Sop control paradox slides - 07 feb12

© StrataBridge 2012

02.07.2012

The S&OP Control Paradox: Folly in a Volatile World

© StrataBridge 2012 © StrataBridge 2012

e S&OP Control Paradox: Folly in a Volatile World? (or Babbage’s Analytical Engine in an iPad World?)


Some Structure & Thought-Provokers

The Case for ‘Agility’ •  So, what’s Agility anyway… and ‘VUCA’? •  It’s a ‘VUCA’ World… Some Insights •  Most companies are compounding the situation

Contending with ‘VUCA’ •  The ‘Growth ⇆ Control Paradox’ •  Underneath it all… Three Laws •  An Architecture for Growth against a ‘VUCA’ Backdrop

‘Joined-up Decision-Making’ for Growth •  Where are you on the ‘Control ⇆ Growth’ Spectrum? •  Some Implications and Questions for Decision-Making


What’s in a name?


VUC Some Insights…

It’s a ‘VUCA’ World…?

COMPLEXITY

UNCERTAINTY

VOLATILITY

A AMBIGUITY



Beyond the Human impact…

Massive disruption on both sides of the Demand and Supply sides of the economic equation, amplified by an increasingly interconnected world…

Some Insights… It’s a (naturally) ‘VUCA’ World…



‘04 ‘06 ‘10 ‘08 ‘12 ‘03 ‘05 ‘07 ‘09 ‘11

20.00

60.00

50.00

40.00

30.00

100.00

90.00

80.00

70.00

110.00

120.00

130.00

140.00

‘94 ‘96 ‘00 ‘98 ‘02 ‘95 ‘97 ‘99 ‘01

Brent Crude

$/Barrel

Source: FT.com

‘VUCA’ – It’s amplifying… Some Insights…



Dairy

‘04 ‘06 ‘10 ‘08 ‘12 ‘03 ‘05 ‘07 ‘09 ‘11 ‘94 ‘96 ‘00 ‘98 ‘02 ‘95 ‘97 ‘99 ‘01

100

300

250

200

150

400

350

50 Oil

Meat

Cereals Food

Sugar

Price"Index

(2003=100)

Source: Centre for Security Studies"

– ETH Zurich

‘VUCA’ – It’s ‘Everywhere’… Some Insights…


© StrataBridge 2012 © StrataBridge - 2010

There are many drivers; 20th Century Technology Adoption…

Source: Karl Hartig/WSJ

Television Radio

Telephone Computer

Some Insights…

© StrataBridge 2012 © StrataBridge - 2010

Television Radio

Telephone Computer

Some Insights… The Context When S&OP Was Developed


Some Insights…

78% 8% �

61% �of companies plan �to increase their Innovation spending......�

of CEOs expect their innovations will lead to significant new revenue opportunities over the next three years

Source: PwC, 14th Annual Global CEO Survey, 2011

The Internal Drive for Growth

...while only��

plan to decrease it ��

Innovation 2010 – BCG Report – April 2010�


Some Insights…

13% 13%

13%

10%

15% 19%

14%

21%

23%

20%

17%

30%

11%

14%

15%

37% 38%

20%

29%

10%

14%

17%

0 2007 2008 2009 2010 2011

10

20

30

40%

Increased share in existing markets New product/service developments New geographic markets Mergers and acquisitions New joint ventures and/or strategic alliances

CEO’s are turning to new product and service development for Growth Percentage of CEO’s on the main opportunity to grow their business in the next 12 months

Source: PwC, 14th Annual Global CEO Survey, 2011


How Common is Joined-Up Behaviour?

–  Only 37% said they had a clear understanding of what their organisation was trying to achieve and why.

–  Only one in five was enthusiastic about the goals of their team and organisation. –  Only one in five said that they had a clear line of sight between their tasks and the

goals of their team and organisation. –  Only 15% felt that their organisation fully enabled them to execute key goals. –  Only 20% fully trusted the organisation they worked for.

The 8th Habit: From Effectiveness to Greatness November 2004 Simon & Schuster

Stephen Covey in his book The 8th Habit, describes a poll of 23,000 employees drawn from a number of companies and industries. Here are the findings:

Or, put another way…

Some Insights…


Only 4 of the 11 players would know which goal is

theirs

Only 2 would care

Only 2 would know what position they play and what

they are supposed to do

And all but 2 players would, in some way, be competing

against their own team members rather than the

opposition

© StrataBridge - 2012


‘VUCA’ – How is it for you?

Are you experiencing, or can you see the early signals of, 'VUCA' in your external environment?

Does your strategy call for increasing degrees of 'new stuff' - new products, new services, new channels, new markets/territories, new technologies, etc?

Yes 89%

Yes 91%

No 11%

No 9%


‘VUCA’ – How is it for you?


Are you experiencing, or can you see the early signals of, 'VUCA' in your external environment?


Yes

Yes

No

No

You can check your e-mail now or be filling-in your expense form or something else useful… Keep improving what you’re doing and you’ll be fine! (Or will you?)


‘VUCA’ – How is it for you? Are you experiencing, or can you see the early signals of, 'VUCA' in your external environment?


Yes

Yes

No

No

You’ve obviously got some work to do, but as it stands you can dictate the pace… Make sure your strategy takes advantage of this; it won’t last forever!




Yes

Yes

No

No

Wake-up! To quote Jack Welch: “When the rate of change on the outside exceeds the rate of change on the inside, the end is in sight”




Yes

Yes

No

No

It’s time to review our strategic and operational planning and decision-making processes for ‘design overreach’. We’re in danger of taking them past the limits of what they were designed for!







Contending with ‘VUCA’ The Growth Paradox…

The Pursuit of ‘Growth’

The creation of new value for customers and shareholders, driving the need for new stuff – new products, new services, new markets, new business models, etc. – by definition, increasingly different from what we currently do…

The Desire for ‘Control’

The focus on continuously tightening the grip on how we do things today – driving predictability and productivity by

fine-tuning our knowledge of, and control over, our existing business portfolio – products, customers, channels, etc.


Underneath it All"3 Fundamental Laws that have shaped the StrataBridge approach…

The Law of PERSPECTIVE

The Law of ENTROPY

The Law of CHANGE No matter how hard you resist or deny it, things are going to change, often unpredictably so

It all depends on ‘where you are coming from’

Unless energy is expended to counter it, things become random, break-down, over time


Clear decision rights, integrated processes and

routines to enact strategy

Joined-up"Decision"Making

An Architecture for Strategy Development, Deployment & Delivery… Against a VUCA Backdrop

‘Big C’"Capability

Laws,"Principles"

& Balances

dialog

ue a

roun

d st

rate

gic c

hoice

s at

all l

evels

Serie

s of q

uest

ions/

conv

ersa

tions

to st

ruct

ure

effec

tive

on-g

oing

Strategic Dialogue

Strategy ‘Toolkit’

Strategic Direction

Long Term Plan (e.g. 5-10 Years) – Context, fundamental choices and boundaries, combining clarity about where you are going and flexibility about how to get there






© StrataBridge 2012 © StrataBridge 2012 © StrataBridge 2012

C

o

n

t

r

o

l

G

r

o

w

t

h

Striking the ‘Right Balance’?

In general, how would you rank your organisational DNA on the 'Control-Growth

Spectrum’? 1 2 3 4 5 4% 42% 34% 19% 1%

13% 67%

21%

More 'Control’ More 'Growth’

About right

What do you need to strike the right balance to deliver your strategy and desired business

results?


‘VUCA’ and Growth Drivers?

‘Control ⇆ Growth’ Balance?

Key questions to provide a platform for Agility Joined-up Decision-making

Right Conversations?

Right Capabilities?

Pace, Experimentation and ‘Learning-by-doing’?

Does ‘VUCA’ represent a strategic threat or opportunity in"our environment and do we understand our drivers of growth? Are are these reflected in our Strategy, Tactics and underpinning Assumptions and Plans?

Are we ‘wired’ for Control or Growth? Are our internal mindsets, processes, routines and behaviours synchonised with our external realities?

Do our decision-making processes and forums ask the right questions, bring together the right perspectives from across the business, and generate insight and

coherent actions?

Do we have explicit development actions building organisational capability – Capability with a ‘Big C’ – to develop agility and use ‘VUCA’ to our advantage?

Are we countering ‘VUCA’ with vision, understanding, clarity and agility, and accelerating results through an aggressive transition, rapid experimentation and

‘learning-by-doing’?


Chris Turner mobile: +44 7802 252 003 e-mail: [email protected] web: www.stratabridge.com

© 2012 Steelwedge Software, Inc. Confidential. 28

Plan. Perform. Profit.

02.07.2012

The S&OP Control Paradox: Folly in a Volatile World



Agility Measured in time (e.g., Order to Delivery lead-time)

Agile Characteristics Market Driven Bias Toward Information Over Inventory Low Inventory Levels Collaborative relations with trading partners

“The Triple –A Supply Chain responds to short term changes in supply and demand more quickly”

Dr. Hau Lee Thoma Professor of Operations, Graduate School of Business, Stanford University



Typical: Extended Lead Time = Reduced Agility

Enterprise

Customers

Suppliers

Extended Lead Time

Info Raw & WIP

Info Info FG

Excess Inventory

Excess Inventory

Lack of External

Collaboration

Not Demand Driven

Plan Driven Inventory

Vs. Demand



Suppliers

Enterprise

Improved Agility

Raw & WIP FG

Being Market Driven With Improved Information Flow Reduced Inventory and Lead Time Reduced Lead Time = Increased Agility

Reduced Carrying Costs and Expedited

Logistics

Increased Revenue and

Fill Rate

Reduced Inventory

Customers

Improved Information Flow



Flexibility Rapidly change processes based on market events

•  Short term flexibility –  Can be obtained through better execution –  Limited ability to respond in a strategic manner –  S&OP has smaller role

•  Long term flexibility –  Can be obtained through better strategic and operational planning –  Provides ability to execute new strategies and programs –  S&OP has major role


Plan. Perform. Profit. 33

Agility and Flexibility Metrics are Integral to Best-in-Class Performance

Source: Steelwedge/Accenture value assessment



Steelwedge: Business Agility Starts Here Integrated Business Planning platform Supply chain “shock absorbers” to react, respond, recalibrate

Collaborative S&OP solution: single view of demand, supply, finance, partners

Powers “What if” scenario modeling

Cloud-based: fast, elastic, value

Trusted across Global 1000

Singular, obsessive focus



Executive S&OP Final S&OP Plan

Business Strategy Scenarios S&OP Finance

Executive S&OP

Final Consensus Plan Final Supply Plan

Statistical Forecast

Marketing Marketing Plan

Sales Management Sales Plan

Finance Revenue Plan

Demand Planning Demand Plan

S&OP Sales

S&OP Ops

Procurement Procurement Plan

Finance Inventory Investment

Inventory Inventory Plan

Sourcing Allocation Plan

Production Rough Cut Capacity

Financial Forecast Operating Budget M&A Strategy Capital Investment

S&OP Collaboration Customer

Forecast Supplier

Commit Plan

Consensus Unconstrained

Forecast

All Business Aspects Integrated



Executive S&OP Final S&OP Plan

Business Strategy Scenarios S&OP Finance

Executive S&OP

Final Consensus Plan Final Supply Plan

Statistical Forecast

Marketing Marketing Plan

Sales Management Sales Plan

Finance Revenue Plan

Demand Planning Demand Plan

S&OP Sales

S&OP Ops

Procurement Procurement Plan

Finance Inventory Investment

Inventory Inventory Plan

Sourcing Allocation Plan

Production Rough Cut Capacity

Financial Forecast Operating Budget M&A Strategy Capital Investment

S&OP Collaboration Customer

Forecast Supplier

Commit Plan

Consensus Unconstrained

Forecast

All Business Aspects Integrated

Finance Market

Product

Demand

Market Supply

Supply

Capacity

Executive Planning & Scenarios



Improve Agility and Flexibility Focus on What Matters Understand Complexity and Its Impacts

Volatility

Imp

ac

t

Statistical Forecast with

Exception Monitoring

Collaboration with

Exception Monitoring

Stocking Strategy: Min/Max, Safety Stock, etc. with Exception Monitoring



Demand Planning Policy Steelwedge Policy Analysis Tools



Steelwedge Test Drive

Why Test Drive Live System = Real User Input = Real Proof Point Validate Requirements Assumptions (Customer & SW) Validate Data Health and Availability (Customer & SW)

What is a Test Drive Compass Express “Best Practices” platform hosted by SW One time data load 8 hours of Hands-on Training

Optional: Integrated Planning Assessment / Design workshop



Ed Lewis Ed Lewis joined Steelwedge in 2009 and brings over twenty years of leadership experience providing sales and operations planning and supply chain solution design, development and implementation. Prior to Steelwedge, Ed was CEO and President of Amitive, Inc (acquired by GXS) which he founded in 2004. Under his direction the company grew from start-up to a leading SaaS supply chain synchronization and execution provider controlling complex supply chains around the globe. Prior to launching Amitive, Ed designed and implemented global SCM solutions for numerous companies, including Mitsui & Co., as a Sales and Operations Executive and consultant. Ed holds a Juris Doctorate from Western State University, College of Law. The Steelwedge Solution Steelwedge, like our name, is a powerful, yet simple tool. The company is a pioneer in delivering cloud-based Integrated Business Planning (IBP.) Steelwedge Sales and Operations Planning (S&OP) solutions supercharge well-established, but complex collaborative planning processes that balance demand and supply, enable "what-if" scenario planning connecting operations with business strategy and financial performance. Our robust Integrated Business Planning Platform extends the value of customers' investments. Large global enterprises, including five of the Fortune 100, trust Steelwedge to provide a clear line of sight from plan to performance to profit across demand, supply and finance systems. This visibility, in turn, empowers more agile "what if" scenario testing and decision-making to minimize confusion, maximize efficiency and optimize profit in even the most volatile business environment.


A Brief Introduction… …Chris Turner Co-founder of StrataBridge, Chris works with a range of clients worldwide, across industry sectors, on strategy development, innovation and integrated decision making. A highly respected facilitator, Chris has a unique ability to understand and simplify complex business issues and opportunities and translate these into action. He has worked with leadership teams around the world, helping them to articulate, share and realise their strategies through aligning the organisation, integrating decision making and capability building.

Chris’s long-term client relationships are built on his ability to balance the delivery of fast results with sustainability, and Chris’s clients include Anheuser-Busch, Bakehouse, Coca-Cola, Compass Minerals, Mars, Mass Mart SA, PZ Cussons, SC Johnson, Shell. …StrataBridge StrataBridge is a boutique consulting firm that specialises in advising fast-moving, brand led organisations on strategy, innovation and operations.

StrataBridge help create and develop the relevant thinking, processes, capabilities and behaviours to allow organisations to bridge the gap between where they are and where they want to be. In short, we connect the dots between hard and soft organisational issues to create the bridge between a client’s real world and their ideal world. Chris can be reached at: e | [email protected] m | +44 7802 252 003 o | +44 1277 633 433 w | www.stratabridge.com



Thank You