Making Sales and Operations Planning a Truly Collaborative Process, Dick Ling

Ling Coldrick Partnership
Making Sales and Operations
Planning a Truly Collaborative
Process
Dick Ling
© D. Ling and A.Coldrick 2010
Sales & Operations Planning Summit
Caesars Palace, Las Vegas, NV
January 28, 2011

How many people have picked
up some good ideas at the
conference about improving
the S&OP process?
© D.Ling and A.Coldrick 2010

Prioritize them
1 2 3 4 5 6 7
X X XX X X
JUST DO IT

Agenda
• Collaboration
• Integrated Reconciliation
• Scenario Planning

Why is it important that S&OP
be collaborative?
© D. Ling and A.Coldrick 2010

Ling Coldrick Partnership © D.Ling and A.Coldrick 2010
1986

In the early days of S&OP
development, we emphasized
leadership, all areas of the
business being involved and
managing at the aggregate
level(product families)

Why did we not emphasize
Collaboration at that time?
• As a young boy I heard about the
collaborators during World War
Two and therefore the term did
not resonate with me until
recently.

S&OP
Meeting
MANAGING
SUPPLY
MANAGING
DEMAND
Pre-S&OP
Meeting
Original
5 Step S&OP
Process
GATHER
DATA
1984

SENIOR
BUSINESS
MANAGEMENT
REVIEW
INTEGRATED
RECONCILIATION
WITH BUSINESS PLAN
MANAGING THE
PORTFOLIO &
NEW ACTIVITIES
MANAGING
SUPPLY
MANAGING
DEMAND
Sales and Operations Planning
Ling/Coldrick Model
1993

SENIOR
BUSINESS
MANAGEMENT
REVIEW
INTEGRATED
RECONCILIATION
WITH BUSINESS PLAN
MANAGING THE
PORTFOLIO &
NEW ACTIVITIES
MANAGING
SUPPLY
MANAGING
DEMAND
This process will work best when it
is done in a truly collaborative way.

SENIOR
BUSINESS
MANAGEMENT
REVIEW
INTEGRATED
RECONCILIATION
WITH BUSINESS PLAN
MANAGING THE
PORTFOLIO &
NEW ACTIVITIES
MANAGING
SUPPLY
MANAGING
DEMAND
The secret is understanding &
implementing Integrated
Reconciliation.

Forces a cross-functional way of operating
and this requires collaboration
integrate /|inti|greite/ adj.
1. Combine parts into a whole; incorporate.
2. make into a whole by bringing all parts together; unify.
3. join with something else; made part of a larger unit; unite.
4. form into one whole; make entire; complete.
5. complete (imperfect thing), by addition of parts
reconcile /|rεk( )n|sail/ n.
1. make (two or more apparently conflicting things) compatible or
consistent with each other.
2. bring back to harmony; cause to be no longer at variance.
3. make consistent or congruous; bring to agreement.
4. harmonise, make compatible, show compatibility of by argument or in
practise (apparently conflicting facts, statements, qualities, actions of
one such with others)
5. bring into consonance or accord.
Integrated Reconciliation

Integrated Reconciliation will
not work well in your Company
unless you either have or
develop a collaborative culture

What needs reconciling?
• New directives from senior management
• New opportunities in the market place
• New product timing
• Deviations from the business plan
• Supply problems
• Any issue emerging from the monthly process

Who Makes up the Integrated
Reconciliation Team
Who Needs to Collaborate?
• You need a leader or process owner of the
Integrated Reconciliation process
• Leaders from finance, new product development,
sales and marketing and supply chain
• Members from each area of the company who are
needed to reach a consensus, make decisions and
make recommendations on a path forward

OPTION 5
OPTION 4
OPTION 2
OPTION 1
OPTION 3
STRATEGY
GAP
OPTION 7
OPTION 8
OPTION 6
2 YEARS 5 YEARS0
LATEST VIEW
OPTION 9
MANAGING
NEW
ACTIVITIES
MANAGING
SUPPLY
MANAGING
DEMAND
MANAGEMENT
BUSINESS
REVIEW
Analysis/
Decisions
Required
Options/
Contingencies
Decision
Support
Interactive
Emerging
Issues
European Business Summary
Austria
Belgium
France
Germany
Greece
Holland
Ireland
Italy
Norway
Portugal
Spain
Switzerland
UKInventory KPIs 1-3 KPIs 4-6
Brand Y
Brand X
Major Assumptions (In ata)
Price rise q303 75% certain
Supply does not inclunewly
acquired plant Italy
Based on IRR total growth
of 8%…….
Major Changes thiiteration
Timing of price rise brought
forward by 3 weeks t Tesco
range review date
…….
Vulnerabilities and
Opportunities
Capacity constrained. If erises
by 12% stockouts occur qtr 3 03
Low stock position leads to
Emerging Issues and Gaps
Supply at near fullcapacity.
Overtime cannot uaranteat
Avezzano over Christmas
……
Decision Made in PreviousSteps
Low service rates will be erated
Reduce the bridge buying ading
price rise
……
Decisions Required – endations
& Costs
Phase marketing spend in 0bolster
demand through price rise.
Pull £1.5m in media from
qtr 4 03 to qtr 3 03
Brand Z
Europe - Total Business
68
980
378 370
653169
1084 1060
1796
1687
0
200
400
600
800
1000
1200
1400
1600
1800
2000
02Actual 03Current
View
03 LQR 03 Plan 04
Forecast
03 Plan
$ MM's Gross Margin
COGS
European Rolling Quarterly Summary
245
96
245 245
98
245
9589 89 89 96 96
473
468
425 430
270 274
256 255 256
274285 274
0
50
100
150
200
250
300
350
400
450
500
Current
View Q2
LGR Q2Plan Q2 Current
View Q3
LQR Q3Plan Q3 Current
View Q4
View Q1
LQR Q1Plan Q1
$ MM's Gross Margin
COGS
Euro Total
Performance
Monitoring
Financial
Impact &
Analysis
INTEGRATED
RECONCILIATION
WITH BUSINESS PLAN
What is the work of the Integrated Reconciliation team?

OPTION 5
OPTION 4
OPTION 2
OPTION 1
OPTION 3
STRATEGY
GAP
OPTION 7
OPTION 8
OPTION 6
2 YEARS 5 YEARS0
LATEST VIEW
OPTION 9
What is the work of the Integrated Reconciliation team?
MANAGING
NEW
ACTIVITIES
MANAGING
SUPPLY
MANAGING
DEMAND
•Review global performance outlook and differences
between business strategy, budget and forecast.
Reconcile gaps between new activities, demand,
supply and financial targets
•Highlight impact of changes (units and financials),
gaps, opportunities and major integration issues
over a 2 Year-end horizon
•Develop scenarios considering the
interdependencies and trade-offs that drive overall
business performance.
•Redirect issues that should have been resolved
elsewhere, in line with organisational
accountabilities
•Make recommendations and/or decisions for
alternatives with business impacts for each
•Elevate to senior management major issues and
opportunities still requiring resolution.
MANAGEMENT
BUSINESS
REVIEW
Analysis/
Decisions
Required
Options/
Contingencies
Decision
Support
Interactive
Emerging
Issues
European Business Summary
Austria
Belgium
France
Germany
Greece
Holland
Ireland
Italy
Norway
Portugal
Spain
Switzerland
UKInventory KPIs 1-3 KPIs 4-6
Brand Y
Brand X
Major Assumptions (In ata)
Price rise q303 75% certain
Supply does not inclunewly
acquired plant Italy
Based on IRR total growth
of 8%…….
Major Changes thiiteration
Timing of price rise brought
forward by 3 weeks t Tesco
range review date
…….
Vulnerabilities and
Opportunities
Capacity constrained. If erises
by 12% stockouts occur qtr 3 03
Low stock position leads to
Emerging Issues and Gaps
Supply at near fullcapacity.
Overtime cannot uaranteat
Avezzano over Christmas
……
Decision Made in PreviousSteps
Low service rates will be erated
Reduce the bridge buying ading
price rise
……
Decisions Required – endations
& Costs
Phase marketing spend in 0bolster
demand through price rise.
Pull £1.5m in media from
qtr 4 03 to qtr 3 03
Brand Z
Europe - Total Business
68
980
378 370
653169
1084 1060
1796
1687
0
200
400
600
800
1000
1200
1400
1600
1800
2000
02Actual 03Current
View
03 LQR 03 Plan 04
Forecast
03 Plan
$ MM's Gross Margin
COGS
European Rolling Quarterly Summary
245
96
245 245
98
245
9589 89 89 96 96
473
468
425 430
270 274
256 255 256
274285 274
0
50
100
150
200
250
300
350
400
450
500
Current
View Q2
LGR Q2Plan Q2 Current
View Q3
View Q4
View Q1
LQR Q1Plan Q1
$ MM's Gross Margin
COGS
Euro Total
Performance
Monitoring
Financial
Impact &
Analysis

Air Traffic Control for Issues and
Opportunities
To be effective the business needs to know where these
issues are and guide them into land for decisions in the
appropriate timing and sequence to minimise risk and
maximise business value.
All businesses have a range of issues and opportunities
‘in the air’ at any point in time moving at different
speed, at different altitude, in different directions.

The internet and teleconferencing
capabilities available today make
this much easier to accomplish
because there is no need for face
to face meetings

Preparing information for the Management Business Review
Volumes, Financials and the Story in One Sheet or Screen
Ongoing Planning Assumptions
Major Assumption Changes In this Cycle
Emerging Issues
Decisions made in Previous steps
Risks and Opportunities
Decisions Required

2/1/20
11 Pg 23
Product Family: WIGITS I &II
WW Canto - Demand (FY06)
0
10
20
30
40
50
60
70
80
90
100
FY05 Shipments 20 44 26 43 28 35 29 25 35 20 43 37
FY06 July Demand Plan 27 7 6 31 31 32 26 19 61 29 69 92
FY06 June Finl. Forecast 22 22 22 27 27 28 21 21 21 47 48 48
Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep
*Actual
FY05Shipments 385
FY06JulyDemandPlan 430
FY06JuneFinl.Forecast 354
WW Canto - Supply (FY06)
0
10
20
30
40
50
60
70
80
FGI Inventory 19 34 26 18 24 18 9 5 3 15 15 -9
FY05 Actual Build 35 55 31 21 26 34 30 34 33 26 31 43
FY06 August Supply Plan 28 22 2 19 39 25 17 15 63 41 69 68
Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep
*Actual
Major Assumptions (In Data)
1. Wigit II Launch schedule
 US IVD Clearance –
estimated Sep 06
 Japan Registration approved
to sell Canto II in August.
 China and Taiwan
registration estimated by
end of FY07
2. Based on current inventory and
open purchase orders the
assumption is that the current
Wigit supply will satisfy current
demand of 48 units (Aug 06 to Aug
07). No additional demand can be
satisfied.
Major Changes this Cycle (In Data)
1. Last Month’s statement (Current
Wigit I Demand from July to August
07 is 45 units. No additional Wigit I
can be built based on material
availability.)
2. Europe increased Wigit II demand
by 16 units for the period of August
and September.
Risks and Opportunities (not in Data)
1. High volume for Wigit lines still
causing serious constraints in test.
2. Chassis availability for Wigit II is still
an issue. Supplier concern about
meeting current requirements for
September.
Decisions Made During this Cycle
1. Strategy about Wigit II Demo units is
that new builds will take priority
unless otherwise defined by US Sales
and Marketing leadership.
Decisions Required -
Recommendations & Costs
1. For the remaining Wigit II Demo units
we need to decide if additional material
be purchased for remanufacturing.
Emerging Issues and Gaps (in
Data)
1. Wigit II mix is still not stable
and could create supply issues.
2. Production still unable to meet
plan. Production resources will
be stretched in September.
FY05ActualBuild 399
FY06AugustSupplyPlan 408
FY06OpsBudgetPlan 450
WW Canto - Demand & Supply (2 year end)
0
20
40
60
80
100
120
140
160
180
200
FY06 June Demand Plan 40 94 106 190 112 110 111 114
FY06 July Supply Plan 52 83 95 178 143 112 112 114
FY06 Jun Fin FC/FY07 Fin Pln 66 82 63 143 82 91 100 105
FY06 Q1 FY06 Q2 FY06 Q3 FY06 Q4 FY07 Q1 FY07 Q2 FY07 Q3 FY07 Q4
FY06FY07
FY06JuneDemandPlan 430 447
FY06JulySupplyPlan 408 481
FY06JunFinFC/FY07FinPln 354 378
Canto A Regular,
185
Canto A RUO &
Refub, 34
Canto II Internal,
38
Canto II End
User (incl. Inv.),
173
FY06 WW Canto Demand Breakdown
Canto FY06
CA
2%
EU
45%
US
34%
AP
10%
JP
6%
NLA
1%
SLA
2%
FY06

2 YEARS 4 YEARS0
2 YEARS 4 YEARS0
2 YEARS 4 YEARS0
Integrated Reconciliation will look quite
different depending on which models you are
supporting
5
4
3
2
1
Line Extension and Promos
2 YEARS 4 YEARS0
Existing Portfolio
2 YEARS 4 YEARS0

Week 1 Week 2 Week 3 Week 4
GLOBAL
REGIONAL
(e.g. EUROPE)
COUNTRY
Your Organisational Structure will Shape your S&OP process
Activities that need to be managed and
decisions that need to be taken GLOBALLY
decisions that need to be taken REGIONALLY
decisions that need to be taken LOCALLY

REGION
2 COUNTRY
NEW
PRODUCT
REVIEW
COUNTRY
CUSTOMER
8 SENIOR
MANAGEMENT
REVIEW
COUNTRY/
REGION
4 GLBL
DEMAND
REVIEW
3 COUNTRY
DEMAND
REVIEW
5 PLANT
SUPPLY
REVIEW
5 GLBL
SUPPLY
REVIEW
7 INTEGRATED
RECONCILIATION
(GLOBAL)
9 SENIOR
MANAGEMENT
REVIEW
GLOBAL
GLOBAL
6 INTEGRATED
RECONCILIATION
(COUNTRY/REGION)
1 REGION NEW
PRODUCT
REVIEW
Example Global Model
1 GLBL NEW
PRODUCT
REVIEW
4 REGION
DEMAND
REVIEW

The PROCESS and the
PLAYERS must change as
the business conditions
evolve

What will it take to enable
the organization to do the
integrated reconciliation in a
truly collaborative way?
The Question Is:

What will it take?
• Leadership
• Attitude
• Education
• People understanding the value
• Support tools
• Experience and results

Collaboration
• When people see that something better can
result from sharing ideas and information
and that is what is right for the company not
who is right---Then and only then will the
people be in collaboration mode

Extend Collaboration Beyond your
Company, where it is appropiate
• Your Customers-CPFR
• Your Suppliers

2 YEARS 4 YEARS0
2 YEARS 4 YEARS0
2 YEARS 4 YEARS0
The more that there is uncertainty about the
future the more you may need to do scenario
planning.
5
4
3
2
1
Line Extension and Promos
2 YEARS 4 YEARS0
Existing Portfolio
2 YEARS 4 YEARS0

What is Scenario Planning
• Scenario Planning involves testing business
strategies against a limited number of
alternative futures.
• It can be used to help develop the Strategic
plan
• It can be used to help execute your strategic
plan through the S&OP process
• We need a new set of tools in order to
accomplish Scenario Planning

Developing Scenario’s
• What is your Strategic Plan?
• What is your Business Plan?
• How do you measure whether you are achieving
them?
• What assumptions are supporting them?
• What are the elements of your plans and
anticipated results that could be affected by
change?
• How could we evaluate the results or these
changes and see the possible results

When is Scenario Planning Needed
• When there are major issues in your ability to
sell, produce or hit your financial targets
• When there are major opportunities that you
would like to explore
• When there is much uncertainty in the
market place

Using Scenarios in Strategic Planning
• Acquisition of a new business
• Entry into a brand new product line
• Entry into a brand new market
• Employing a dramatically new marketing
approach
• Moving production offshore

Scenario Planning within S&OP
Environment
• Changing timing of new product introduction
• Change in product life cycle
• Massive swing in demand - UP or Down
• Major supply problem
• Price change – UP or Down
• Major cost change – Up or Down
• Change in inventory strategy
• It probably isn’t needed every month

Scenario Planning
• Each scenario that you are exploring should
therefore be defined by a set of assumptions
in order to meet your business goals
• A different scenario would be to define a
different set of assumptions

What are you trying to determine
with each scenario?
• Will it solve the business plan problem or
take advantage of an opportunity?
• What will it do to profitability?
• What will it do to market share?
• Can I accomplish it with my resources?
• Is the risk worth it?
• What did we learn from looking at these
scenario?

Scenario Planning
• Scenario Planning does not make the
decision for you, it gives you better
information so that you can make a more
informed decision in charting your future

New tools are finally emerging that
will assist you with your
scenario planning
You can see the term starting to
appear more in presentations and
in software vendors literature about
their capabilities

Andy and I are collaborating with Portfolio
Decisions in order to help them use their
powerful Scenario Planning software
(which has been highly successful in the Oil
and Gas industry for 15 years)
to operate in a Sales & Operations planning
environment with your S&OP data
© R.Ling and A.Coldrick 2010

Scenarios with Graphic Results
Source: Portfolio Decisions

Scenario Planning
• In the past the focus in scenario planning has
been on optimization of resources
• In the future the focus will also be on new
market scenarios in order to maximize
business results
• There needs to be a better definition of
scenario planning that is understood by all
We are working on that

My Challenge to you
• Explore improving your Integrated reconciliation
process.
• Adopt Collaboration as a way of life.
• Look at Scenario planning as a tool to help improve
your decision making process.
• Obtain continuous improvement of your S&OP
process through continuous assessment.

Ian Wilson
However good our research may be, we
shall never escape from the ultimate
dilemma that all our knowledge is about
the past, and all our decisions are about
the future

Making Better Decisions
about the future and
setting direction is what
Sales and operations
planning is all about

Thank You
lingcoldrick.com
dick.ling@lingcoldrick.com
andy.coldrick@lingcoldrick.com

Making Sales and Operations Planning a Truly Collaborative Process, Dick Ling

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Making Sales and Operations Planning a Truly Collaborative Process, Dick Ling