Driving Sales and Top Line Revenue Improvements through Executive S&OP

Supply Chain and Logistics April 13, 2007

Driving Sales and Top Line Revenue Improvements
through Executive S&OP
Hypothesis
Aberdeen research in 2006 identified that traditional S&OP has evolved into Integrated Business
Planning among Best in Class companies. Traditional S&OP can be thought of consisting of two
distinct stages – operational S&OP and executive S&OP. The focus of this research is on the
executive S&OP process. The thesis of this research is that Best in Class companies are most
focused on improving their top line sales and revenues through initiatives like improving the
ability to create a profit-optimized supply-demand balanced S&OP plan and improved 360-
degree view of the operational and financial aspects of S&OP through BI/Analytics.

Best In Class PACE Hypothesis
Research Background
In 2006, Aberdeen research found that traditional sales and operations planning (S&OP) processes
and supporting technologies are no longer sufficient in today’s high-pressured business
environment.
Continued disconnects between financial goals, How to Participate in the Study
marketing efforts, and supply chain actions erode
If your company is a:
corporate performance and cause unnecessary
√ Manufacturer
footwork and redundant manual data entry. When all
√ Distributor
parties in the sales and operations planning value chain
— from shop-floor managers on up to the CEO — can √ Retailer
base their decisions on a shared, consolidated pool of √ Supply chain planning software
information, companies can ensure that a single, vendor
unified plan is driving the business. √ S&OP software vendor
√ Business Intelligence software
This is why S&OP has evolved to become Integrated vendor
Business Planning (IBP). Figure 1 illustrates the √ Consulting organization that
different stages of the IBP process. provides S&OP-related services
Aberdeen is launching new research on steps 4 and 5 Contact us right away
of the Integrated Business Planning process; these to get involved in this study!
stages are also referred to as the “executive S&OP
stage.”

Announcement Find Out How On-Demand Solutions Enable B2B Collaboration

Driving Sales and Top Line Revenue Through Executive S&OP
Research Brief Page 2

Figure 1: Elements of Integrated Business Planning

1. Sales Revenue Planning

New Product Planning
Sales Opportunity Planning
Revenue, Margin and Profitability
Planning
Alignment to Corporate Goals

5. Management Review 2. Demand Planning

KPI Measurement Demand Forecasting
Working Capital Demand Collaboration

Integrated Business
Gross Margins (sales, marketing,
Inventory Turns operations input)
Plan vs. Actual Demand Shaping
Forecast error
Root Cause Analysis
Planning Process (promotions, other events,
new product introduction)
Consensus Forecasting

4. Profit based Supply/
Demand Balancing 3. Supply Planning

Product Mix Capacity Planning
Constraint Management (Labor Leveling,
What-if Analysis resource Planning)
Allocation of Demand Inventory Optimization
to Supply Material Planning
Consensus Transportation
Source: AberdeenGroup, April 2007
What do Best in Class Companies do Better?
To improve S&OP processes, Best in Class companies are not focusing on lowering cost as their
primary driver, but are instead placing focus on improving their top-line and sales revenue.
These Best in Class companies are focused on providing a 360-degree view of their operational
and financial performance to their executive teams. They are using enablers like BI and
corporate performance tools, S&OP tools, and supply chain planning tools to move beyond
traditional S&OP practices to an Integrated Business Planning process.
New research by Aberdeen will measure the impact of improving the executive S&OP stage,
including top-line benefits such as:
• Improved gross margin
• Improved customer retention (market share)
• Improved order fill rate

© 2007 AberdeenGroup, Inc. Telephone: 617 723 7890
260 Franklin Street Fax: 617 723 7897
Boston, Massachusetts 02110-3112 www.aberdeen.com


The research will also investigate the effect on cost-related measures like:
• Finished goods inventory levels
• Logistics costs as a percentage of revenue
Table 1 shows the hypothesized Best in Class actions that will be proved or disproved during the
upcoming benchmark study.

Table 1: Best-in-Class PACE Hypothesis for Executive S&OP

Pressures Actions Capabilities Enablers
Improve top line Create a profit optimized Profit optimized supply Composite applications
revenue supply demand balanced demand matching for S&OP
plan
Lowering supply Create timely executive Ability to improve ad-hoc Business
chain operating reporting for key metrics reporting/analytics Intelligence/Analytics
costs capabilities for S&OP
Meet customer Create multiple Ability to create and S&OP overlay
mandates for faster, scenarios to analyze manage multiple applications built on top
more accurate and S&OP plan scenarios for S&OP of spreadsheets
more unique
process
fulfillment
Management of Increase the frequency Ability to perform real- Supply chain planning
increasingly global of executive S&OP time dynamic S&OP applications (APS)
supply chains processes
Speed up the new Make the executive Ability to collaborate Spreadsheets
product launch S&OP process more internally and externally
process to be more collaborative during executive S&OP
responsive to
customers
Create risk management Ability to perform risk ERP modules focused
workflows management on S&OP


Case in Point
Seagate Implements Executive S&OP Process Using Integrated Business Planning Solution
Seagate designs and manufactures rigid hard disk drives for use in enterprise servers, mainframes
and workstations, desktop applications, mobile computing, consumer electronics applications, etc.
Seagate has a dynamic business environment resulting in the need for flexible supply chain
applications. They implemented an integrated business planning solution that connects excel from a
desktop environment to a formal DBMS. The solution handles the executive S&OP process from
managing the consensus forecasting process to executive buy-in and plan acceptance, and finally
releasing the plan to manufacturing for enabling material planning.



Key Benefits:
Executive visibility – allows management to look at various plans and create scenarios
around it. Management can model both demand upside as well as downside scenarios. In the
past, management had to rely on analysts as well as extended timeframes to perform a
fraction of these scenarios.
40% improvement in planner productivity – instead of working with multiple
spreadsheets/templates the planners were able to consolidate their input into one interface
Data integrity and cleansing – instead of critical data being stored in Excel and in the
memories of analysts, the data was moved into an Oracle database.
Management and planner commitment – the existing climate of skepticism was turned around
based on the initial success and realized value from this initiative, laying the ground for
future process change initiatives using established methods such as 6-Sigma.
Solution Snapshot
The following categories of technology enablers can help to improve the S&OP process.
ERP S&OP modules – these are the capabilities embedded within ERP systems to help
support the S&OP process. Examples of solution providers in this space: SAP, Lawson, Infor.
Supply chain APS – these are the capabilities available within individual demand planning
and supply planning applications to support the S&OP process.
S&OP Overlay applications – these are the solutions sold as standalone S&OP modules that
can sit on top of existing ERP or APS solutions. These are intended to be deployed as an
integrated solution tying data together from multiple sources and applications.
Composite applications for S&OP – these are emerging solutions that are built using web
services/ SOA based architecture and are intended to be deployed as an integrated solution
tying together data from multiple sources and applications.
Table 1 shows a sample list of vendors who provide solutions for S&OP and the mapping of
these vendors to the above categories.



Table 1: List of Vendors
Vendor ERP Supply Chain BI/ S&OP Composite
S&OP APS Analytics Overlay Applications
Modules Apps for S&OP
Adexa X (DP/SP/IO)
Aspentech X (DP/SP/IO) X
Cognos X
DCRA X X
Demand X X X
Solutions
Equazion X
i2 X(DP/SP/IO/AIO) X X
LogicTools X (AIO)
(ILOG)
Infor X X X
Interace X
JDA X(DP/SP/IO/AIO) X
John Galt X X
Solutions
Lawson X
Logility X(DP/SP/IO) X X
Manhattan X
Associates
Oracle X X X X
Prescient X
QAD X X
SAP X X X X
Smart X
Software
Steelwedge X X X
Software
Supply X X X
Chain
Consultants
Syncron X
Syspro X
TXT e- X X
solutions/G
4 Analytics
WAM X X
Systems



Legend:
Demand Planning – DP
Supply Planning – SP
Inventory Optimization - IO
Advanced Inventory Optimization - AIO (multi-echelen inventory optimization)

Given the industry specific nature of Sales and Operations planning processes, it is important for
enterprises to be aware of the vertical industries that the vendors are focused in. Table 2 will be
helpful in this regard.
Table 2: List of Vendors and Applicable Vertical Markets
Vendor Consumer Discrete Process Retail Semiconductor/
Packaged Manufacturing High Tech
Goods Electronics
Adexa X
Aspentech X (Process) X
Cognos X
DCRA X X X
Demand X X X
Solutions
Equazion X X X
I2 X X X X X
Infor X X X
Interlace X X X
JDA X X X X X
John Galt X X X X
Solutions
Lawson X
Logility X X X X
Manhattan X X
Associates
Oracle X X X X X
Prescient X X
QAD X X X X
SAP X X X X X
Smart X X X X X
Software
Steelwedge X X X X
Software
Supply Chain X X
Consultants
Syncron X X
Syspro X X X
TXT e- X
solutions/G4
Analytics
WAM X
Systems


Sales and Operations Planning and Supply Chain Business Intelligence
Research Brief
Page 7

Related Research

Integrated Price Management: The Key to Technology Strategies for Inventory
Profitable Demand Management; April Management; September 2006
2005 Consumer Industries Strategies for Demand
Technology Strategies for Integrated Management: Sensing, Shaping and Pricing;
Business Planning; July 2006 Nov 2006
Demand Management in Consumer
Industries, Dec 2006

Author: Nari Viswanathan, Research Director, Supply Chain & Logistics,
(nari.viswanathan@aberdeen.com)

Founded in 1988, AberdeenGroup is the technology- driven research destination of choice for the global business executive.
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This document is the result of research performed by AberdeenGroup. AberdeenGroup believes its findings are objective and represent
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AberdeenGroup, Inc. and may not be reproduced, stored in a retrieval system, or transmitted in any form or by any means without prior
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Driving Sales and Top Line Revenue Improvements through Executive S&OP

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Driving Sales and Top Line Revenue Improvements through Executive S&OP