866.P4D.INFO | Plan4Demand.com | Info@plan4demand.com Every Company will have to manage "Gaps" in their Operating Plans. Understanding the key drivers of these gaps is critical to a robost S&OP Process. Check out this webinar on-demand at http://plan4demand.com/Video-Profit-Plan-Gap-Closers

1. S&OP Leadership Exchange: Gap Closers
The Web Event will begin
momentarily
with your host:
Andrew McCall

2.  Quick Introduction
 Defining a “Gap to Plan”: What is this in your organization?
 Risk & Opportunity: How do they fit into the Gap closing discussion?
 Different types of Gaps to consider
 Developing Solid Gap Closing Activities
 Discussion & Closing

3. • Five Compelling Facts from the Research
o Best-in-Class companies have 15% -25% higher average Customer Service Levels than All Others.
o Best-in-Class companies have three times lower Cash-to-Cash cycles than All Others.
o Best-in-Class companies have 35% greater forecast accuracy at the product family level than All
Others.
o Thirty percent (30%) of Best-in-Class companies have increased their inventory turns in the last six
months as compared to 10% of All Others.
o Sixty percent (60%) of Best-in-Class companies have increased their perfect order percentage to
customers versus 20% of All Others.
Strategic Actions Taken by Best-in-Class Companies
Create a profit optimized supply- 50%
24%
demand balanced plan 28%
Manage demand forecasts within the 39%
53%
S&OP plan 51%
Trying to reduce inventory to free up 39%
52%
working capital 46%
Integrate financial planning and 33%
35%
budgeting with the S&OP process 43%
Manage supply constraints within the 31% Best-in-Class
36% Average
S&OP plan 29% Laggards
Source: Aberdeen Group, July 2009
0% 10% 20% 30% 40% 50% 60%
Percentage of Respondents, n = 214

4. Item Best in Class Your Current Potential
Results* State
Inventory Reduction 15% - 25%
Service Level Improvement 3% - 5%
Excess & Obsolete Reduction 25%
Forecast Accuracy (product family level) 82%
 Soft Benefits:
o Improvement of Accountability & Control
o Detailed Assumptions Supporting Plan from Marketing and Sales, through the Planning and
Operations organizations and ultimately integrated with finance.
o Earlier visibility into issues
o Embedded Communication & Complex Project Management Capability
o Action Orientation
o Exception and KPI focused
* Aberdeen Group 7/2009
* Tom Wallace - S&OP Cost & Benefits 2009

6.  Does some of this sound familiar?
 Your organization has moved towards an integrated S&OP Process
 You have made investments in the processes to support it, as well as technology to
enable it in some way, shape or form
 You are evolving the process to be more sensitive to market conditions and
fundamental drivers of your demand
 You have broad based involvement in S&OP, across many organizations and layers in
the organization
 And you work hard on this operating plan, but in some way – our view of the future is
not matching up with our expectations….

8.  We have a Gap to plan…What does that mean:
 Projected Shortfall against expectations
 Market Share and Growth are not trending according to our plans/assumptions
 Volume commitments to our plants or suppliers may not be met
 Impact on compensation and incentive based pay – from executives to sales people to
the resources on our plant floor – this has an impact
 Change Management Point – S&OP needs to exist in a culture that is
transparent, expects to uncover trouble and gaps in time to do something
about it – that can’t happen where we don’t deal with some hard truths. It’s
a fact based, data driven environment.

9.  Risks
 Potential drivers of a non-trivial, negative impact that are NOT "baked"
into the S&OP one-set-of-numbers.
 These may be factors outside of your control, or they may be gaps to
stated annual plan due to soft demand.
 Examples:
 Production Capacity not meeting planned ramp up
 Supplier Performance below standard
 Revenue is soft across the industry
 Opportunities
 Potential drivers with a non-trivial, positive impact that are NOT "baked"
into the S&OP one-set-of-numbers.
 These may be factors outside of your control, or they may be positive
deviation from stated annual plan.
 Examples:
 New Product Introduction ready to Launch
 Additional Capacity available to support promotional push of specific products
 Geographic Expansion

10.  Critical Elements to using these effectively:
 Consistent, Continuously updated set of R&O that travel from meeting or
process step to the next.
 A depth of horizon that allows us to develop these over the course of many
cycles. Lots of cross functional work goes into flushing these out and making
them realistic – the early the visibility, the better.
 Common Language, and principles for applying these. Can not have a
version of these for Finance, that is stated differently in marketing, sales and
production.
 They are dynamic – they will evolve month over month and get more
realistic, as they evolve, the need to be tested and continually measured

11. • New Product Introductions
• Cash Flow
• Market Expansions
• Margin/Mix
• Pricing
• Gross Profit
• M&A
• Market Share/Growth
Assumptions
• Forecasted Demand
• Capacity • Product Mix
• Schedule Attainment • Sales Goal Attainment
• Suppler Performance • New Product Demand
• Inventory Position Projections
• Customer Fill Rates

12. • Outline Drivers
• Understand Impact
Identify Gap • Identify Timing
• Root Cause Analysis
• Quantify Impact
Eliminate Risk
• Develop Action
Driving Gap? • Implement
• Feasibility
• Quantify & Agree on Upside
• Detail Investment Requirements
Capitalize on • Risk Management
Opportunity to • Develop Action
Close Gap
• Implement

13.  Executive Team Sets Direction in Motion
 Each team owns a component of the solve
 Cycle process works the problem through a cycle (or more)
 Once adopted, impact is now included into the Plan
 Assumptions are updated for tracking as plan is executed and moves
forward
 Constant Monitoring outside of S&OP – Management “to do” list or action
log
 Example: Walk through the Profit Gap

14.  Every company will have to manage Gaps to the operating plan.
Understanding your key drivers of these gaps is critical to a robust S&OP
process.
 The process needs to constantly work on quantifying Risks & Opportunities,
so that a consensus evolved around the impact of risk, and the feasibility of
taking advantage of opportunities
 Gap closers, once put in place are part of the number – Assumptions, and
“risk to plan” are used to monitor progress
 Sets the direction for the org from an execution standpoint (demonstrated
performance becomes the link)

15. February 29th March 28th April 25th
What does Harnessing Innovation -
“Good” Getting to one number Planning Challenges
look like to your
organization?