Integrated Business Planning. Robert Rossi May 2015

Transcription

1 Integrated Business Planning Robert Rossi May 2015

2 Introduction and objectives Introduction Agenda Page 2

3 IBP Why IBP What is IBP IBP process IBP governance and decision making Implementation approach and tools Industry perspectives and case studies Page 3

4 Supply chain volatility keeps increasing, making regular matching of planning and execution ever more important Mega trends impacting SC Increasing demand and supply volatility Margin pressure Ever shorter product lifecycles Increasing product complexity Longer lead times to supply Increasing distribution network complexity Channel convergence Compliance, green Outsourcing? Internal business challenges High inventories of slow movers Stock outs on fast movers NPI delays Obsolescence Low service levels Functional silos remain Strategic objectives not being reached Page 4

5 Uneven management attention also leads to a vertical disconnection between financial and operating plans Strategic planning Planning horizon Business planning Disconnect! Master planning Detailed scheduling and execution Level of detail Imposing revenue goals on mid-term planning without an appropriate decision-making process in-between will most often lead to infeasible operating plans. Page 5

6 Imagine a company competing in a rowing race yet the strokes are not synchronized Manufacturing: Sales are highly overstated, we will figure out what to decrease Marketing: There s a new promotion we need to do next week. Supply Planning We will need to rapidly expand our manufacturing capacity to achieve the plan Demand Planning: Our high forecast accuracy error is not my fault I just enter what sales tells me Customer Finance: Working capital is too high, we need to reduce inventory by 20% Sales: I will place multiple orders to make sure my customer does not get shorted. Logistics and Distribution: We will require excessive overtime and airfreight to accomplish what is being asked of us New Product Development: I can guarantee that this new product will fly off out of the warehouse once it is available Page 6

7 An IBP process and leader can help ensure the supply chain team is synchronized Mfg Finc Mkt Sales SP L&D DP NPD IBP Customer IBP provides the forum and measures to enable supply chain functions to all row in the same direction and cross the finish line each month. Page 7

8 Supply chain volatility keeps increasing, making regular matching of planning and execution ever more important Mega trends impacting SC Increasing demand and supply volatility Margin pressure Ever shorter product lifecycles Increasing product complexity Longer lead times to supply Increasing distribution network complexity Channel convergence Compliance, green Outsourcing IBP Internal business challenges High inventories of slow movers Stock outs on fast movers NPI delays Obsolescence Low service levels Functional silos remain Strategic objectives not being reached Page 8

9 IBP Why IBP What is IBP IBP process IBP governance and decision making Implementation approach and tools Industry perspectives and case studies Page 9

10 Industry Definitions 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 financial analysis in relation to the business goals and strategy. - Aberdeen Group 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. - AMR Research Page 10

11 What is IBP Customer collaboration The process that links sales and operations efforts to financial objectives One number lies at the heart of the business Demand Supply NPD Demand portfolio Supplier collaboration Financial (BPM) Finance The three business functions are inter-dependent, to deliver the strategy we must ensure our processes are truly integrated to achieve the One Number Page 11

12 IBP framework Customer collaboration Demand plan adjustments Demand requirements Supply and capacity plan Supply requirements Supplier collaboration Strategy Strategic direction Intelligence Demand planning MBR Supply planning NPI management Sales/account planning Integration Reconciliation Materials planning Production planning Promotions management Forecasting Demand Supply Transport planning Inventory planning Budget Finance Amendments to budget Page 12

13 A good process creates accountability and focuses on results, calls for action and provides metrics What it is NOT Only two more meetings per month Only corporate based A decision of the same problem over and over again What it is A continuous process Multi-functional with the participation of top management Focused on performance Only resolving today s problems or the operations of the next months (short term approach) Focus on planning the next months Focused on SKU level daily execution It disappears after a few months Focused on the alignment of strategic planning and execution at product family/group level A continuous improvement process The process is a forum for the evaluation of problems, decision making and taking action Page 13

14 How IBP has been evolving What is the difference between S&OP and IBP? Greater financial integration Inclusion of strategic initiatives and activities Improved simulation and modelling Easier translation between detail and aggregate Improved decision-making S&OP (Sales Operations Planning) SIOP (Sales Inventory and Operations Planning) IBP (Integrated Business Planning) Improved trust within the management team Reference: Oliver Wight ( Page 14

15 Key objectives of IBP Visibility Support for decision making Tracking of execution Value Chain Management and information processing: Demand Forecast Sales Planning Operations Planning Analysis of fulfillment alternatives considering: Business stragegy Resources and constraints Financial results Fulfillment scenarios preparation for decision making support S&OP meetings with attendance of all operations involved functional areas Monitoring of execution adherence in relation to plans Value Chain performance analysis (KPIs) Page 15

16 IBP is critical to operationalize your business strategy and plan in a collaborative manner IBP Before Dark Line After Yellow Line Demand Signal Volatility Value Chain Page 16

17 Key benefits Non-financial Page 17 Decision making process consolidation in relation to tactical operations planning Better understanding and visibility of operations and among functional areas and their interfaces Better communication among functional areas Learning for people related to tactical and operational management Better information quality for decision making Better integration of business core process such as new products introduction, inventory management, distribution and other Value chain management process formalization Better roles and responsibilities alignment among people related to operations Better customer orders fulfillment

18 Key benefits Financial Profitability Value elements Revenue Costs 2-8 % revenue 2-10% SC costs Levers Improve forecast accuracy Align demand and supply and monitor vs. AOP. Improve activity planning (promos, innovation etc.) Stabilize plans to reduce rush orders Optimise distribution, channel allocation and transport though more accurate and stable planning. Improve collaboration and planning accuracy with suppliers Supply chain impacts Increase product availability Improve customer service level Decrease customer lead time Optimize product mix in market Lower distribution & warehouse costs Improved productivity through plan stability Reduce raw material plan variability and material costs Invested Capital Working Capital Fixed Capital 10-30% inventory 5-15% assets Increase visibility in the end-to-end supply chain. Review inventories in line with demand projections. Actively monitor and address SLOBs More stable plan for current and future investment in capacity & assets Align supply resources based to an agreed plan Increase inventory turns Reduce customer lead-times Reduced slow moving and obsolete inventory Optimized network & assets that reflect demand not to absorb volatility (e.g. production facilities, distribution centers etc.) Increase asset utilization of assets Note: the % change is indicative and can very Page 18

19 IBP Why IBP What is IBP IBP process IBP governance and decision making Implementation approach and tools Industry perspectives and case studies Page 19

20 How IBP fits into enterprise planning framework Integrated enterprise planning framework Corporate strategy Business planning Financial planning Integrated Business Planning Logistics planning Supply chain execution IBP Sits at the center of the integrated enterprise planning functional framework Serves to integrate all aspects of demand and supply management to financial and business planning Page 20

21 Decision making horizons T=0 Operationally constrained rolling horizon 0-3 months (short term planning) Order acceptance/ prioritisation Transport expediting Overtime 3-12 months months (and beyond) Product Campaigns (actual vs. forecasts) Capacity constraints Visibility Review Tactical unconstrained rolling horizon 3 Mths 12 Mths Planning decision lead times Inventory holding decisions Sourcing changes (locally) Shutdowns and maintenance 18 Mths Strategic planning rolling horizon Performance vs. Budget Changes to market offer New product introduction Personnel Restructuring Capital investment Global sourcing Import/Export/Registration decisions 24 Mths Page 21

22 IBP process Five planning steps 5. Management Business Review Final financial, demand and supply plans Profitable scenarios built-up 4. Integration Reconciliation Supply Consensus 3. Supply review Continuous plan and execution review. Measure and act on deviations. 1. Portfolio management review 2. Demand review Demand Consensus NPI and EOL product pipeline Page 22

23 IBP process A calendar view Week 1 Week 2 Week 3 Week 4 1 Portfolio Management Review Output: Decisions on NPI/EOL, portfolio, SKU Projects Volumes Resources Constraints 2 Demand Review Output: Signed off demand plan Volumes Assumptions Gaps R&O 3 Output: Supply Review Signed off supply plan Capacities Inventory Constraints Outsourcing 4 Integration Reconciliation Output: Agreed constrained plan 5 Output: MBR Agreed gap closing actions Financial forecast Meeting Owner: Customer Marketing Director Meeting Owner: Sales Director Meeting Owner: Supply Chain Director Meeting Owner: Country Director Meeting Owner: GM Page 23

24 IBP calendar An illustrative example Illustrative Key for Meetings Activity Review or Portfolio Management Review Demand Review Supply Review Integration/Reconciliation Consensus Review BPM R&O sign off Key for Forecast Submissions Pre- Demand Review unconstrained forecast submission Post- Demand Review unconstrained forecast submission Rough Cut Capacity Plan (RCCP) submission Final country constrained forecast submission Global R&O finance submission Page 24

25 1. Portfolio management review This first step is all about evaluating the product portfolio. Is the portfolio in line with the strategic objective? Are new products in development? Any significant delays in our new product introduction plans Which marketing campaigns are lined up? Is the NPI pipeline sufficient to reach out strategic objectives Which products can be phased out Goal of the portfolio review meeting is to collect all relevant product information that might positively or negatively impact mid term demand. Page 25

26 Portfolio management review Key takeaways Purpose Discussion topics Innovations/renovations review Promotions review Distribution points review Performance review Issue management Project prioritization Trends and insights Review and align month rolling innovation pipeline, renovation and product portfolio Proactively manage and optimise month rolling activity plans behind innovations/renovations, promotions and distribution changes Who needs to be there? Customer Marketing Director* Commercial Planning & Activation/Customer Marketing Manager Innovation Marketing Manager Brand Manager Demand Planning Manager Supply Innovation Manager Meeting Owner: Customer Marketing Director* Outputs Key takeaways.. 1. Re-aligned activity plan 2. Visibility of longer term R&O s 3. Agreed contingency plan 4. Action list of unresolved issues to be escalated Page 26

27 2. Demand review A typical demand planning process gathers all available information to create the best possible forecast 1 Historical data Demand planner Optional: Promotions Phase in/phase out Cannibalization Causal factor 4 6 Forecast review Sales area manager Key account manager Demand review meeting Demand planer Sales and marketing Statistical forecast Review and Enrichment of Forecast Consolidation Demand planner Demand planner Demand planner Goal of the demand review meeting is to create an agreed upon consensus plan that includes all available information. Consensus plan Page 27

28 Demand review Key takeaways Purpose Sign-off the unbiased, accurate, unconstrained month rolling volume forecast Proactively identify R&O vs AOP gaps and propose gap filling actions Discussion topics Business context Forecast performance Demand plan projections Challenge of assumptions Volume-Value cash up Who needs to be there? Sales Director Supply Chain Director Commercial Planning & Activation/Customer Marketing Manager Demand Planning Manager Brand Manager Key Account/Channel Managers Outputs Key takeaways.. 1. Aligned month unconstrained rolling forecast 2. Visibility of month R&Os 3. Issues/options for escalation to Consensus Review 4. Agreed SFA improvement plan 6 Risks & opportunities Commercial Finance Manager Meeting Owner: Sales Director Page 28

29 3. Supply review Supply planning is done based on the consensus demand plan and provides the input for the supply review meeting. Identification of possible supply chain bottlenecks: Available capacity Available material Cycle times Dependencies between the different production and distribution levels Supply review Decisions in bottleneck situations Supply plan candidates Procurement alternatives Make-or-buy strategy Simultaneous planning of various decisions to solve bottlenecks Inventory planning Alternative production sites Capacity enlargement Goal of the supply review meeting is to align the supply network with the consensus plan, together with customer service targets, lead times, supply cost and target inventory levels. Page 29

30 Supply review Key takeaways Purpose Discussion topics Business context Performance review Demand signal changes Supply plan & inventory review Supply constraints mitigation proposal Risks & opportunities Align month rolling cost optimum supply promise Identify short and long-term supply constraints and propose mitigaton options Confirm supply promise to the identified R&Os Who needs to be there? Supply Chain Director Supply Chain Manager Local Plant Manager Imported Products Planning Manager Supply Chain Finance Supply Planner Meeting Owner: Supply Chain Director Outputs Key takeaways.. 1. Aligned month rolling supply promise 2. Proposal for supply constraints and R&Os 3. Agreed KPI improvement plan 4. Agreed SLOBS and inventory actions Page 30

31 4. Integration reconciliation Review of last month results leads to constant process improvement: Did we sell what we said we would sell? Did we make what we said we would make? Did we use the key resources according to plan? Comparison of current consensus demand plan, constraint supply plan and financial budget, projected revenue, profitability and working capital per scenarios Decision support through carving out of possible alternative demand and supply plans and evaluation of their risks, opportunities and financial impact Matching of the alternatives with the targets derived from strategic business goals etc.. Alternative 2: Alternative No Promotion 2: Service No Promotion level for Prio 1 Customers Service level remains for etc.. Prio 1 Customers remains etc.? Goal of Integration Reconciliation meeting is to agree on demand and supply plan alternatives with validated financial impact etc.. Alternative 2: Alternative No Promotion 1: Service Promotion level for 4711 Prio 1 Customers Moderate remains drop of etc.. service level for Prio 1 customers etc. Page 31

32 5. Management business review Discussion of the risks and opportunities of the recommended S&OP alternative and approval or rejection. Focus on critical issues and decision making If needed review of the goals and objectives and setting new ones. Alternative 2: No Promotion Service level for Prio 1 Customers remains etc.! Alternative 1: Promotion 4711 Moderate drop of service level for Prio I customers etc. Goal of the MBR Meeting is to agree on one integrated master plan for sales, sourcing, manufacturing, warehousing, transportation and financial Page 32

33 Some Key metrics for the process S&OP Phase Description Key metrics Product review Implementation of new products, major offers and activities, formulations, packaging changes, product harmonization, etc. Product launch date vs. plan Slow moving and obsolete (SLOB) inventory levels, portfolio optimization measures Portfolio management measures (new product volume, turns, profitability) Promotions effectiveness (incremental sales versus promotions cost) R&D expenditure versus plan Demand review Determination of total, unconstrained product demand Forecast accuracy and bias with several lags (e.g., 6 month, 2 month, 1 month) Customer service levels (on time and in full) Slow moving and obsolete (SLOB) inventory levels Inventory turns Promotions effectiveness (incremental sales versus promotions cost) Supply review Assessment and development of a plan to satisfy demand for both existing and new products and services also development of a total cost forecast Customer service levels (on time and in full) Cost to serve all in supply costs Expedited freight expense, manufacturing, logistics and distribution costs versus plan Slow moving and obsolete (SLOB) inventory levels Rough cut capacity plan gaps and opportunities Integration reconciliation Reconcile supply with demand and reconcile demand plan with financial plans, goals and targets Revenue versus plan Margin versus plan Profit versus plan Inventory turns Capacity gaps and opportunities first pass resolution plan MBR Review business performance, assess strategic issues and opportunities; make decisions Inventory turns and working capital measures Customer service levels (on time and in full) Capital expenditures versus capital plan Market share Return on investment Page 33

34 IBP Why IBP What is IBP IBP process IBP governance and decision making Implementation approach and tools Industry perspectives and case studies Page 34

35 Organization typically consists of at least 2 leaders and 2 analysts Demand Analyst IBP Organizational Structure IBP Champion IBP Manager Supply Analyst Description Management level, who conducts the demand planning meetings, reviews the supply chain, Integration Reconciliation and MBR. Co-leader of the sessions and ensures that all the information is obtained by the demand and supply analysts. Responsible for gathering the information necessary for each of the meetings and follow up on issues and resolutions arising from the meetings Page 35

36 Decision making steps Issue review and resolution tactics used in developing, communicating and reviewing supply and demand alternatives with associated risks and business impacts, as well as the capture and recording of decisions made Action planning tactics used in deciding who is going to do what and by when and in what order in accordance with the decisions resulting from issue review and resolution What are the common challenges related to Governance and Decision Making? Page 36

37 Recap of the process Characteristics Typically good Typically poor Frequency Monthly Weekly or quarterly Horizon 24+ month rolling 3 to 12 months or less as year progresses Focus Month 4 and beyond New few months Language Segments (product and market) Families SKU and detail Involvement Executive and middle management Middle management Outcome Gap closing strategies Production Output Decisions Tactical and strategic Tactical and short term Process Connects to business plan and strategy as well as master plan by volume and value with well documented assumptions Meeting to review numbers, no documented assumptions, little business alignment and no value. Page 37

38 Critical success factors, all components are important People Periodic meetings with a clear ownership and a structured Meeting Agenda Cross functional participation leading to a consensus overall plan (one number truth) Clear Roles and Responsibilities for the Process. Have a motivated team The S&OP process facilitates cross functional learning Process Rolling horizon m Good preparation upfront: Demand Review: Unconstrained plan incl. future demand impact like promos and new product introductions. Supply Review: plan incl. all future supply capacity and limitations like downtimes Systems Performance Proper tools for demand planning and supply planning, what-if scenarios, etc. Planning and transactional data in one robust reporting system For globally operating companies: must support fast consolidation and disaggregation of global demand and supply master data (also across multiple ERP instances in many cases) Define a balanced set of performance indicators, allowing to closely follow the execution of the business and Supply Chain strategies Regular monitoring and revision Measurement of performance against the plan and remember IBP is all about trade offs. Decide together on what is best for business! Page 38

39 IBP Why IBP What is IBP IBP process IBP governance and decision making Implementation approach and tools Industry perspectives and case studies Page 39

40 Defining vision and strategy to drive the process Understanding & Designing Business Models Aligning Value Chains trade-offs Really understanding clients Customer Intimacy Product Leadership Operational Excellence Page 40

41 Future state design principles are leading practices that drive improvements in operations EY perspective on today s client realities... Increasingly demanding consumers and customers High supply chain volatility Shortened product life-cycles Inability to forecast accurately Excessive inventory (high turns) Build-up of slow-moving and obsolete inventory Poor customer service, high level of back-orders Multiple, uncoordinated plans Financial Operational Inventory Lack of common metrics (balanced scorecard) Lack of common metrics (e.g., balanced scorecard) The future state will rely on... Collaborative, cross functional, monthly process Incorporates internal and external inputs Single, consensus operating plan Clearly defined forecasting process and tools Use of statistical forecasting Incorporation of demand exceptions Use of forecast accuracy measures Balancing of critical resources People Capacity Working capital Ability to prioritize opportunities Focus on data-driven, proactive behavior Common metrics with use of consistent processes and tools Aligned goals and incentives across the organization Forward-looking, three-to-24 months out Not focused on fighting today s fires Page 41 A new approach using the IBP framework and principles will improve operational performance

42 The future state design leverages elements of leading programs IBP programs adopted by leading companies Counsel based programs led by full time IB&OP leader High degree of executive involvement Fully integrates demand & supply planning, replenishment processing, financial planning (revenue, margin, variable costs), marketing (pricing & promotions), strategic planning, budgetary processes and R&D Product lifecycle management (NPD/EOL) activities are an integral component of the IB&OP process Focus is a 12 month planning horizon (high growth business, alignment with traditional S&OP cycles) plus an executive component that will focus on a long range plan three to five years out Technology advancements have led to an increase in data usage to support the planning process Recent push for CPFR (collaborative planning, forecasting, and replenishment) programs with external trading partners Elements of leading IBP programs Leading companies have implemented IBP as a strategic imperative to manage their business operations and to help shape their longer term strategic direction Monthly cycles setup for planning with clear visibility of all variables Multi-level statistical forecasting. Supports seasonality and external conditions Forecast accuracy is measured at all levels Trade promotions planning tightly coupled with supply planning KPI driven processes Bottoms up planning approach Planning processes aligned with strategic working capital management Program that is easily scalable to support geographic and product portfolio expansion IB&OP technology is fully integrated with existing ERP systems Single source of truth one holistic operating plan Page 42

43 Our experience shows that this is a marathon and not a sprint. Teaching clients to walk before they can run IBP Limited integration between departments and cross company measurements Increased visibility across the end to end S&OP process Formal, robust fully integrated formal process with KPI management Business is focused on one number Demand Management Limited demand forecasting processes, no statistical modeling, Statistical modeling used for forecasting Sales & marketing input incorporated at regular points Full visibility to forecast and demand across the supply chain Supply Management Short term focused Limited visibility to future capacity needs Greater demand visibility and discussion of product development and promotional activity Full collaboration across functional areas Full visibility to demand product development and promotional activity Financial Integration Supply chain staff have a limited understanding of the distinctions between operational and financial projections Limited or inconsistent visibility into forecast assumptions and drivers Supply chain staff understand operational and financial projections and can quickly identify differences gaps and their potential impacts The definition of best in class varies by industry.. Many companies today A more competitive position Best in Class Page 43

44 IBP Why IBP What is IBP IBP process IBP governance and decision making Implementation approach and tools Industry perspectives and case studies Page 44

45 Industry Perspectives and Case Studies Discussed at conference Page 45

46 Thank you Page 46

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