APICS-SV Chapter
Meeting
Trends Shaping the Evolution of S&OP
& Integrated Business Planning
Stephen P. Crane
Stephen Crane Consulting, LLC
Supply Chain Risk Consortium
November 19, 2015
Background

Principal & Founder – Stephen Crane Consulting, LLC

B.S. Chemical Engineering - University of New Hampshire

APICS CSCP – Certified Supply Chain Professional

Board Member – Supply Chain Council & APICS

Member of The Supply Chain Risk Consortium

30+ years industry experience from Air Products, Wacker-Chemie and Firmenich

Implemented Sales & Operations Planning in 12 businesses, 3 companies, 4 countries

Implemented best-in-class supply chain organizations and planning processes

Practitioner focused on sustainability of benefits
Stephen Crane/APICS-SV/November 19, 2015
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Agenda
 S&OP vs. Integrated Business Planning
 Greatest Challenges to Improving S&OP
 Six Trends Shaping the Evolution of S&OP & IBP
 Key Takeaways
 Questions?
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S&OP vs. Integrated Business Planning
Stephen Crane/APICS-SV/November 19, 2015
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S&OP & IBP: Decades of Evolution
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Evolution of S&OP
In the past, S&OP is most often identified as a Supply Chain based process and has been too
singularly focused to engage and provide value across functions to provide true business
optimization.
The S&OP process develops tactical plans that provide management the ability to strategically
direct its businesses to achieve competitive advantage on a continuous basis by integrating
customer-focused marketing plans for new and existing products with the management of the
supply chain. The process brings together all the plans for the business (sales, marketing,
development, manufacturing, sourcing, and financial) into one integrated set of plans. (APICS
Dictionary, 14th edition)
Stephen Crane/APICS-SV/November 19, 2015
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Evolution of S&OP
“Traditional Sales and Operations Planning (S&OP) processes and supporting technologies are no
longer sufficient in today’s business environment. Sales and Operations Planning has evolved to
become Integrated Business Planning. It is a truly cross-functional, multi-dimensional process that
includes all elements of demand, supply, and the financial analysis in relation to the business goals
and strategy.”
“The broader strategic mandate for S&OP is key to superior returns. S&OP leaders are
aggressively converting S&OP from an operations level demand and supply balancing process to
the mechanism of choice for integrated business planning and strategy deployment.”
Stephen Crane/APICS-SV/November 19, 2015
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Evolution of S&OP
Every company needs to decide on how they want to use S&OP in their business. Best-In-Class
companies use S&OP as a way of running the business supporting a company’s growth strategy
by routinely reviewing customer demands, anticipating shifts in business patterns, and aligning an
extended enterprise of resources, suppliers and service providers to deliver on expectations in a
dynamic and evolving global marketplace.
 Management’s handle on the business…
 All P&L impacts integrated into process…
 Is an Executive decision making process…
 A set of decision making processes…
 Provides "long range vision“ to issues before they become a crisis…
Stephen Crane/APICS-SV/November 19, 2015
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Month-End Close Drives Price/Volume
Variance Analysis and Monthly Outlook
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Companies That Have implemented S&OP See Benefits
Across Many Areas - Performance Benefits (% Improvement)
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Greatest Challenges to Improving S&OP
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Unwritten Rules Causing Profit
Leakage
 Always under promise and over deliver
 Never submit your real budget the first time
 Always inflate your budget, as it will likely be cut
 Always make your budget, it’s what really matters
 Avoid specific measures, especially if you can’t control them
 Get the most people reporting to you and protect your budget
Stephen Crane/APICS-SV/November 19, 2015
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Lost Business Value
 Cost Reduction (Conference Board)
─
90% of organizations that launch cost
reduction programs fail to sustain
results for > 3 years
 Execution (McKinsey)
─
Organizations realize only 63% of the
value of their strategies
 Complexity (AT Kearney)
─
Complexity costs organizations 3-5% of
sales
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Greatest Challenges to Improving S&OP
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Greatest Single Challenge to Improving S&OP
 Lack of Executive support, commitment, and engagement
o
Leadership team needs to be committed to a new style of running the
business
o
Organizations need to comprehend the true scale of what the process can
achieve for the business
o
The sizable challenge of overcoming the traditional thinking of operating in
functional silos and mis-aligned incentives
o
Integrating all the key areas of the business (Sales, Product Management,
Manufacturing, Purchasing, Finance, R&D) into a single integrated business
planning process
o
There is no one owner of the management process
Stephen Crane/APICS-SV/November 19, 2015
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Six Trends Shaping the Evolution of S&OP &
Integrated Business Planning
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Six Trends Shaping the Evolution of S&OP
& Integrated Business Planning
1. Speed of Business Continues to Accelerate
2. Complexity, Volatility, Lack of Value Based Planning
3. One Size Does Not Fit All
4. Develop Planning Talent
5. Global is More Than a Template
6. Software is Not a Silver Bullet
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Speed of Business Continues to Accelerate
1
The need for organizational alignment is more critical than ever. The
speed of business continues to accelerate driven by the consumer
now dictating the channels, any confusion about priorities or delays in
orders can result in increased costs, inventory or even loss of
business.
 Need to capture timing and volume shifts is critical to maintaining
customer service and fulfill orders profitably
 The need for strategic focus on Sales Forecasting has never been
greater
 S&OP is the perfect process mechanism to recognize, evaluate, and
determine the impact of these changes
 Effectively communicate changes and align the organization to “one
plan”
Stephen Crane/APICS-SV/November 19, 2015
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Complexity, Volatility, & Lack of Value
Based Planning Squeezing Margins
2
Companies need to better manage complexity and volatility which are
squeezing margins and decreasing profitability. By focusing on value
based planning, companies can maximize their profitability.
 Increasing complexity of products and length of global supply chains
 Increased product proliferation and shorter lifecycles
 Demand volatility is increasing while customers require increased
responsiveness and better service
 Value based planning not integrated into S&OP
Stephen Crane/APICS-SV/November 19, 2015
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One Size Does Not Fit All
3
Companies should leverage segmentation techniques in planning to target
performance improvement opportunities and capitalize on those
opportunities. By combining portfolio and planning techniques,
organizations can drive segmented strategies to achieve maximum
business profitability.
 The 80/20 rule (Pareto)
 Measure and manage complexity
 Focus on synergy areas: procurement, product
design, manufacturing, planning and order fulfillment.
Stephen Crane/APICS-SV/November 19, 2015
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Area
Develop Planning Talent
4
ZEU
ZNA
ZCN
ZLA
ZSEA
WW
ZIMEA
ZJPN
Total
1. PF 2. PPR 3. MPP 4. PP
76%
74%
80%
88%
81%
81%
82%
65%
78%
75%
63%
73%
82%
72%
83%
67%
67%
72%
77%
66%
82%
86%
74%
73%
69%
64%
75%
78%
73%
75%
75%
74%
76%
78%
52%
74%
5. DP
88%
80%
91%
89%
86%
94%
74%
79%
86%
6. SP
7. IM
65%
58%
59%
85%
74%
80%
74%
62%
68%
8. S&OP
74%
74%
83%
76%
69%
90%
80%
61%
75%
With recognized talent gap in the marketplace, companies should establish
talent management programs and career paths that attract and retain
planning talent. Career paths need to include opportunities to move into
other functional areas in the organization to broaden planners’ experience
and establish context for better decision making.
 New generation of the workforce expects to be mentored
 Universities are not providing the necessary planning skills, so companies
should expect to develop these skills
 Culture and capability differences makes it difficult to plug-and-play new talent
from other companies
Stephen Crane/APICS-SV/November 19, 2015
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63%
66%
70%
81%
82%
85%
46%
79%
71%
Total
76%
70%
78%
83%
77%
83%
73%
67%
76%
1.0
2.0
Gather and
Historical update
Sales data
vs. Prev. Sales
Plan
KPIs
Order Book
(Sales Backlog)
Add New
Customer Items
to R3
Competitive/M
arket
Intelligence
Upload Sales
History to APO
Global is More Than a Template
Guidance on
BU Priorities
Vetted Supply
Options
4.0
5.0
5
PreAlignment
Executive
Sign-off
Update
and Add
New
CVCs
Conduct
PreDemand
Reviews
3.0
Demand Planning
Review
Correct
Demand
Sales
Metrics
History
PreDemand
Changes
Complete
d
Generate
24 Month
Unconstrai
ned
Forecast
 Globalization is core to most growth strategies
 Templates are a good start, but not enough
 Global vs. regional vs. local, regional considerations to increase alignment
and engagement
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Validate
Changes
to Sales
Plan and
Update
Months 1
and 2
Stat
Forecast
Copied to
BW
Demand
Review
Approve
Unconstra
ined
Forecast
Make
Stat/Marke
t Intell
Forecast
Adjustme
nts
DP
Released
to CO for
Financial
Forecast
Upload/E
nter
Customer
Forecasts
Publish
Assumpti
ons,
Minutes,
Decisions,
and
Action
Items
Iteration
loop
Identify
Run
Supply
Heuristi
Imbalanc
cs for 24
es /
Month
Review
Supply
Supply
Plan
Publish
Alerts
Minutes,
Conduct
Decisions
Supply
, and
Review
Action
Items
Validate
Sales
Agent
Forecast
Make
Changes
to
Constrain
Final
Forecast
Review
Update
Refresh
Preferre
Adjust
&
Planning
Resource Supply Network
Inactive
Update
d
SNP
Confirm
Review
Capacitie
Version /
Network
Sources
Supply
Availabl
Supply
Planning
s&
Release
Source
Assigne
e
Metrics
Constrain
Assumpt
DP to
Changes
d to
Inventor
ts
ions
SNP
Demand
Summari
Finalize
y
Submit
Conduct
Publish
ze
Financial
Supply
Provide
Supply
Pre24 Month
Supply
Impact of
Options
Supply
Raw
Options
Supply
Option
Supply
&
Constrain
Material
to BU for
Review
Proposal
Options
Assumpt
ts to DP
Forecast
Approval
w/Plants
s
ions
Review
Summariz
Review
KPIs,
Publish
Review
Lock &
e top
Review
Supply
Revenue,
Minutes,
Supply
Deploy
Finalize 3issues/acti
Major
Options
Options to
S&OP
month
ons &
Cost
Decisions,
Business
Financial
Balance
Plans for
Sales Plan
decisions
Projections
and Action
Issues
Implicatio
Demand
Execution
expected
, & Gaps to
Items
ns
ESO
AOP
Review
Summarize
Communic
Review
Financial
Key
ate
Review
Review
Major
Review
Projections
Decisions
Decisions &
Business
Demand &
Supply
Capital &
vs. AOP &
& Top
Actions to
Strategy &
Supply
Chain Risks
Resource
Gap
Issues Still
Organizatio
Objectives
Plans
and Top
Requests
Closure
Outstandin
n
Issues
Measures
g
As companies look to expand S&OP globally, standardized process
templates can help efficiently establish a common understanding of
desired process. However differences exist in data, skills, and market
structure that can significantly impact planning capabilities regionally. So
companies should review go-to-market strategies and align their global
S&OP process with regional considerations to optimize business
capabilities and performance.
Stephen Crane/APICS-SV/November 19, 2015
Create
Statistical
Forecast
Software is Not a Silver Bullet
6
Companies continue to invest money, time, and resources into buying and
implementing software, typically ignoring segmentation, analytics, and skill
development critical to maximizing their return on these investments. To
generate real improvements in S&OP, companies should refocus their
efforts on building planning competencies and capabilities to ensure real
and sustainable benefits on investments.
 Use segmentation to apply software automation appropriately (ABC
Pareto)
 Remember, software does not solve business problems
 Focus on defining the questions that need to be answered first, then build
the capabilities to provide those answers
 Competency development starts with teaching people how to think,
followed by teaching them how to click – not the other way around
Stephen Crane/APICS-SV/November 19, 2015
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Key Takeaways
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Key Takeaways
 New dynamics are creating complexities that require enhanced integrated
planning capabilities to drive efficiency and effectiveness – people, process,
technology
 A renewed focus on Planning For Growth provides a platform for collaboration,
internally with Commercial Teams and externally with trading partners
 One size does not fit all – leverage segmentation to apply appropriate focus and
capability to specific situations
 Building an effective Planning organization requires development of portfolio and
planning competencies
 Executives have to lead the changes
Stephen Crane/APICS-SV/November 19, 2015
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Thank you!
Stephen P. Crane
Stephen Crane Consulting, LLC
Supply Chain Risk Consortium
cranesp1@gmail.com
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