant Goal Competing Interests Unwanted Outcomes

Finance Outlay Minimum Cost Low Price vs Low Cost

Delayed vs Prompt Payment

Invoice Checking

Cash Flow Problems

High interest Charges

Incorrect allocations

Sales &

Marketing

Achieve Sales Forecast High vs Low Stock Levels

Dispersed vs Centralised Storage

Monthly targets

Inaccurate Pricing

Poor Timing of Purchases

Poor product Knowledge

Production Achieve Production Forecast Variable vs Fixed Quantities

Low vs High Stock Quantities

Minimal vs Advanced Planning

Special Production Runs

Premium Transport Rates

Production Shutdowns

Engineering/

Product

Development

Provide Correct Product High Quality vs Low Cost

Detailed vs Simplified Specs

Restricted vs Open Market

Buy Incorrect Raw Materials

Buy From Wrong Source

Over Specification

Supply Delivery In Full On Time High vs Low Stock Levels

Dispersed vs Centralised Storage

Break-bulk vs Full Pallets/Trucks

Excessive freight rates

Cash flow problems

Poor customer service

- 14 -

So from which part of the business do we second the coordinator?

If there is no scale or scope for a specialist

S&OP Coordinator

… select someone with …

respect in the business

a passion and interest

broad corporate knowledge

total business understanding

sound computational or analytical skills

Honest Broker

Sales

Marketing

Finance

Production

Development

Supply Chain

… preferably from Supply Chain – if they meet the criteria

- 15 -

How do meetings vary between large and small organisations?

A single combined S&OP Meeting:

Insufficient managers

Avoid overlapping attendance

Flattened organisation

Diverted attention

Less recording

Management

Review

(S&OP Meeting)

6

Integrated Reconciliation

(Pre-S&OP)

5

Data

Gathering

Supply

Plan

Demand

Plan

1

3

2

Financial

Plan

4

Combined

S&OP Meeting

5

Data

Gathering

Supply

Plan

Demand

Plan

1

3

2

Financial

Plan

4

- 16 -

What shortcuts cannot be taken …

No matter how small the business, there are some rules that must

be followed:

The concept of honest broker must be observed

Independent or unilateral decisions must not be permitted

Separation of functions must be observed

Collaboration must continue

The recurring process must be followed

No one person or manager can dominate

- 17 -





Contents

- 18 -

Where will S&OP/IBP work?

Hospitals

Manufacturing

Military

Utilities

S&OP is appropriate for numerous organisations: basically

anything that optimises resources, people, materials,

equipment and finance

Construction

Heavy

Maintenance

Banking

Specialist

Equipment

- 19 -

Where is your organisation on the path to S&OP/IBP?

Is there a consensus planning culture in the organisation?

Does your sales team regularly conduct structured forecasting or demand

planning?

Do you manage inventory levels based on scientific methods?

Is regular supply planning (including all the affected players) a feature of your

business?

Do all of the key business team participate in regular planning meetings - always?

Is there consensus agreement on plans every week, fortnight or month?

Is there senior management buy-in to the planning cycle and decision making?

Do managers adhere to the plan after sign-off or change plans without

consultation?

Are planning systems robust, comprehensive and sufficiently detailed?

Are records kept of planning meetings?

Does your organisation conduct what-if scenario & contingency planning?

… if you answered no to many of these questions, then you are like many other

organisations in Australia, and probably need urgent help with S&OP

- 20 -

Reported Improvements from IBP

% Improvement

Revenue Growth 10-31%

Gross Margin 25-29%

Demand Plan Accuracy 18-43%

DIFOT 10-50%

Order Fill Rate 29-34%

Perfect order 22-30%

Customer Satisfaction 29-39%

Inventory Turns 24-28%

Inventory Value 33-37%

Inventory Reduction 18-46%

Safety Stock Reduction 11-45%

Working Capital 25-30%

Asset Utilisation 32-49%

Increased productivity 30-45%

Return on Assets 24-30%

*2013 Sources: Oliver Wight; Aberdeen;

AMR; and Ventana Research

- 21 -





Contents

- 22 -

How can ISCM help?

Assess

Envision

Design

Implement

Master

Diagnose S&OP

Maturity

Agree S&OP vision

and improvement

roadmap

Agree detailed S&OP

process design

Implement new ways

of working and

enablers

Sustain and initiate

continuous S&OP

improvement

• S&OP maturity matrices

• Network value chain diagnostic

• Supply chain business case

• Supply chain transformation 1st phase

• Accelerated solutions environment

• S&OP design

• S&OP programme mobilisation

• Stakeholder alignment

• Advanced planning and scheduling

• Corporate performance management

• RFID and agent technologies

• S&OP mastery (process shadowing and

re-inforcement)

• Capability coaching

Our approach to S&OP and/or IBP enables rapid integration of the culture and

concepts required through any or all of the following elements:

- 23 -

The ISCM Team

John has 40 years experience in all levels of business and numerous industries. His experience includes process

redesign, strategic analysis, business development, procurement & supply chain management, and business process

improvement. Industry experience includes energy & resources, chemicals & plastics, oil & gas, pharmaceuticals &

healthcare, local government, and aerospace in both the private and public sectors. John has experience in various

regions having lived and worked extensively in Asia, United States and Europe. Qualifications include a Master’s

Degree in Business, Graduate Diplomas in Transport & Distribution and Strategic Studies, and a Bachelor’s Degree in

Business majoring in Accounting and Human Resource Management. In addition, John has lectured for many years at

post graduate level in supply chain in Australia and across the Asia-Pacific region.

Kerry is a senior manager and academic who has had 40 year’s experience in both private and public enterprises.

Industry experience includes both public and private sectors: public sector experience includes, local, state and federal

government; private includes logistics & transport, chemical, mining, food & beverage, textile & clothing,

telecommunications, electronics and metals. Major consulting assignments have involved logistics and business audits,

continuous improvement programs, project management and strategic planning. Kerry has formal qualifications in Civil

and Mining Engineering and a Masters Degree in Logistics Management.

David is an experienced supply chain professional who is results orientated and has significant operational and change

management abilities across the FMCG, Consumer and Pharmaceutical industries. Managerial accomplishments include

leading teams, providing operational services across multi-sites, managing budgets, implementation of supply chain

management continuous lean improvement projects, management of third party service providers, development of

strategic plans, systems implementation, procurement, S&OP, demand planning, production planning, forecasting,

training and network optimisation. Qualifications include a Master’s Degree in Business Logistics, Graduate Diplomas in

Transport & Distribution, Diploma of Project Management, Certificates in Finance, Management, Change Management,

Distribution ,Training and Assessment and is a Certified Logistics and Supply Professional – Asia Pacific.

Kerry Hammond

John Oska

David Rogers

- 24 -

The ISCM Team

John Eleftheriou

John Eleftheriou is an experienced Managing Director with more than 40 years experience across multi-national manufacturing

and complex supply chain industries.. As senior and executive manager John has successfully held key roles in strategic

procurement, contract distribution; wholesale and retail distribution. As well as delivering improvement strategies to various

clients, John is currently leading a diverse specialist group offering and operating across tailored training, business

improvement and business development aimed at corporate to individual improvement. John holds a Grad Dip Transport and

Distribution Management, Grad Dip Materials and Purchasing Management, Certificate in Business and Finance Management,

Cert IV TAE and is an accredited Innermetrix

- 25 -

Our experience covers a broad spectrum of industries and categories …

energy/oil & gas

pharmaceutical

health care

automotive

wholesale & retail

agriculture

mining

ISCM team members have extensive experience throughout Australia, Asia,

United States and Europe in industries as diverse as...

public sector

aerospace & defence

high-technology

chemicals & packaging

consumer electronics

consumer goods

food & beverages

- 26 -

Organisations we have worked with include …

Manufacturing Industry Logistics Industry Manufacturing Industry Other Industry

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