866.P4D.INFO | Plan4Demand.com | Info@plan4demand.com An organization's ability to effectively plan for, manage & execute Innovation driven changes smoothly has a direct correlation to their maturity level. In order to gain the necessary visibility to the various sources of error, and truly harness the power of these unique planning challenges one must understand what role each plays, and the impact each of these has on the business. Considering that: o Innovation and Planning innately have conflicting priorities o Product Portfolios are evolving faster than ever before o SKU proliferation is a rapidly growing trend in ' organizations o Innovations account for the highest source of planning variability o NPI activities span horizontally across an organization intermingling a multitude of different roles & silos Portfolio changes, New Product Introductions, launch strategies & end of life transitions, for many account for the highest source of forecast inaccuracy. These innovation activities do not have to be a high pressure point for your organization. In today's volatile market, when it comes to the Supply Chain, You are only as strong as your weakest link. Check out this webinar on-demand at http://plan4demand.com/Video-Harnessing-Innovation-and-Its-Planning-Challenges

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S&OP LEADERSHIP EXCHANGE:
HARNESSING INNOVATION & ITS’ PLANNING CHALLENGES
The Web Event will begin
momentarily with your host:
Andrew McCall
May 23rd, 2012 plan4demand

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 Goals for the session
 Overview – Innovation & Planning: Conflicting Goals & Priorities?
 Planning for Innovation – Objectives, Goals, & Realities
 Typical Issues Encountered by the S&OP Process when these two converge
 Leveraging S&OP to Harness the Innovation Process and solve these issues
 Cross Functional Visibility
 Creating a Common Language
 Aligning & Harmonizing Goals
 Case Study: Using S&OP to drive the NPI/Stage Gate process & Shorten
Launch Cycles
 The Bottom Line
 Q&A/Closing

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 Create an Awareness of the importance of innovation in today’s business
and some of the issues and challenges this presents to our Business Planning
Process in the near and long term.
 Outline the different ways that S&OP and Innovation Management can not
only co-exist, but enhance both processes.
 Identify the Inputs and Outputs from each step in the S&OP that interact
with the Innovation engine of our business.
 Outline what you can do to tie these two processes together in your business
without re-inventing the wheel.

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 Oct 1995 – Apple stock price is at $5/share
 “Fall of an American Icon” - Business Week
 “Apple: A chaotic mess with no strategic vision, and certainly no future” – Time
Feb 1996
 “I’d shut it down and give the money back to the shareholders” – Micheal Dell
 “The cure for Apple is not cost cutting. The cure is for Apple to INNOVATE it’s
way out of its current predicament” – Steve Jobs, Returning as CEO in 1997
 Since 2003 – Apple has become the #1 Music Retailer, iPod dominates the
category
 2007 – Apple reinvents the Cell phone with the release of the iPhone
 2011-Q4 Global PC sharply negative (9%) – Apple Computer sales up 26%,
iPad sales up 111%
 Earlier this year, Apple posted a record quarterly revenue number of $46B
 Feb 2012 – Apple stock price tops $500/share – “Innovation has made Apple
the most valuable company in the world” – Forbes Magazine 2/16/2012

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 Innovation
 Speed
 Big Splash
 Initial Scarcity Drives Demand and “Buzz”
 “Let’s not let the details constrain our thinking”
 Planning
 Orderly
 Detail Oriented
 Accuracy
 Predictability
 Thoroughness

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What problem does your organization struggle with the
most that is being driven by Planning for Innovation?
 Structured Stage/Gate process that gives the organization the time and the
data it needs to smoothly transition new products into the portfolio?
 High levels of SLOB (Slow Moving & Obsolete product) as a result of
inaccuracy of initial volume projections or inventory transitions?
 Forecast accuracy issues surrounding innovation that creates production
volume issues (either too high or too low?)
 Missing Launch Dates?
 Master Data issues as a result of late or prolonged planning decisions?

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 Master Data
 Volume Projections Impacts
 Launch Strategy & Planning  Delays, Short Planning Windows
 Test & Repeat Processes, Study  High Resulting SLOB/Inventory Right Offs
Groups,
 Slow to Market/Expansion
 Treating all Innovation the
 Launch Bureaucracy
Same – Breakthrough, Disruptive,
Sustaining, Event Based  Unintended Consequences on other
Brands/Products
 Cannibalization
 Too Many New Products without subtractions
 Supersession Management
 SKU Rationalization/Proliferation

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• Launch Projections &
• Plan/Changes to Plan?
Assumptions
• Gap Closing?
• Volume
• Opportunity Deployment
• Cannibalization
• Financial Projections
• Brand Volume Plans
• Pricing Strategies
• Sales Planning
• Capacity Availability • Sales Volume Impact
• Production Readiness • Initial & Follow up
• Operational Standards Distribution Drives
• Raw Materials & Packaging • Demand Forecast
• Supplier Readiness • Customer Volume &
• Initial Quality Trials • Strategic Innovation & Pipeline Adoption Projections
Approval
• Communicating the Plan
• Stage Gate Integration
Leveraging Existing Activities in both processes

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Portfolio Review:
- Create Linkage from Stage/Gate
process into Portfolio Review
- Longer Range Visibility
- Size of Prize/Volume Inputs
- GTM Assumptions
- Link SKU Rationalization Process to
drive use up and end of life
Demand Review: processes to conclusion
- Take & act upon Innovation Data - Establish Feedback loop into both
from the Portfolio Review, Not both of these processes to output S&OP
sets of processes assumptions and decisions back to
- Volume Assumptions NPI and SKU/RAT teams.
- Geographic/Market Launch - Publish Innovation Funnel and
data & timing Stage/Gate status from one source
- Update forecasts based on in both processes
planning data from PR
- Normal pass of forecast and
innovation impacts down stream to
Supply

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 Establish & Maintain Separate Disciplines
 Harmonize & Leverage each process strengths & audiences
 Create Process checks that provide balance across both areas

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 Initial Situation:
 Beverage Company – 160MM Case Equivalents/Year
 New Product’s accounted for ~ 15MM cases a year – Predominantly Line Extensions, Packaging
Changes & Season/Promotional Packaing
 Usually a 5 month planning cycle including suppliers
 SKU proliferation – 40 SKU’s > 104 SKU’s in 3 years
 New Product Launch:
 New Brand into North American Market
 Initial Launch into Midwest Market (Test)
 Followed by Limited National Rollout (Repeat)
 Ran thru same processes as Line extensions
 12 Month Launch cycle

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 How did it go??
 Test – High Volume
 Repeat – SLOW compared to optimism created from Test Market
 Repeat/Rollout ended up with 5MM cases of write off (3% of total business!!)
 Too Much Product, Expiration Dates, Wrong Packages??
 What went wrong??
 Post – Mortem
 Test ran too short
 High Volume was determined from Channel positioning, not sales
 Stage/Gate Process was modeled on Line Extensions, had no “New Brand Launch” intelligence built
into the Volume projections
 Repeat went into market expansion too quickly
 Sales Planning & Execution did not have the time to get distribution right
 Market Expansion used assumptions from Test, not new assumptions
 Stage/Gate process did not get folded into planning and forecasting windows until last
minute, creating an “Inventory as the buffer” solution which backfired as product neared
expiration dates

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 Changing for the next time…
 Segmentation – Launch types  Next Launch: Post – Mortem
 Line Extension  Write Down reduced by 85%
 Seasonal/Event  Faster Ideation to Launch Time
 Net New Window
 Created Assumptions and Reporting Base  14 Months down to 8 Months
for each time  Sales Plan Error was cut in half on
 Timing New Product (49% to 24%)
 Approvals
 Data Reviews
 Linked Stage/Gate to Portfolio Review
 Gate Status Report
 Decision Summary
 Innovation Dashboard – R/Y/G on key planning inputs
 Linked Demand Review Forecast Assumptions back to
Stage/Gate Process
 Volume assumptions by Region fed back to Marketing/Innovation
 Supply Planning Inputs from DR also updated into Launch Team Process
 Closed Loop on everything

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 Set up these two critical business processes to feed each other – not to take
over one or the other.
 Establish closed loop feedback between the Stage/Gate or Innovation
process and the Portfolio Review – don’t allow this data to enter the
planning cycle everywhere. Make a single point of connection, single
moment of truth between the two processes, and then it run through the
cycle.
 Segmentation – Don’t try and fit everything into the same mold. Different
levels of rigor for different needs.
 Establish the “Owner” of Innovation in your company – make sure they are
tied into the Portfolio Review and Executive Review.

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June 27th September 12th
Global Rollouts – Balancing S&OP Technology – Matching
Standardization & Localization Capabilities with Maturity