Presentation given in Chicago at the S&OP IE event based on Supply Chain Insights Research. Tailored to consumer products audience.

1. Supply Chain Insights
What Does Good Look Like?
Supply
Chain
Insights

2. BRICKS Book
Publishes
Matter
in August
2012
The Role of Supply Chains
in Building Market-Driven
Differentiation
LORA M. CECERE
CHARLES W. CHASE JR.

4. S&OP Challenge
Supply Chain Insights, LLC © 2012, p. 4

5. Supply Chain Pain Points:
All vs. Largest
Supply Chain Insights, LLC © 2012, p. 5

6. IT Systems:
Quantity
Supply Chain Insights, LLC © 2012, p. 6

7. Is it any wonder…?
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8. Year-over-Year Growth
Years 1990-1994 1995-1999 2000-2004 2005-2009 2010-2012
RETAIL
17.05% 42.46% 12.89% 8.76% 5.15%
AVERAGE
CPG
2.12% 0.84% 3.91% 7.26% 2.32%
AVERAGE
FOOD CPG
3.68% 2.97% 8.13% 2.59% 4.27%
AVERAGE
BEVERAGE
CPG 12.87% 2.00% 9.59% 11.53% 4.92%
AVERAGE
Supply Chain Insights, LLC © 2012, p. 8

9. Supply Chain Insights, LLC © 2012, p. 9

10. My Bias
Supply Chain Insights, LLC © 2012, p. 10

11. What’s in
a name?
A rose by any other
name would smell as
sweet.
William Shakespeare
Supply Chain Insights, LLC © 2012, p. 11

12. What Is In A Name?
• Integrated business planning (IBP) refers to the technologies, applications and
processes of connecting the planning function across the enterprise to improve
organizational alignment and financial performance. IBP accurately represents a
holistic model of the company in order to link strategic planning, and operational
planning, with financial planning. By deploying a single model across the enterprise
and leveraging the organization’s information assets, corporate executives, business
unit heads and planning managers use IBP to evaluate plans and activities based on
the true economic impact of each consideration.
• Sales and operations planning (S&OP) is an integrated business management
process through which the executive/leadership team continually achieves focus,
alignment and synchronization among all functions of the organization. The S&OP
plan includes an updated sales plan, production plan, inventory plan, customer lead
time (backlog) plan, new product development plan, strategic initiative plan and
resulting financial plan. Plan frequency and planning horizon depend on the
specifics of the industry. Short product life cycles and high demand volatility
require a tighter S&OP planning as steadily consumed products. Done well, the
S&OP process also enables effective supply chain management.
Supply Chain Insights, LLC © 2012, p. 12

13. Agenda
What is the Goal?
How do we make
Decisions?
What do we Measure?
Supply Chain Insights, LLC © 2012, p. 13

14. Getting to Letter Perfect
Common Practice Market-driven Focus
Focus on market drivers:
S Ask sales
How do we best shape demand?
Design of the value chain to optimize
& Direct integration to supply trade-offs, minimize risk, balance
cycles, and orchestrate demand
Trade-offs between make, source and
OP Manufacturing plan
deliver
14
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15. S&OP Process
Existence, Goals & Processes
Supply Chain Insights, LLC © 2012, p. 15

16. S&OP Evolution
Greater Benefit
Business- • Growth
Sales Driven
planning Driven • Resilience
Match Demand
Maximize • Efficiency
with Supply
Profitability
Market Driven
Manufacturing- Demand Driven
Driven Maximize
Maximize
Opportunity and
Deliver a Feasible Opportunity
Mitigate Risk.
Plan for Operations Sense and
Orchestrate
Match Demand Shape
Demand
with Supply Source: Supply Chain Insights, LLC, 2012 Demand
Market to Market
Supply Chain Insights, LLC © 2012, p. 16

17. A Supply Chain is a Complex
System with Complex
Processes with Increasing
Complexity
Supply Chain Insights, LLC © 2012, p. 17

18. The Effective Frontier
Profitable Growth
Revenue Cost of Goods
Working Capital
Corporate Social Responsibility
R&D Strategy and Investment Asset Strategy and Investment
Forecast Accuracy Customer Service Inventory
Channel Strategy Product and Supplier Strategy
Service Portfolio
Sales Distribution Manufacturing Logistics Procurement
Policies Policies Policies Policies Policies
Returns Backorders First Pass Yield Empty Miles Material Yield
Source: Supply Chain Insights, LLC, 2012
Supply Chain Insights, LLC © 2012, p. 18

19. Value Network Strategy
Business Strategy
What are the right things to do to increase company value?
Value-network Supply Chain Strategy
What are the right ways to support the business strategy?
What are the right trade-offs between value drivers for each value network?
Align demand Right product Design the Build Align supply
Supply chain strategy
relationships platforms supply organizational relationships
response systems and
manage talent
Effective Supply
Demand Networks Design Networks Continuous Networks
Improvement
Joint Value Creation Innovation Supply Chain Execution of buy-
Strategies Methodologies Network Design Capabilities Required side strategies
Business Process
How do I do the right things right?
Source: Supply Chain Insights, LLC
Supply Chain Insights, LLC © 2012, p. 19

20. Center of Excellence
Importance vs. Performance
Supply Chain Insights, LLC © 2012, p. 20

21. Agenda
What is the Goal?
How do we make
Decisions?
What do we Measure?
Supply Chain Insights, LLC © 2012, p. 21

22. Typical Organization
CEO
Chief Customer
COO
Officer
Chief Marketing VP of Supply VP of
Sales CFO
Officer Chain Manufacturing
Customer
Account Teams Procurement Logistics CIO Quality
Service
Growth Volume Cost
Supply Chain Insights, LLC © 2012, p. 22

23. S&OP Process Operations
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24. An Athlete Needs:
Source: Supply Chain Insights, LLC
Supply Chain Insights, LLC © 2012, p. 24

25. Supply Chain Organization
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26. The Need for Balance
&
Goal
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27. S&OP Balance
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28. What is Agility?
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29. Agility Importance vs. Performance
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30. Agility Today vs. Past
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31. Agility Scenario Planning
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32. Agenda
What is the Goal?
How do we make
Decisions?
What do we Measure?
Supply Chain Insights, LLC © 2012, p. 32

33. Benefits Received from S&OP
Processes
▲ 2%
▲ 5-7%
▼ 10-15%
▲ 3-7%
▲ 3-6%
▼ 2-8%
▲ 3-6%
Supply Chain Insights, LLC © 2012, p. 33

34. Measure
• Forecast accuracy
• Inventory
• Customer Service
• Profit
• Revenue
Supply Chain Insights, LLC © 2012, p. 34

35. S&OP Process
Plan Execution
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36. Technology
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37. Comparison of Revenue/Employee
for the Period of 2000-2011
Comparison of Revenue/Employee for the Period of 2000-2011
P&G Colgate Unilever Kimberly-Clark Nestle Kraft
700
Revenue/Thousands of Employee
600
500
400
300
200
100
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Supply Chain Insights, LLC © 2012, p. 37

38. Comparison of EBIT/Employee for
the Period of 2000-2011
Comparison of EBIT/Employee for the Period of 2000-2011
P&G Colgate Unilever Kimberly-Clark Nestle Kraft
140.0
120.0
100.0
EBIT/Employee
80.0
60.0
40.0
20.0
0.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Supply Chain Insights, LLC © 2012, p. 38

39. Consumer Products:
Comparison of Days of Inventory
Consumer Products: Comparison of Days of Inventory
P&G Colgate Unilever Nestle Kraft
80
75
70
65
60
55
50
2002 2003 2004 2005 2006 2007 2008 2009 2010
Supply Chain Insights, LLC © 2012, p. 39

40. Consumer Products:
Cost of Sales as a Percentage of Revenue
Consumer Products: Cost of Sales as a Percentage of Revenue
Unilever Kellogg Kraft General Mills Campbell Hershey P&G
70%
Cost of Sales as a % of Revnue
65%
60%
55%
50%
45%
40%
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Supply Chain Insights, LLC © 2012, p. 40

41. Historically, we have…
• Tried to get precise on inaccurate data.
• Believed that the most efficient supply chain is
the most effective supply chain.
• Built efficient chains, but not effective networks.
• Focused inside-out, not outside-in.
• Rewarded the urgent, not the important.
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Supply Chain Insights, LLC © 2012, p. 41

42. Ask the Right Questions
• What is the goal?
• How do we make decisions?
• What do we measure?
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Supply Chain Insights, LLC © 2012, p. 42

43. Who is Lora?
• Founder of Supply Chain Insights
• Partner at Altimeter Group (leader in open
research)
• 7 years of Management Experience leading
Analyst Teams at Gartner and AMR Research
• 8 years Experience in Marketing and Selling
Supply Chain Software at Descartes Systems
Group and Manugistics (now JDA)
• 15 Years Leading teams in Manufacturing and
Distribution operations for Clorox, Kraft/General
Foods, Nestle/Dreyers Grand Ice Cream and
Procter & Gamble.
Supply Chain Insights, LLC © 2012, p. 43

44. Where do you find Lora?
Contact Information: loracecere@gmail.com
Blog: www.supplychainshaman.com
(3500 pageviews/month)
Twitter: lcecere 2900 followers. Rated as the
top rated supply chain social network user.
Linkedin: linkedin.com/pub/lora-
cecere/0/196/573 (2300 in the network)
Supply Chain Insights, LLC © 2012, p. 44