Presentation given at the S&OP Best of the Best Conference on the role of finance in S&OP/IBP

1. The RoleMasterFinance
Click to edit
of title style

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

3. What’s in
a name?
A rose by any other
name would smell as
sweet.
William Shakespeare
3

4. 4

5. Agenda
• Current State
• Alignment and Measurement
• Process Maturity
• Agility
• Governance
• Wrap-up
5

6. S&OP Challenge

7. Impact of Supply Chain Challenges
(among those without S&OP Experience)

8. Agenda
• Current State
• Alignment and Measurement
• Process Maturity
• Agility
• Governance
• Wrap-up
8

9. Typical Organization

10. A Supply Chain
is a Complex System
with Complex Processes
with Increasing Complexity

11. Looking at Supply Chain
as a Complex System
Profitable Growth
Revenue Cost of Goods
Corporate
Trade-offs Working Capital
Corporate Social Responsibility
Investment
Trade-offs R&D Strategy and Investment Asset Strategy and Investment
Forecast Accuracy Customer Service Inventory
Supply Chain
Trade-offs Channel Strategy Product and Supplier Strategy
Service Portfolio
Sales Distribution Manufacturing Logistics Procurement
Supply Chain Policies Policies Policies Policies Policies
Waste
Returns Backorders First Pass Yield Empty Miles Material Yield

12. Useful Ratios
Growth Profitability Cycle Complexity
R&D Margin Cash on Hand C2C Cycle Altman Z
R&D to COGS Ratio Free Cash Flow Ratio Days of Finished Goods Capital Turnover
SGA Margin Gross Margin Days of Inventory Current Ratio
Days of Payables
SGA/COGS Net Profit Quick Ratio
Outstanding
COGS as Percent of Net
Operating Margin Days of Raw Materials Return on Assets
Sales
Days of Sales
Pretax Margin (EBIT) Return on Equity
Outstanding
Days of Work in Return on Invested
YoY Sales Growth
Progress Capital
Operating Margin DPO/DSO Return on Net Assets
Inventory Turns Revenue/Employee
Receivables Turns Cost of Sales

13. Evolution of Supply Chain Process Excellence
Continuous
Testing
Align Building Horizontal
Process Connectors Learning Orchestrate
Demand and Supply
Improving
In Market
Adapt
Resilient
Reliable
Right Product Efficient
Sense Demand
Demand Volatility
and Supply Right Place Cost
Shape Right Time
Procure to
Demand and Supply pay/order to
Supply based Volatility cash
on Market Right Cost

14. Supply Chain Excellence Definition
Most Mature

15. Agenda
• Current State
• Alignment and Measurement
• Process Maturity
• Agility
• Wrap-up
15

16. Developing the Supply Chain Strategy
Business Process
How do I do the right things right?

17. Rethinking Planning
Strategic
Network Design
Planning
Product Product Platforms
Planning New Product Launch
Tactical
Planning: Sales and Operations
Revenue Management Supplier Development
Horizontal Planning
Processes
Tactical
Planning: Sales Global Demand Tactical Supply Procurement
Vertical Forecasting Planning Planning Planning
Processes
Material
Distribution
Requirements
Regional Regional Requirements
Operational Manufacturing
Sales Demand
Planning Planning Contract
Execution Planning Transportation
Manufacturing
Requirements
Planning

18. Scenario Planning

19. What-if Analysis

20. 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
20

21. 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 Demand
Market to Market

22. Technology

23. Modeling Challenges
• Volume to mix to revenue/profitability
• Equivalent units
• Reward systems
• Alignment on “What good looks like”

24. S&OP Process
Plan Execution

25. Agenda
• Current State
• Alignment and Measurement
• Process Maturity
• Agility
• Governance
• Wrap-up
25

26. An Athlete Needs:

27. What is Agility?

28. S&OP Balance

29. The Need for Balance

30. Agility Importance vs. Performance

31. Agenda
• Current State
• Alignment and Measurement
• Process Maturity
• Agility
• Governance
• Wrap-up
31

32. S&OP Process
Existence, Goals & Processes

33. Supply Chain Organization

34. Multiple S&OP Processes
Regional
S&OP
Processes
Executive
S&OP Supply Chain
S&OP
Planning
Processes
Processes
With Key
with Key
Customers
Suppliers

35. Supply Chain Center of Excellence
(among those with S&OP Experience)

36. Center of Excellence
Importance vs. Performance

37. S&OP Process Operations
(among those with S&OP Experience)

38. Integration of S&OP with Financial Planning
(among those with S&OP Experience)

39. 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.
39

40. Wrap-up
• Start with strategy and a clear definition of
supply chain excellence
• Build metrics to drive balance in a complex
system
• Improve agility through “what-if” capability
• Focus on a multi-year road map
• Fuel the energy through a guiding coalition
and continuous improvement initiatives