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Sales and Operations Planning Research Study ResultsPresented to Oliver Wight February 23, 2007
2
Confidentiality Statement
The materials in this presentation are protected under the 02/22/2007 contractual agreement between Oliver Wight Americas and Ventana Research. Any use of content must show explicitly attribution of the source. Use of the materials beyond the intended use for education needs to be explicitly approved by Ventana Research.*
* © 2007 Ventana Research
3
What did we do in this study?
How does S&OP influence business performance?
What are the key performance measures?
Who has responsibility?
What is the extent of departmental participation in this process?
What is the role of software?
What are the people, process and systems best practices that determine success?
4
Survey demographics
Qualified Respondents by Organizations Revenue
Largest study on S&OP to date952 respondents470 qualifiers85% from the USA15% rest of the world
Broadest industry surveyManufacturing – 34%Services – 18%Banking & Financial – 11%
Most comprehensive by roleLine-of-business – 56% IT – 19%Finance – 13%Executive Management – 12%
Not Sure9%
US$100 million to US$500
million30%
US$500 million to US$1 billion
19%
US$1 billion to US$2 billion
16%
US$2 billion or more26%
Source: Ventana Research 2006
Sales and Operations Planning Research Study
5
Demographics – role
Qualified Respondents by Function
Other9% IT Development
19%
Finance13%
Executive Management
12%Supply Planning8%
Sales Management7%
Manufacturing6%
Demand Planning6%
Distribution6%
Marketing5%
Product Development
4%
Procurement3%
Order Management
3%
Source: Ventana Research 2006
Sales and Operations Planning Research Study
6
1. There is confusion about the goal of S&OP
What’s the primary goal of S&OP?
Align operations with corporate
strategy and goals26%
Use company resources better
15%Integrate
operational plans with company financial plans
8%
Provide executive reporting and
visibility4%
Meet executive mandate
3%
Don't know4%
Make better decisions
20%
Establish cross-functional
coordination and business planning
20%
There is confusion about the goal of S&OP. Only 26% of companies said the goal of S&OP is to align operations with corporate strategy and goals.All others are tactical steps that lead to this strategic goal.
Source: Ventana Research 2006
Sales and Operations Planning Research Study
7
2a. Most companies are new to S&OP and so lack a rigorous process.
How long has your company had a formal S&OP process?
Less than one year14%
One to two years29%
Three to five years22%
More than five years35%
Best practices for S&OP have existed for almost 20 years, but 65% of companies have been doing S&OP for less than five years.
Source: Ventana Research 2006
Sales and Operations Planning Research Study
8
2b. Most companies are new to S&OP and so lack a rigorous process.
What organizational level is S&OP conducted?
58%
72%
74%
42%
28%
26%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Multiple entities orglobal level
Single entity or locallevel
Line of business ordepartment
Current Future Source: Ventana Research 2006
Sales and Operations Planning Research Study
9
2b. Most companies are new to S&OP and so lack a rigorous process.
29%31%
33%
37%
40%41% 42%
43%
47%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Establishedtime fences
Balancedscorecard orperformance
reviews
Consensusdemandplanning
Formalexecutive
S&OP reviewmeetings
Financial planreconciliation
Strategicinitiatives and
projects
Formal demandand supply
reviewmeetings
New productintroduction
plans
Supply andcapacityplanning
What’s included in S&OP?
Source: Ventana Research 2006
Sales and Operations Planning Research Study
10
Ventana Research S&OP Maturity Model
People, Process, Technology, Performance Management
Tactical – The company does only the basics of S&OP, such as demand and supply balancing.
Advanced – The company has progressed in knowledge and skill of S&OP beyond the basics, for example, to formal planning and review meetings.
Strategic – The company uses S&OP to align operational planning with corporate strategic objectives.
Innovative – The company runs S&OP using a variety of performance management techniques.
Source: Ventana Research 2006
Sales and Operations Planning Research Study
11
3a. There is a lot of room for improvement
S&OP Maturity Model - Overall
26%
23%
16%
35%
0%
5%
10%
15%
20%
25%
30%
35%
40%
Tactical Advanced Strategic Innovative
Most companies practice S&OP at a tactical or advanced level. Only 16% of companies are innovative.The other 23% are at the strategic level.
Source: Ventana Research 2006
Sales and Operations Planning Research Study
12
3b. There is a lot of room for improvement
24%
29%
17%
30%
0%
5%
10%
15%
20%
25%
30%
35%
Tactical Advanced Strategic Innovative
26%
10%
32% 31%
0%
5%
10%
15%
20%
25%
30%
35%
Tactical Advanced Strategic Innovative
22%
13%
24%
41%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Tactical Advanced Strategic Innovative
19% 19%
6%
56%
0%
10%
20%
30%
40%
50%
60%
Tactical Advanced Strategic Innovative
S&OP Maturity Model - People S&OP Maturity Model - Process
S&OP Maturity Model - Technology S&OP Maturity Model – Performance Mgt
Source: Ventana Research 2006
Sales and Operations Planning Research Study
13
4a. Benefits are not being measured.
What benefits do you associate with S&OP?
22%24%
28%31%
44%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Better salesplanning
Better budgetingBetter assetutilization
Better inventoryutilization
Improvedcustomer service
`
`
Source: Ventana Research 2006
Sales and Operations Planning Research Study
14
4b. Benefits are not being measured.
What performance measures are used for S&OP?For the top benefit of S&OP only 18% actually measure customer satisfaction.Worse still, only 11 percent measure inventory (turns) and only 8 percent measure asset utilization.
16%18%18%18%
21%
25%
27%
29%
32%
0%
5%
10%
15%
20%
25%
30%
35%
QualityOn-timedelivery
Marginattainment
Customersatisfaction
Profitabilityby product
Plan tobudget
Salesvolumegrowth
Salesrevenue
attainment
Forecastaccuracy
S&OP improvement projects should measure the “before” and “after” results to evaluate and promote the benefits
Source: Ventana Research 2006
Sales and Operations Planning Research Study
15
5. Companies plan in isolated units
What hinders companies from making S&OP more successful?
16%18%
19%
23%
30%
0%
5%
10%
15%
20%
25%
30%
35%
Lack of IT resourcesPoor collaborationwith customers
Lack of dataintegration
Lack of internalcollaboration
Lack of singleforecast across all
operations andfinance Source: Ventana Research 2006
Sales and Operations Planning Research Study
16
6. Executive sponsorship and Finance involvement are important.
Who sponsors S&OP?
P&L Owner (CEO or GM)32%
Head of Operations (COO or VP of Ops)
24%
Head of Finance (CFO or Controller)
15%
Plant Manager or Director of
Manufacturing15%
All others14%In companies reporting
overwhelmingly strong gains (the highest category) in customer satisfactioneither the CEO or the CFO is the sponsor 100% of the time.
Source: Ventana Research 2006
Sales and Operations Planning Research Study
17
7a. When S&OP is the plan of record, performance improves
How well are financial and S&OP plans aligned?
Very well18%
Well34%
Somewhat well36%
Not well9%
Not at all3%
c
The single most significant factor contributing to overwhelming performance gains is financial plan and S&OP plan alignment.
Source: Ventana Research 2006
Sales and Operations Planning Research Study
18
7b. When S&OP is the plan of record, performance improves.
Who gets and uses the S&OP plan?
63%
60%
59%
57%
57%
52%
51%
47%
43%
43%
38%
35%
34%
32%
32%
30%
29%
31%
36%
30%
36%
35%
32%
38%
39%
41%
31%
43%
45%
42%
42%
39%
42%
37%
7%
4%
11%
7%
9%
16%
11%
14%
16%
26%
19%
20%
24%
27%
29%
28%
34%
Sales
Executive Management
Demand and Supply Chain Planning
Finance
Marketing
Manufacturing
Sourcing and Procurement
Distribution and Delivery
Order Fulfillment
Billing and Collections
IT Development and Delivery
R&D, Engineering or Product Design
Field Service
Human Resources
Returns
Consulting
Contact Center
Used to adjust plans Used as reference Ignored
Source: Ventana Research 2006
Sales and Operations Planning Research Study
19
Performance gains
What amount of performance improvement has S&OP provided?
24%25%24%22%25%27%
29%33%32%
29%
36%
4%4%6%8%5%4%
5%
4%7%10%
7%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Inventoryturns
Grossmargin
Return onassets
Perfectorder
Workingcapital
RevenueOrder fillrate
Inventoryvalue
Assetutilization
Customersatisfaction
Forecastaccuracy
Substantial Overwhelming Source: Ventana Research 2006
Sales and Operations Planning Research Study
20
8. Improving the process a little brings big gains
14%33%Has 18-month planning horizon
42%56%Has formal demand and supply review meetings
56%72%Includes multiple lines of business or brands
34%53%Creates plan quarterly or monthly
33%61%Includes consensus demand planning
52%70%Action items are assigned and tracked
46%78%Includes progress on projects and initiatives
37%70%Includes multiple factories or regional operational facilities
40%73%Top-level S&OP has regular agenda and key decisions
36%72%Capture assumptions and meeting notes
46%82%Executive Management included in the process
53%90%S&OP has plan-vs.-actual reports
18%55%Company aligns financial plans with S&OP very well
63%100%Sales uses S&OP to adjust their plans
40%82%Process includes financial plan reconciliation
42%91%Includes Finance in S&OP
GENERALTREND
COMPANIES WITH THE
MOST GAINSCONTRIBUTING FACTOR
Source: Ventana Research 2006
Sales and Operations Planning Research Study
21
9a. Dedicated software is the right tool for the job
How important is software to S&OP?
Very unimportant
3%
Very important
41%
Neither important or unimportant
15%
Unimportant6%
Somewhat important
35%
More than three out of four respondents (76%) told us that software is an important element of S&OP.
Source: Ventana Research 2006
Sales and Operations Planning Research Study
22
9b. Dedicated software is the right tool for the job
What type of software is used for S&OP?
Dedicated in-house IT developed
20%
Dedicated vendor-provided stand-
alone16%
Dedicated on-demand or SaaS
14%
Spreadsheets14%
ERP system with supply chain
planning12%
Financial planning3%
Data warehouse reporting and
analytics4%
No system3%
Dedicated management consultant-provided
9%
Best-of-breed demand and supply
chain5%
Only 23% of spreadsheet users are satisfied vs. 71% that have a dedicated, vendor provided stand-alone software package for S&OP
Source: Ventana Research 2006
Sales and Operations Planning Research Study
23
9c. Dedicated software is the right tool for the job
Why are users dissatisfied with their S&OP software?
7%
12%12%13%
14%
17%
18%
31%
33%
0%
5%
10%
15%
20%
25%
30%
35%
Data isinaccurate or not
reliable
Users morecomfortable with
spreadsheets
No IT resourcesavailable to
implement andmaintain it
Data getsoutdated quickly
Inadequatereporting
capabilities
Does notadequately
support role-based views
S&OP applicationtoo complex toimplement and
maintain
Supportingapplications notintegrated with
each other
Difficult to dowhat-if analysis
Source: Ventana Research 2006
Sales and Operations Planning Research Study
24
10. Users know what they need
What do users want in S&OP software?
48%
48%
48%
48%
49%
51%
53%
53%
60%
62%
0% 10% 20% 30% 40% 50% 60% 70%
Unstructured data capture
Monitors and exception alerts
Multidimensionional (slice and dice) data views
Workflow for the process
Automated plan publishing
Profit-based S&OP
Collaborative demand planning
Automated financial plan reconciliation
Real-time S&OP dashboard
Scenario what-if analysis
Source: Ventana Research 2006
Sales and Operations Planning Research Study
25
11. Competitive pressures are driving S&OP improvements.
What are the business drivers?
18%18%18%
25%25%
28%
0%
5%
10%
15%
20%
25%
30%
35%
Need forgreater return
on assets
Rapidexpansion in
businessgrowth
Competitivepressure for
new products
Risingcustomer
expectationsof order fill
rates
Complexitycaused by
growth in newproducts or
services
Competitivepressures for
customerretention
Source: Ventana Research 2006
Sales and Operations Planning Research Study
26
12. Globalization adds complexity.
What are the effects of globalization on S&OP?
10%
15%
19%20%
32%
35%36%36%38%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
We miss ourperformance
targets
Mistrust ofplans at the
linepersonnel
level
Mistrust ofplans at
executivelevel
Mistrust ofplans at
manageriallevel
Not enoughdata is
included
Datacollection
takes moretime
Plans areconstantly
revised
Plans areinaccurate
Datareconciliation
is moredifficult
Source: Ventana Research 2006
Sales and Operations Planning Research Study
27
Report recommendations for users
PeopleBroaden deployment to include executive management, finance, manufacturing, demand planning, supply planning, marketing, product engineering and design and IT functions. Use a cross-functional team for plan development and reporting.Have all departments use S&OP as the plan of record –including FinanceEngage the CEO or CFO a sponsor
ProcessUse S&OP to align operations with corporate strategic objectives.Have regular formal demand and supply review meetings and look at actual-vs.-forecast targets. Plans should cover 18 months and include multiple lines of business or brands and multiple factories or regional operational facilities across product lines.
Source: Ventana Research 2006
Sales and Operations Planning Research Study
28
Report recommendations for users
The S&OP process itself should include these steps:
1. new product (or service) introduction planning2. consensus demand planning3. supply and manufacturing planning4. formal demand, supply and capacity reviews5. financial plan reconciliation6. formal executive S&OP meetings that
review demand and supply trade-offstrack progress of strategic initiatives and projectsinclude balanced scorecards or performance reviewsassign action items and set follow-up assessments.
Source: Ventana Research 2006
Sales and Operations Planning Research Study
29
Report recommendations for users
TechnologyActively evaluate vendor-provided dedicated solutionsLook for software that has what-if scenario planning , real-time dashboards, collaborative demand planning, automated financial planning reconciliation and profit-based solving.Consider supporting technologies like EAI and BI platforms
Performance ManagementMatch S&OP metrics with corporate goalsIntegrate S&OP with Balanced Scorecard
Source: Ventana Research 2006
Sales and Operations Planning Research Study
31
Biography
Colin Snow, VP & Research DirectorOperational Performance Management and Business Process Management
Colin heads up the Ventana Research Operational Performance Management (OPM) practice focusing on the alignment of business and information technology in the areas of operations, supply chain, and business process management. His research investigates what organizations need to manage their operational processes and supply chain for performance improvement. Colin brings 10 years of enterprise software experience from vendors like PeopleSoft and Steelwedge as well as over 15 years of industry experience in manufacturing, planning and services from firms like Olympus America and CIDCO Corporation. Colin has worked in automotive, consumer products, food and beverage, healthcare, manufacturing and publishing. Colin earned his BA from Evangel University and his MBA from Florida Atlantic [email protected]