© DM Integration Ltd 2018

LEADERSHIP t h r o u g h INTEGRATION

DMi case study

The Company

The company is a global market leaders in the food and beverage category of the fast moving consumer goods sector. Its customer base is a mixture of traditional trade, modern trade (major retail chains) and services (hotels, restaurants etc). Its products include snacks, drinks, breakfast nutrition and in some regions dairy products. The business imperative was to grow market share in all of these product categories across the European region where market condition at least in the larger markets units had been particularly challenging.

They identified that they needed to strengthen their S&OP process which is now referred to as Integrated Business Planning (IBP) through an assessment carried out by Dave Manning. Following which S&OP has been rolled out in more than 20 countries in Europe and South Africa, which has been the basis for their success through the execution of what they refer to as ‘must win battles’ or strategic business objectives (SBO’s).

Iconic Global FMCG Company Rollout IBP (S&OP)

created and improveda substainable

customer service

lowered inventory holding & increased

inventory returns

increased effectiveness of New Product development and marketing activations

improved Demand Plan accuracy and better

demand management

reduced slow moving inventory & created

greater accountabilitymore consistent execution

of the annual operating plan and strategic

business objectives

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The Journey

It was in 2012 that the business unit in Russia realised that there was a need to improve their planning processes if they were going to achieve their strategic business objectives. The business had achieved significant growth over the previous decade including surviving the Russian economic crisis. They had developed their categories but knew that to continue to sustain their growth then they would have to develop the S&OP and planning processes.

Dave Manning was contracted to carry out an assessment and benchmarking intervention of their S&OP and Planning process, which he did based upon a proven approach and checklist developed over 30 years of experience.

The results of the assessment and benchmarking showed that their long term S&OP process was ineffective and that the short term Demand and Supply Planning process was not integrated and failing to deliver best in class performance in areas such as customer service despite that fact that they had high levels of finished goods inventory with poor inventory turns. In particular the Demand Planning process was not delivering a good forecast that was believed or trusted leading to the

classical firefighting environment. As is typical in the FMCG market demand has to be managed in a heavily promoted market responding to consumer, customer and competitor changes which occur almost constantly and typically on a short term horizon.

This all contributed to poor levels of forecast accuracy which were only compounded by sales incentives and targets which drove ‘bad behaviour’. When the demand did change the lack of a robust demand management and control process created and fuelled the firefighting and the high levels of inventory were simply masking the real issues. As a result the Russia BU decided to address all of these issues through a formal Integrated Business Planning (S&OP) process which would deal with both long and short term issues creating a totally integrated planning process and strategic execution of their strategic business objectives.

Dave Manning’s Role

Dave Manning helped to set up the project structure covering the Leadership Team and the four steps of the ‘to be’ S&OP process including the Product and Marketing Review, Demand Review, Supply review and Financial Reconciliation. The first step was to conduct a series of education and Design Workshops to engage the leadership Team and Managers to start the process of developing the overall process and each step. This led to further coaching of the Teams to help them fully define and establish the processes and behaviours

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needed to support the new S&OP process that was tailored to the business requirements and organisation structure. It was also important to build on what was already in place and not try to re-invent the wheel.

One of the keys to success was to recognise that the Demand Planning process needed to become a multi-input process requiring cross functional engagement. Operations, Sales, marketing, Supply Chain and Finance all engaged in the process and ‘one set of numbers’ started to become a reality.

The result was a fully integrated long term (18-24 month rolling) S&OP process. In turn this fully integrated with an effective short term demand and Supply Control process. It was not long before the Russian business unit began to improve customer service, manage inventory more effectively and execute its strategic business objectives.

Rollout across Europe and South Africa

The Regional president could quickly see the benefits of the process and as a consequence made the decision to fully rollout S&OP and Demand & Supply Control across Eastern Europe and subsequently the whole European and South African Region with the vision of eventually integrating the whole Region through an Executive S&OP process which would enable him to have an integrated view of the Region’s performance as well as holding the Sector and BU GMs and Leadership Teams accountable for the execution of

the strategic business objectives. As another one of our FMCG clients CEO said “clear accountability is core to a successful S&OP process”.

S&OP has now been rolled out across more than 25 countries in Europe, CIS and South Africa. Each BU adopted the same approach of Education, Workshops and Coaching to apply the standard process to their market and business requirements. Their journey has been supported by coaching from Dave Manning and an assessment process based upon a specifically tailored checklist which reflects their company business requirements and organisation structure. This coaching and assessment programme has ensured continuous improvement and sustainability of the process. Several of the BU’s have now achieved the highest level of maturity against the assessment checklist.

The key to success with all change management, not least of all S&OP/IBP is a demonstrated leadership commitment, and this was certainly the case in those business units that have achieved the highest levels of maturity.

Very few Corporate resources were allocated to the programme and Dave Manning’s role was as an educator, facilitator and coach which meant that the process was driven and owned by the BU’s. In particular the local GM, Leadership Team and BU Process Leaders played a very visible and active role in the development and adoption of the S&OP and Demand & Supply Control processes. Another critical success factor has been the recognition that the Education, Workshops and Coaching provided

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by Dave Manning have been the keys to the essential behaviour change management.

Results

Awards are interesting but the most important results are tangible benefits. Obviously results varied by BU dependent upon the engagement of the local Leadership Teams and to some extent the business and economic environment that existed in that country. However some common themes have emerged across all BU’s which include:-

• Improved and sustainable customer service

• Lower inventory holding and increased inventory turns

• Increased effectiveness of New Product development and marketing activations

• Improved Demand Plan accuracy and better demand management

• Reduced slow moving inventory

• More consistent execution of the annual operating plan and strategic business objectives

• Greater accountability

• Improvements in the Advantage Group (TAG) ratings

The process has also resulted in a ‘net gain’ in Management time as compared to a net consumption of time. One BU documented 100 hours of Executive management time per month had been released back to the business, by

eliminating the short term focus, crisis management and allowing a more strategic focus. This also includes a significantly simplified annual operating planning process.

The focus is now about long term gap closure or long term gap opening which of course represents growth which was the original purpose of developing the S&OP process back in Russia.

Looking to the Future

All BU’s are now engaged in continuous improvement and sustainability. They are looking for the next best practice S&OP/IBP development and continue to utilize Dave Manning for leadership coaching. Future developments are likely to include further development of scenario planning, the integration of people development, integration of project management office (PMO) and strategic execution.