Sales and Operations Planning

Research Study Results

Presented to Oliver Wight
February 23, 2007
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

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 What did we do in this study?

ƒ How does S&OP influence business

performance?

ƒ What are the key performance

measures?

ƒ Who has responsibility?

ƒ What is the extent of departmental

participation in this process?

ƒ What is the role of software?

ƒ What are the people, process and

systems best practices that determine
success?

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 Survey demographics

Largest study on S&OP to date

ƒ 952 respondents Qualified Respondents
by Organizations Revenue
ƒ 470 qualifiers
ƒ 85% from the USA
US$500 million
ƒ 15% rest of the world to US$1 billion
19%

Broadest industry survey US$1 billion to

US$2 billion
ƒ Manufacturing – 34% 16%

ƒ Services – 18%
ƒ Banking & Financial – 11% US$100 million
to US$500
million
30%

Most comprehensive by role

ƒ Line-of-business – 56%
US$2 billion or
ƒ IT – 19% more
26%
ƒ Finance – 13% Not Sure
9%

ƒ Executive Management – 12% Source: Ventana Research 2006

Sales and Operations Planning Research Study

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Demographics – role

Qualified Respondents by Function

Order
Management
3%
Other
9% IT Development
Procurement
3% 19%
Product
Development
4%
Marketing
5%

Finance
Distribution 13%
6%

Demand Planning
6%
Manufacturing
6% Executive
Management
Sales Management 12%
7% Supply Planning
Source: Ventana Research 2006
8%
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 1. There is confusion about the goal of
S&OP

There is confusion What’s the primary goal of S&OP?

about the goal of S&OP. Use company

resources better

Only 26% of Establish cross-

15%
Integrate
operational plans
functional w ith company
companies said coordination and
business planning
financial plans
8%
20% Provide executive
the goal of S&OP reporting and
visibility
4%

is to align Meet executive

mandate
3%
operations with Don't know
4%

corporate strategy
and goals. Make better
decisions
20%
All others are tactical Align operations

steps that lead to this w ith corporate

strategy and goals
26%
strategic goal.
Source: Ventana Research 2006
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 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?

Best practices for S&OP Less than one year

14%
have existed for almost
20 years, but More than five years
35%
65% of companies
have been doing
One to two years
S&OP for less 29%

than five years.

Three to five years
22%

Source: Ventana Research 2006

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 2b. Most companies are new to S&OP and
so lack a rigorous process.

What organizational level is S&OP conducted?

Line of business or
74% 26%
department

Single entity or local

72% 28%
level

Multiple entities or
58% 42%
global level

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Current Future Source: Ventana Research 2006

Sales and Operations Planning Research Study

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 2b. Most companies are new to S&OP and
so lack a rigorous process.

What’s included in S&OP?

50%
47%

45% 43%
41% 42%
40%
40%
37%

35% 33%
31%
29%
30%

25%

20%

15%

10%

5%

0%
Established Balanced Consensus Formal Financial plan Strategic Formal demand New product Supply and
time fences scorecard or demand executive reconciliation initiatives and and supply introduction capacity
performance planning S&OP review projects review plans planning
reviews meetings meetings

Source: Ventana Research 2006

Sales and Operations Planning Research Study

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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

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 3a. There is a lot of room for improvement

S&OP Maturity Model - Overall

Most companies 40%

35%
practice S&OP at a 35%

tactical or advanced 30%

level. 26%
25%
23%
Only 16% of 20%

companies are 15%

16%

innovative. 10%

The other 23% are at the 5%

strategic level.
0%
Tactical Advanced Strategic Innovative

Source: Ventana Research 2006

Sales and Operations Planning Research Study

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3b. There is a lot of room for improvement

S&OP Maturity Model - People S&OP Maturity Model - Process

35% 35%
32% 31%
30%
29%
30% 30%
26%
24%
25% 25%

20% 20%
17%

15% 15%
10%
10% 10%

5% 5%

0% 0%
Tactical Advanced Strategic Innovative Tactical Advanced Strategic Innovative

S&OP Maturity Model - Technology S&OP Maturity Model – Performance Mgt

45% 60%
41% 56%
40%
50%
35%

30% 40%

24%
25%
22%
30%
20%
19% 19%
15% 13% 20%

10%
10% 6%
5%

0% 0%
Tactical Advanced Strategic Innovative Tactical Advanced Strategic Innovative

Source: Ventana Research 2006

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Sales and Operations Planning Research Study
4a. Benefits are not being measured.

What benefits do you associate with S&OP?

50%

45% 44%

40%

35%
31%
30% 28%

25% 24%
22%
`
20% `

15%

10%

5%

0%
Improved Better inventory Better asset Better budgeting Better sales
customer service utilization utilization planning
Source: Ventana Research 2006
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 4b. Benefits are not being measured.

For the top benefit of What performance measures are used for S&OP?

S&OP only 18% 35%

32%

29%
30%

actually measure 27%

25%
25%

customer 20%
21%

18% 18% 18%

satisfaction. 15%
16%

Worse still, only 11

10%
percent measure
inventory (turns) and 5%

only 8 percent 0%
Forecast Sales Sales Plan to Profitability Customer Margin On-time Quality
accuracy revenue volume budget by product satisfaction attainment delivery
measure asset attainment grow th

Source: Ventana Research 2006

utilization. Sales and Operations Planning Research Study

S&OP improvement projects should measure the “before” and “after”

results to evaluate and promote the benefits

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5. Companies plan in isolated units

What hinders companies from making S&OP more successful?

35%

30%
30%

25% 23%

20% 19%
18%
16%
15%

10%

5%

0%
Lack of single Lack of internal Lack of data Poor collaboration Lack of IT resources
forecast across all collaboration integration with customers
operations and
finance
Source: Ventana Research 2006
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 6. Executive sponsorship and Finance
involvement are important.

Who sponsors S&OP?

All others
14%
In companies reporting
overwhelmingly strong P&L Owner (CEO or
GM)
32%
gains (the highest Plant Manager or
Director of
category) in customer Manufacturing
15%
satisfaction
either the CEO or
the CFO is the
Head of Finance
sponsor 100% of (CFO or Controller)
15%
Head of Operations
the time. (COO or VP of Ops)
24%

Source: Ventana Research 2006

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 7a. When S&OP is the plan of record,
performance improves

How well are financial and S&OP plans aligned?

The single most Not at all

Not well 3%
Very well
significant factor 9%
18%
contributing to
overwhelming
performance gains is
financial plan and c

S&OP plan
Somewhat well
alignment. 36%

W ell
34%

Source: Ventana Research 2006

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 7b. When S&OP is the plan of record,
performance improves.
Who gets and uses the S&OP plan?
Contact Center 29% 37% 34%

Consulting 30% 42% 28%

Returns 32% 39% 29%

Human Resources 32% 42% 27%

Field Service 34% 42% 24%

R&D, Engineering or Product Design 35% 45% 20%

IT Development and Delivery 38% 43% 19%

Billing and Collections 43% 31% 26%

Order Fulfillment 43% 41% 16%

Distribution and Delivery 47% 39% 14%

Sourcing and Procurement 51% 38% 11%

Manufacturing 52% 32% 16%

Marketing 57% 35% 9%

Finance 57% 36% 7%

Demand and Supply Chain Planning 59% 30% 11%

Executive Management 60% 36% 4%

Sales 63% 31% 7%

Used to adjust plans Used as reference Ignored

Source: Ventana Research 2006
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Performance gains

What amount of performance improvement has S&OP provided?

50%

45%

40% 7%

35% 7% 4%
10%
5%
30%
4% 5%
6% 4%
8% 4%
25%

20%
36%
32% 33%
15% 29% 29%
27% 25%
24% 25% 24%
22%
10%

5%

0%
Forecast C ustomer Asset Inventory Order fill Revenue Working Perfect Return on Gross Inventory
accuracy satisfaction utilization value rate capital order assets margin turns

Substantial Overwhelming Source: Ventana Research 2006

Sales and Operations Planning Research Study

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 8. Improving the process a little brings big
gains
COMPANIES
CONTRIBUTING FACTOR WITH THE GENERAL
MOST GAINS TREND
Includes Finance in S&OP 91% 42%
Process includes financial plan reconciliation 82% 40%
Sales uses S&OP to adjust their plans 100% 63%
Company aligns financial plans with S&OP very well 55% 18%
S&OP has plan-vs.-actual reports 90% 53%
Executive Management included in the process 82% 46%
Capture assumptions and meeting notes 72% 36%
Top-level S&OP has regular agenda and key decisions 73% 40%
Includes multiple factories or regional operational facilities 70% 37%
Includes progress on projects and initiatives 78% 46%
Action items are assigned and tracked 70% 52%
Includes consensus demand planning 61% 33%
Creates plan quarterly or monthly 53% 34%
Includes multiple lines of business or brands 72% 56%
Has formal demand and supply review meetings 56% 42%
Has 18-month planning horizon 33% 14%

Source: Ventana Research 2006

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Sales and Operations Planning Research Study
 9a. Dedicated software is the right tool for
the job

How important is software to S&OP?

Neither Unimportant
important or 6%
unimportant Very
More than three out 15% unimportant
3%

of four respondents
(76%) told us that
software is an
important element Very
important
of S&OP. Somewhat
41%

important
35%

Source: Ventana Research 2006

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 9b. Dedicated software is the right tool for
the job
What type of software is used for S&OP?

Only 23% of ERP system w ith

supply chain
Spreadsheets planning

spreadsheet 14% 12%

Dedicated
users are management
consultant-
provided
satisfied vs. 71%Dedicated on-
demand or SaaS
9%

14% Best-of-breed
that have a demand and supply
chain

dedicated, 5%
Financial planning
3%
vendor provided Data w arehouse
reporting and

stand-alone Dedicated vendor-

provided stand-
analytics
4%
alone No system
software package 16% 3%

Dedicated in-house
for S&OP IT developed
20%

Source: Ventana Research 2006

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 9c. Dedicated software is the right tool for
the job
Why are users dissatisfied with their S&OP software?

35%
33%

31%

30%

25%

20%
18%
17%

15% 14%
13%
12% 12%

10%

7%

5%

0%
Difficult to do Supporting S&OP application Does not Inadequate Data gets No IT resources Users more Data is
what-if analysis applications not too complex to adequately reporting outdated quickly available to comfortable with inaccurate or not
integrated with implement and support role- capabilities implement and spreadsheets reliable
each other maintain based views maintain it

Source: Ventana Research 2006

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 10. Users know what they need

What do users want in S&OP software?

Scenario what-if analysis 62%

Real-time S&OP dashboard 60%

Automated financial plan reconciliation 53%

Collaborative demand planning 53%

Profit-based S&OP 51%

Automated plan publishing 49%

Workflow for the process 48%

Multidimensionional (slice and dice) data views 48%

Monitors and exception alerts 48%

Unstructured data capture 48%

0% 10% 20% 30% 40% 50% 60% 70%

Source: Ventana Research 2006

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11. Competitive pressures are driving
S&OP improvements.
What are the business drivers?

35%

30% 28%
25% 25%
25%

20% 18% 18% 18%

15%

10%

5%

0%
Competitive Complexity Rising Competitive Rapid Need for
pressures for caused by customer pressure for expansion in greater return
customer growth in new expectations new products business on assets
retention products or of order fill growth
services rates
Source: Ventana Research 2006
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 12. Globalization adds complexity.

What are the effects of globalization on S&OP?

50%

45%

40% 38%
36% 36% 35%
35%
32%

30%

25%

20% 19%
20%

15%
15%
10%
10%

5%

0%
Data Plans are Plans are Data Not enough Mistrust of Mistrust of Mistrust of We miss our
reconciliation inaccurate constantly collection data is plans at plans at plans at the performance
is more revised takes more included managerial executive line targets
difficult time level level personnel
level
Source: Ventana Research 2006
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Report recommendations for users

People
ƒ Broaden deployment to include executive management, finance,
manufacturing, demand planning, supply planning, marketing,
product engineering and design and IT functions.
ƒ Use a cross-functional team for plan development and reporting.
ƒ Have all departments use S&OP as the plan of record –
including Finance
ƒ Engage the CEO or CFO a sponsor
Process
ƒ Use S&OP to align operations with corporate strategic
objectives.
ƒ Have regular formal demand and supply review meetings and
look at actual-vs.-forecast targets.
ƒ 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
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Report recommendations for users

The S&OP process itself should include these steps:

1. new product (or service) introduction planning

2. consensus demand planning
3. supply and manufacturing planning
4. formal demand, supply and capacity reviews
5. financial plan reconciliation
6. formal executive S&OP meetings that
ƒ review demand and supply trade-offs
ƒ track progress of strategic initiatives and projects
ƒ include balanced scorecards or performance reviews
ƒ assign action items and set follow-up assessments.

Source: Ventana Research 2006

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Report recommendations for users

Technology
ƒ Actively evaluate vendor-provided dedicated solutions
ƒ Look for software that has what-if scenario planning , real-time
dashboards, collaborative demand planning, automated financial
planning reconciliation and profit-based solving.
ƒ Consider supporting technologies like EAI and BI platforms
Performance Management
ƒ Match S&OP metrics with corporate goals
ƒ Integrate S&OP with Balanced Scorecard

Source: Ventana Research 2006

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Questions

Colin Snow
Ventana Research
650-931-0886
colin.snow@ventanaresearch.com
www.ventanaresearch.com

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Biography

Colin Snow, VP & Research Director

Operational 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
University.
colin.snow@ventanaresearch.com

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