Integrated Business Planning (IBP): A Tale of Two Perspectives

2. Spinnaker Proprietary & Confidential 2014 All Rights Reserved 1 Founded in 2002 as a Supply Chain Planning consulting firm, Spinnaker Management Group has become a holding company for several brands. 350+ resources 200+ clients globally Spinnaker Overview ERP & CRM Maintenance HQ Denver Supply Chain Services HQ Houston Technology Staffing Services HQ Pittsburgh

3. Spinnaker Proprietary & Confidential 2014 All Rights Reserved 2 Introductions David Foster Senior Manager • An SAP-focused supply chain functional consultant with over 25 years of industry and IT experience • Experience with hands-on cross module requirement analysis, design/development, configuration • Implementation experience in SAP IBP/S&OP,APO DP/SNP/PPDS/TPVS/Alert Monitor, and ECC/MM/PP as well as SAP/BW Jay Nearnberg Senior Manager • A supply chain professional with over 30 years of industry and consulting experience • Experience driving supply chain transformations/improvements, including organizational development, process reengineering, and systems implementation • Specialty in S&OP, planning, logistics, metrics, and inventory management

4. Spinnaker Proprietary & Confidential 2014 All Rights Reserved 33 Goals ForThe Session 1. Clarify understanding of what Integrated Business Planning (IBP) is, both from a process and from a technology point view 2. Share Spinnaker’s Point Of View on IBP – Typical performance gaps and what’s behind them – Our framework for IBP and its role in improving performance 3. Review Integrated Business Planning from SAP – Advanced Planning tools and IBP – How do they work together? – What is SAP’s IBP suite? – Where do you start? 4. Describe Spinnaker services that help our clients achieve successful IBP implementations

5. Spinnaker Proprietary & Confidential 2014 All Rights Reserved 44 Integrated Business Planning (IBP) – One Acronym,Two Definitions Process-Focused Definition: IBP is typically used to refer to highly mature (Stage 3-4) Sales & Operations Planning (S&OP) processes.At this point companies effectively synchronize the overall company and extended planning process intended to align financial, supply chain, and go-to-market business decisions. SAP’s Software Definition: SAP Integrated Business Planning is a suite of planning applications focused on S&OP, Demand, Supply, and Inventory Planning that provides essential technology support for achieving advanced IBP capabilities. S&OP/IBP Maturity Model STAGE 1 REACTING STAGE 2 ANTICIPATING STAGE 3 COLLABORATING STAGE 4 ORCHESTRATING Development of an operational plan Demand and supply matching Internal cross- functional collaboration and profitability focus Extended supply chain collaboration and financial optimization S&OP/IBP Strategy Goals

6. Spinnaker Proprietary & Confidential 2014 All Rights Reserved 55  Customer service levels are unacceptable – deliveries take too long or are incomplete, promise dates constantly slip, and information is inaccurate  Sales falling short of plan, with repeated cycles of finger pointing over who’s responsible for the gap and lots of wasted effort on fire drills  Mismatch of supply and demand cause shortages of some products while others are “pushed” at quarter end to make the number  Sales, Marketing, Finance and Supply Chain functions seem to be operating to different numbers “We spend a lot of time reconciling different views of what ‘demand’ will be”  New product rollouts never seem to be able to launch and ramp with predictability  We keep creating excess / obsolete inventory across the network while simultaneously experiencing shortages  “Our Excel-based process won’t scale, doesn’t align with real world demand or supply, and doesn’t allow us to evaluate alternatives” Typical Business Performance Gaps Driving S&OP/IBP Implementations

7. Spinnaker Proprietary & Confidential 2014 All Rights Reserved 66 Understanding the Root Causes of Performance Gaps  Lack of accurate sales input to demand and supply planning  Poor recognition of marketing intelligence and sales  Missed sales opportunities  Excess inventory required to cover lack of visibility (volatility) to near-term demand  Poor service and “whipsaw” responses to shortages  “Blanket” or “rule of thumb” inventory levels leave many items with excesses or shortages  Simultaneous service issues and excess inventory  Excel falls short of S&OP process requirements  Existing planning tools aren’t designed for flexible scenario analysis Performance Gaps  Ineffective collaboration processes and tools lead to consistent capture of actionable sales intelligence and disorganized demand planning & consensus  Highly manual and disconnected planning processes (e.g., financial targets not aligned with supply chain)  Poor policy alignment across inventory goals, financial objectives, and customer service targets  “Top-down” forecast mandates with consequent amplification of error vs. true demand  Lack of analytical capabilities supporting the demand planning process  Lack of analysis and reporting tools to support the business requirements  Lack of training and resources to effectively maintain models and data Root Cause  Low forecast accuracy at multiple levels  Lack of confidence in forecast by supply planners leads to discounting / ignoring of forecasts in favor of history

8. Spinnaker Proprietary & Confidential 2014 All Rights Reserved 77 • What is the biggest challenge preventing your organization from achieving advanced IBP performance? – Disconnected planning processes – Ineffective collaboration processes and tools – Poor policy alignment – Lack of analytical capabilities and reporting tools – Lack of training Flash Poll

9. Spinnaker Proprietary & Confidential 2014 All Rights Reserved 88 • Spinnaker bases our IBP designs on a proven best-practices framework that separates IBP activities into Demand, Supply, and IBP processes • This framework outlines an integrated Demand, Supply, and IBP process. Spinnaker’s Structured S&OP Approach S&OP CycleSUPPLYDEMAND Consensus Demand Planning Closed-Loop S&OP Financial Analysis Executive Review Demand- Supply Balancing Forecasting Analytics Consensus Demand Independent Forecasting & Customer Collaboration Constrained Supply Planning Inventory Planning Supplier Collaboration & Commits Supply Response Financial Plan Scenario Analysis Spinnaker’s IBP Process Framework

10. Spinnaker Proprietary & Confidential 2014 All Rights Reserved 99 Spinnaker’s Structured S&OP Approach S&OP CycleSUPPLYDEMAND Consensus Demand Planning Demand- Supply Balancing Constrained Supply Planning Spinnaker’s IBP Process Framework • Spinnaker bases our IBP designs on a proven best-practices framework that separates IBP activities into Demand, Supply, and IBP processes • This framework outlines an integrated Demand, Supply, and IBP process.

11. Spinnaker Proprietary & Confidential 2014 All Rights Reserved 1010 Spinnaker’s Structured S&OP Approach S&OP CycleSUPPLYDEMAND Consensus Demand Planning Closed-Loop S&OP Executive Review Demand- Supply Balancing Consensus Demand Constrained Supply Planning Supply Response Spinnaker’s IBP Process Framework Financial Plan • Spinnaker bases our IBP designs on a proven best-practices framework that separates IBP activities into Demand, Supply, and IBP processes • This framework outlines an integrated Demand, Supply, and IBP process.

12. Spinnaker Proprietary & Confidential 2014 All Rights Reserved 1111 Spinnaker’s Structured S&OP Approach S&OP CycleSUPPLYDEMAND Consensus Demand Planning Closed-Loop S&OP Executive Review Demand- Supply Balancing Forecasting Analytics Consensus Demand Constrained Supply Planning Inventory Planning Supply Response Financial Plan Spinnaker’s IBP Process Framework • Spinnaker bases our IBP designs on a proven best-practices framework that separates IBP activities into Demand, Supply, and IBP processes • This framework outlines an integrated Demand, Supply, and IBP process.

13. Spinnaker Proprietary & Confidential 2014 All Rights Reserved 1212 Spinnaker’s Structured S&OP Approach S&OP CycleSUPPLYDEMAND Consensus Demand Planning Closed-Loop S&OP Executive Review Demand- Supply Balancing Forecasting Analytics Consensus Demand Independent Forecasting & Customer Collaboration Constrained Supply Planning Inventory Planning Supplier Collaboration & Commits Supply Response Financial Plan Spinnaker’s IBP Process Framework • Spinnaker bases our IBP designs on a proven best-practices framework that separates IBP activities into Demand, Supply, and IBP processes • This framework outlines an integrated Demand, Supply, and IBP process.

14. Spinnaker Proprietary & Confidential 2014 All Rights Reserved 1313 Spinnaker’s Structured S&OP Approach S&OP CycleSUPPLYDEMAND Consensus Demand Planning Closed-Loop S&OP Financial Analysis Executive Review Demand- Supply Balancing Forecasting Analytics Consensus Demand Independent Forecasting & Customer Collaboration Constrained Supply Planning Inventory Planning Supplier Collaboration & Commits Supply Response Financial Plan Scenario Analysis Spinnaker’s IBP Process Framework • Spinnaker bases our IBP designs on a proven best-practices framework that separates IBP activities into Demand, Supply, and IBP processes • This framework outlines an integrated Demand, Supply, and IBP process.

15. Spinnaker Proprietary & Confidential 2014 All Rights Reserved 1414 Spinnaker’s Structured S&OP Approach S&OP CycleSUPPLYDEMAND Consensus Demand Planning Closed-Loop S&OP Financial Analysis Executive Review Demand- Supply Balancing Forecasting Analytics Consensus Demand Independent Forecasting & Customer Collaboration Constrained Supply Planning Inventory Planning Supplier Collaboration & Commits Supply Response Financial Plan Scenario Analysis Spinnaker’s IBP Process Framework Requires Critical Foundations 9

16. Spinnaker Proprietary & Confidential 2014 All Rights Reserved 1515 Successful adoption of IBP needs discipline, simplicity and persistence Measure: You need metrics of both IBP adoption success and metrics of supply chain performance which frame the decision making in IBP. High quality team members: Ensure project resources are the best in their area, can perform as change agents, help build consensus, collaborate and are prepared to lead new processes. “Mastery” of master data: Decision-support tools rely on ERP/ transaction systems for data. Don’t ignore, underestimate, or fail to address gaps in the quality, completeness, and governance of your data assets. Do what drives value: Guard against “over-engineering” both process and technology.The IBP process is meant to be agile, not bureaucratic. IBP tools need to evolve at the pace of demonstrated utility and applicability. Tailored to essentials:Implement S&OP/IBP so it addresses your company’s key decision horizons and frequency – not the textbook’s. Build on the basics: IBP complements core demand and supply planning processes, it does not replace them. Be sure that what you’re pushing into IBP isn’t a response to gaps in other core processes. Executive support: Organizations often struggle with new processes, requirements and accountabilities—senior management must visibly champion the effort and reinforce expectations. No Big Bang: S&OP/IBP success is an extended journey and you need to understand your goals and ensure they fit to your point in that journey. Come back from setbacks: IBP disrupts many legacy assumptions, agendas, and turf. Resistance is a given.Work the obstacles and opposers relentlessly.You have right on your side. Discipline Simplicity Persistence 910

17. Spinnaker Proprietary & Confidential 2014 All Rights Reserved 1616  In the past 10-15 years, most companies have implemented ERP and/or Planning applications to support the core planning processes  Typically, a combination of data from these tools, reporting platforms, and MS Excel support S&OP/IBP Enabling S&OP/IBP withTechnology Core Planning Modules Demand Planning Inventory Optimization Supply Planning Network Optimization Order Promising / ATP Finite Scheduling S&OP/IBP Module Collaboration Dashboards & Analytics Financial Analysis Scenario Analysis NPI Planning Excel-Like Interface  This approach has several shortcomings including: – Manual effort to support the process in Excel – Lack of what-if scenario capabilities – Limited collaboration capabilities  To overcome these challenges, companies seeking to implement advanced IBP processes have implemented S&OP or IBP technologies that build on the core planning modules 1011

18. Spinnaker Proprietary & Confidential 2014 All Rights Reserved 1717 IBP Complements APO Demand and Supply Review Integrated Business Planning Supply Chain Control Tower Sales and Operations Planning Demand Inventory Supply Response The Focus is on:  S&OP+++  “What If” modeling / simulation  Aggregate planning  Collaboration  Visibility  Metrics management The Focus is on:  Detailed Planning  Optimization  Integration with execution  Order Scheduling  Sales Order Product Availability SAP APO Supply Network Planning – APO SNP Demand Planning– APO DP Production Planning and Detailed Scheduling APO PP/DS Demand Plan Master Production Plan Consensus Demand and Supply Plan Integration Via Flat Files OR HCI - Hana Cloud Integration Powered by SAP HANA™ 1112

19. Spinnaker Proprietary & Confidential 2014 All Rights Reserved 1818 SAP IBP Components Integrated Business Planning Control Tower Sales and Operations Planning Demand Inventory Supply Response SAP’s IBP Supply Chain ControlTower provides end-to-end view of the supply chain with near real time information and decision making analytics that have drill down capabilities, custom scorecards and dashboards with flexible exception management. SAP’s IBP S&OP has the ability to match demand and supply plans to financial objectives, profit optimization and cost minimization by leveraging scenarios and scenario comparison. SAP’s IBP Supply is an extension to IBP S&OP that develops a time phased constrained or unconstrained multi level production plan using heuristics or optimization with what If and scenario planning capabilities. SAP’s IBP Inventory application uses scenario and what if analysis coupled with an advanced approach to determine the ideal time phased inventory strategies for FG, SFG and Raw materials and provide a network wide view of inventory levels. 2015 2015 1213

20. Spinnaker Proprietary & Confidential 2014 All Rights Reserved 1919 IBP process enablement:  “What if” scenario modeling and simulation  Monetization of the planning process  IBP Process management metrics Consensus building:  Visibility across the network  Enable organizational collaboration across brands, customers globally  Flexible dashboards  View one version of the truth Change Management andTechnology:  Simplify your SAP Solution  Move away from multiple offline spreadsheets  Straight forward to set up Benefits of using SAP’s IBP solution 14

21. Spinnaker Proprietary & Confidential 2014 All Rights Reserved 2020 • What are your technology plans to improve S&OP/IBP performance? – Improve capabilities in core planning modules – Implement an add-on S&OP/IBP platform integrated with core planning tools – Implement a stand-alone S&OP/IBP platform – Enhance our Excel or reporting-based tools Flash Poll 15

22. Spinnaker Proprietary & Confidential 2014 All Rights Reserved 2121 How to Get Started 2 - 4 weeks Rapid Assessment Current State  Gather current state data  Identify causes and feasible solutions  Validate data Diagnose Analysis  Collaborate with internal team to validate root cause  Capture Critical Requirements and Targets  Analyze Issues and Bottlenecks Future State  Future state solution architecture  Key gaps  Implementation Roadmap  Document Purpose, Scope, Steps 14 3 Step Process 1. Understand / Identify Key Problems 2. Fit / Gap Analysis 3. Pilot 16

23. Spinnaker Proprietary & Confidential 2014 All Rights Reserved 2222 3 Step Process 1. Understand / Identify Key Problems 2. Fit / Gap Analysis 3. Pilot How to Get Started 2 - 4 months Pilot Pilot Design  Finalize scope (regional, category / brand, functional)  Requirements validation Pilot Build,Test andTrain  Solution configuration  Data load and validation  Test and train  “Go Live” 1416

24. Spinnaker Proprietary & Confidential 2014 All Rights Reserved 2323 An Invitation to Self-Assess Spinnaker S&OP/IBP Maturity Model STAGE 1 REACTING STAGE 2 ANTICIPATING STAGE 3 COLLABORATING STAGE 4 ORCHESTRATING Demand • Basic demand projections with no alignment of marketing, finance, and supply chain forecast Demand • Base and promo lift forecasted separately • Consensus demand aligned with financial plan Demand / Supply / Inventory • Demand and supply aligned • Multi-stage inventory planning • Customer CPFR focused on sell-in • Closed-loop supplier collaboration Demand / Supply / Inventory • Demand and supply plans aligned internally and externally • Multi-stage inventory planning aligned with assortment and merchandising processes • End-to-end collaboration with sell- through based forecast • Advanced analytics developed for custom business problems Supply • Locally managed supply plans • No network-level constrained supply plan Supply • Constrained supply plan aligned to demand plan • Single-site inventory planning • Limited supplier collaboration Finance • After the fact reporting Finance • Clear budgets but difficult to predict the future revenue, profit, inventory Finance • Ability to align budgets and future revenue, profit, and budget projections Finance • Feedback loop to influence sales and operational decisions, demand shaping S&OP Meetings • Meeting focus is short-term and historical S&OP Meetings • Meeting focus is short-term and historical S&OP Meetings • Meeting focus is medium/ long- term • Policies to deal with most standard situations developing S&OP Meetings • Defined policies address most demand/supply decisions • Focus is on exceptions and refining standard policies Process/Technology • Multitude of spreadsheets Process/Technology • Standalone demand and supply planning tools • One-way systems interfaces Process/Technology • Integrated demand, supply, and inventory planning tools • Limited collaboration technology • Closed loop interfaces Process/Technology • External-facing collaborative tools integrated to internal demand- supply-inventory planning systems Where are you today? Where do you think your company needs to be? 1517

25. Spinnaker Proprietary & Confidential 2014 All Rights Reserved 2424 Spinnaker’s “5 Lenses” approach brings focus to the full range of perspectives needed to significantly transform supply chain performance. Spinnaker Services That Support IBP Success Our balanced approach helps client achieve profitable growth, optimize costs, and satisfy demanding customers. People • Organizational design, training development, and capabilities assessment • Roles and responsibilities design and process mapping • Change management and transformation planning Process • Best practices assessment • Root cause analysis of performance gaps • Process architecture and re-engineering • Value stream analysis and process simplification Technology • SAP APO and IBP blueprinting, design, and implementation services • Systems integration • Master data assessment, quality improvement, and governance • Data architecture and data integration services • Metrics and analytics automation Policies • Supply chain business rule analysis & definition • Process impact analysis • Monitors and compliance controls definition • Best practices analysis Metrics • Operational & management metrics definition • Change management & metrics of transformation success and process adoption • Dashboards & analytics • Industry norms/bests Roadmapping, planning, & transformation management 1618

27. Spinnaker Proprietary & Confidential 2014 All Rights Reserved 26 Contact Information Dan Luttner Business Development Manager 412.760.2750 dluttner@spinnakermgmt.com David Foster Senior Manager 720.323.1984 dfoster@spinnakermgmt.com Jay Nearnberg Senior Manager 973.727.7174 jnearnberg@spinnakermgmt.com

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