Many CP companies aim to get an Integrated Business Planning (IBP) process running. To achieve good results they are considering different aspects.
Read the interview with Jan Wouters from Capgemini about the role of S&OP for IBP in consumer products companies.
Jan is acknowledged expert for IBP from Capgemini. He is heading the global SAP Supply Chain community in Capgemini, while working for large global companies in the CP industries.
Jan Wouters
Marion: Could you describe the ‘golden’ IBP process for CP companies?
Jan: There is no ‘golden’ IBP process, as companies differ in structure and challenges. However a five-step monthly process is seen as best Practice. The first step is the Portfolio Planning and Review in which the major changes in the product portfolio are discussed : which new products / brands are launched, where promotions are important and what is the performance of the present portfolio. The results of this process go into the step of Sales Forecast and Demand Planning, where Sales & Marketing together with Supply Chain agree on the future sales and demand for the portfolio and plan the promotions. In the monthly planning cycle this process is executed in the second week of the month, ending in the Sales and Demand Review. The new Demand plan is input for the next process, the Supply Network Planning part. Here the new forecast is evaluated on available capacity, production plans, inventory and sourcing plans, with scenario planning in case of supply chain constraints. This ends in the third week with the Supply Review meeting. In the last week of the month the Integrated Reconciliation is performed, where the Finance Department translates the Demand and Supply plans in a Rolling P&L for the next 12-18 months. This P&L translates the Volume forecast into a Value forecast, using Sales price and COGS projections to calculate the Gross margin and EBIT/EBITDA for the next year. The last step in the IBP process is the Business Review, where the management team discusses the Budget-Actuals-Forecast for this and next year. Here also the gaps against budget are closed with new activities.
Marion: What is the role of S&OP in this IBP process?
Jan: In the more traditional view, S&OP covers the two steps of Demand and Supply Planning, companies have grown into mature S&OP processes and taking the step to do the Portfolio Planning and Financial Integration. A structured S&OP process, driven by a strong culture of collaboration, KPI’s and responsibilities from the Sales and Supply Chain departments is an enabler for IBP. However the step to enhance S&OP with the Financial Integration requires extra efforts and can only be done with a Top-down approach and full management commitment.
Marion: Why is it so attractive for CP companies and what are the benefits?
Jan: IBP is attractive as it links the strategy of a company for the next years with the day-to-day operations. Markets and consumers change in a growing pace, which requires collaboration in a company to execute the tactical planning processes in a structured way enabled by a strong IBP culture. The silo-based planning processes in Sales, Supply Chain and Finance cannot cope with the local, regional and global market changes. The strong collaboration in the monthly IBP process breaks down these silo’s and gives the participants the clear responsibility to work together on the future of their company. More benefits are the information exchange between the different business functions, a structured planning, simulation and reporting environment and the Single set of numbers on which the management can make profound decisions.
Marion: Which role plays the right technology?
Jan: Many companies have started the S&OP processes with support of Microsoft tools, which leads to out-of-date, fragmented and often political reports to support the process. Simulations on e.g. sales prices, COGS and capacity require a harmonized technology platform for support. Big data volumes have to be processed during the IBP process and also the reporting requirements are difficult to cover with a fragmented technology. The direct link to the operational ERP environment to get actual sales, supply chain and finance data is crucial for the IBP process. The results of the IBP processes also have to be available in the ERP environment after the major decisions are made.
Marion: What are the major challenges to get the process running?
Jan: These are on the three levels of people, process and technology: the management must fully commit to the organizational aspects of IBP by creating the right culture and structures for IBP. Collaboration and commitment are key in the five processes, it is hard to change from silo-based, fragmented planning processes into a monthly IBP process. Most S&OP processes have started with bottom-up initiatives from Supply chain, trying to convince Sales and Marketing to join without pointing out the benefits. The IBP process leads to the One Number company and this requires a sound technology platform for support. Besides this the main challenge is to agree upon a Common Planning Hierarchy between Sales, Supply Chain and Finance, where on the market and product axis the right hierarchy levels are agreed for planning and reporting. This is a real master data challenge, especially when the different departments are planning on their own set of characteristics.
Marion: What is the conclusion when we talk about S&OP and IBP?
Jan: Many companies are presently executing projects to reach a higher level of maturity in the S&OP and IBP processes. It requires them to take the step from short-term planning to more tactical planning and collaboration. It is like the ERP implementation they had before where standardized and harmonized processes had to be designed to support the operational activities. In IBP, this standardization and harmonization is again the challenge, now on the tactical planning level. Local and regional deviations are not acceptable, therefore a successful step in S&OP and IBP maturity can only be achieved by a top-down approach and a strong direction and support from the management.
Marion: Do you have a recommendation for CP companies?
Jan: Approach S&OP and IBP as a company-wide, management driven initiative with an agreed roadmap, the right change management and a future proof technology like SAP HANA to support the One number company.
Marion: Thank you Jan for the interview!
For more information on SAP new technology SAP HANA or SAP Sales and Operations Planning powered by HANA have a look at http://sophana.com/
Top Ten S&OP Value Drivers Enabled by SAP HANA
- Unlimited Simulation: What-if changes by anyone, anytime, on the full detailed demand-supply-finance model from easy-to-use Excel planning views!
- Scenario Comparison: Compare and promote scenario plans without compromising speed and model size.
- Instant Financial Plan Impact: Change your plans and immediately see the effect on costs and gross and net profit across the entire business.
- Real-time Alerts: No more waiting for the alert to show up, it’s already there.
- Real-time Customizable Analytics: See the impact of changes as you click refresh in state-of-art analytics!
- Real-time Constrained Planning: Change demand and see the impact based on supply constraints – without having to get a cup of coffee.
- Load in the Details: Bring in detailed data from APO and any other system without pre-aggregating to simplify data integration among other things.
- Calculate at the Detailed Levels: Get accurate results by computing financial and supply calculations at low levels. Even seemingly simple calculations like revenue will dramatically improve.
- Drill Down, all the Way Down: Work at the aggregate level (e.g., by Family) and easily drill down to specific areas within the same view in Excel or analytics (and change the detailed mix).
- Drive Execution: We keep and compute details by product, resource, customer, component, etc. So the data is ready for use in APO, other planning systems and your ERP—to drive even more value!
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