ventana research s&op study results for oliver wight

Sales and Operations Planning Research Study ResultsPresented to Oliver Wight February 23, 2007

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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?

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?

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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

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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%



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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.



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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?

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.



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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?

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


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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?



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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.



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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.



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3b. There is a lot of room for improvement

24%

29%

17%

30%

0%

5%

10%

15%

20%

25%

30%

35%


26%

10%

32% 31%

0%

5%

10%

15%

20%

25%

30%

35%


22%

13%

24%

41%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%


19% 19%

6%

56%

0%

10%

20%

30%

40%

50%

60%


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

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



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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

`

`



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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



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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


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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.



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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.



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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



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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


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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



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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.



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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



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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



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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



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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



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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



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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.



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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.



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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



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Questions

Colin SnowVentana Research

[email protected]

www.ventanaresearch.com

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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]

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