- Why classical S&OP fails in emerging and/or distributor markets - Strategies for successful emerging market integration with existing S&OP and IBP process - Before & after – incorporating distributors/third parties into a powerful S&OP - Introduction steps, challenges and measurable benefits within 12—24 months

1. How to integrate difficult
emerging markets into powerful
S&OP and IBP
Supply Chain Management Strategies Summit – Berlin, 27th – 29th November 2017

2. Mapping Our
Journey
2
Intro to speaker & topic
The problem of S&OP/IBP in emerging markets
Case study
• Facts at project start
• Project steps to success
• Introducing Distributor S&OP
• Results at project end
Conclusions
Questions and answers
01
02
03
04
05

3. INTRODUCTION: INTERNEL AND YOU
3
In Zurich we are implementing consultants for:
 Sales & Operations Planning (S&OP)
 Integrated Business Planning (IBP)
 Collaborative Forecasting Planning &
Replenishment (CFPR)
In Warsaw we operate a professional planning
service centre with outsourced positions for:
 Demand and supply planning
 Inventory planning and optimisation
 Supply chain and project management
 S&OP, IBP and CFPR
Happy to talk to you today:
Rolando Casanova
Managing Director Internel SA, Switzerland
What you want to know…
What you should know….
What you need to know…

4. THE PROBLEM WITH EMERGING MARKETS
4
CEOs at most large multinationals say:
They know that emerging markets hold
the key to long-term success.
Yet:
Those same executives tell us that they
are vexed by the complexity emerging
markets.
They fail to seize key opportunities.
26
34
12
30
0
10
20
30
40
50
60
70
2010 2025
World consumption
$ trillion
38
64
Percentage of retail value sales
from emerging markets 2
0% 20% 40% 60% 80% 100%
Danone Group
Coca-Cola Co.
Unilever Group
Pepsi Co.
Nestle
Mondelez International
Procter & Gamble
L'Oreal Group
Mars
Nike
Developed markets Еmerging markets
Retail value sales share: emerging vs
developed markets 1
1 McKInsey quarterly August 2012
2 Euromonitor International, 2015

5. DEVELOPED VS. EMERGING MARKETS
5
Criteria
Developed Markets – 36/160 1
“We want to be the best in the market.”
Emerging Markets – 124/160 1
“We want to reach the market.”
Stability Growth Politically and economically stable, saturated markets. Limited
growth potential.
Economically on the rise, politically often unstable. Large
populations; immense sales potential.
Structure Covered by an own subsidiary, representative or sales office. Covered by distributors or wholesalers; except for largest
markets with own setup.
Demand Pull-based, regular and easy supply. Smaller but frequent
product deliveries and sales.
Push-based, “non-predictable” irregular demand. Difficult to
ship bulk orders.
Focus Service levels, cost optimisation,
profit margins.
Basic supply chain challenges
 getting products into the country; excessive stocks/write-
offs, stock outs and rush deliveries
 trying to seize sales opportunities; often missed due to
lack of staff and market focus
1 Country classification United Nations – World Economic Situation and Prospects 2014

6. THE PROBLEM WITH DISTRIBUTORS
(“WHOLESALERS”)
6
A distributor is an entity that buys, stores and re-sells products to retailers or customers or end-consumers in a
defined territory or country. Most distributors provide financial support to a supplier/manufacturer's promotional
efforts, local customer services, technical support, after-sales services, etc.
The qualities of a distributor are often unpredictable.
Depending on the product range, country size, market development stage
and the competitive environment, a distributor may be:
Consisting of a few individuals or
hundreds of employees
Fully IT developed or technologically
behind
A single, exclusive local agent (e.g., a market
maker with limited alternatives; or fully
dependent on supplier)
Non-exclusive (and possibly compete with
other distributors or also sell competitor
products)

7. A process to develop tactical plans that provide management the ability to
strategically direct its businesses to achieve competitive advantage on a
continuous basis by integrating customer-focused marketing plans for new
and existing products with the management of the supply chain. The process
brings together all the plans for the business (sales, marketing,
development, manufacturing, sourcing, and financial) into one integrated set
of plans.
THE PROBLEM TO SELL S&OP IN EMERGING MARKETS
7
According to the APICS Dictionary, 14th edition, the definition of S&OP is:

8. STATUS OF S&OP/IBP IN EMERGING MARKETS
8
Distributors in emerging markets
are not integrated into S&OP/IBP:
• No ERP system between supplier and
distributors; limited data visibility
• No resources are assigned as too
many markets – sales manager of
supplier creates a forecast
• Suppliers and distributors focus on
sales; but they’re not the same
• Conflicting product strategies – trade-
off volume vs. margin, strategic sales
vs. street fighting
• Sudden orders impact production
negatively and lead to buffer and
safety stocks all along the entire
supply chain
…and what is done about it:
Use S&OP as a treasure hunt
strategy to get extra sales,
helping to fill gaps in latest
estimates and budgets.
Product
Review
Sales and
Operations
Planning
Demand
Planning
Inventory
Planning
Supply
Planning

9. CASE STUDY – FACTS AT PROJECT START
9
Optical manufacturer with € 60 million EMEA distributor market sales
4 manufacturing sites in North
America, Europe and Asia; 1
distribution centre in Europe
Project task
Integrate distributors into S&OP within 2 years and improve performance:
PRODUCT DATA AND LOGISTICS PERFORMANCE START 2014
• Quantity of distributors/ship-to-locations
• Quantity of sold brands/SKUs
• Regular vs. costly rush deliveries
• Order to forecast deviation
• Local inventory level
52
136/6,700
141/36
Rank 16/16
3–6 months
35%of sales within the EU
30%to other European markets
24%in the Middle East
11%to Africa (mainly North Africa)
5 individual country clusters with
5 area sales managers located
within the EMEA territory

10. CASE STUDY – “DEMAND PLANNING” AT PROJECT START
10
My logistics team asked me to
send them a file with
unconstrained demand.
Sure, just give me a better price!
What do you want me to
commit for next year?
I need 15% more compared to
this year’s budget – let the
logistics guys break it down to
units later.
Manufacturer forecast collected monthly by
Area Sales Manager with Microsoft Excel
templates for upload to regional S&OP
demand review; all based on agreed budget
numbers without local sales/stocks.
Area Sales Manager and distributor focus
solely on sales – but local sales ≠
supplier/manufacturer sales.
1
2

11. CASE STUDY – “BUSINESS DEVELOPMENT” AT PROJECT START
11
Limited trust, lack of data
exchange, different
systems, conventional
communication
Non-recognisable order pattern in May, June and September leads to guessing what may be sold to the
distributor in the future – and what should be produced before:
Product X
Actuals/Forecast 2015 – Status October 2015 Expected Result
Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec
Expected
Total
Sold
YTD
Order qty 0 0 0 0 2160 1440 0 0 720 4320
(hide brand name, keep 5ml)
Excluded distributors
from joint demand
planning/data sharing
Major demand bias (whip
effect) due to “planning
lottery” based on
previous sales
Stop-and-go deliveries
due to regularly exceeded
distributor credit limits
High local inventory levels
“just to be safe” which
leads to excessive frozen
capital
Better stay vague as they might sell
competitor products too.
I bought the products, they’re mine. What
do they care about my stocks and sales?

12. CASE STUDY – PROJECT STEPS TO SUCCESS
12
Re-structure distributors and product offering
Gain distributor trust, change language and “sell” Distributor S&OP
 Re-build distributor markets: 1 area instead of 5 clusters, re-group distributors to region and strategic importance
 Re-assess product portfolio: reduce offering and SKU variety, focus more on key products
 Understand local sales patterns, service promises and inventory levels
 Use distributor language: We’re here to ensure product availability when you order.
 Talk about local sales and not forecast numbers
 Give first, take later: e.g. provide distributor with cash flow exposure plans to avoid credit limit stops
 Work on improving order patterns to/with the distributor: freight, reduced stock levels, increased turns, regular orders

13. CASE STUDY – PROJECT STEPS TO SUCCESS
13
Product X
Actuals/Forecast 2015 – Status October 2015 Expected Result
Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec
Expected
Total
Sold
YTD
Oder qty
Forecast
Local sales
Local stock
0 0 0 0 2160 1440 0 0 720 4320
1440 0 2160 3600
587 288 546 781 2356 687 1814 601 159 900 900 900 10519 877
3626 3326 2818 2090 322 3045 1052 397 264 1524 624 1884
 Collect data, plan properly, then share the results back with the distributor; local sales & inventories are analysed, future
sales elaborated then order patterns agreed:
 Enable full data flow and implement distributor S&OP following KISS principles
 Share data regularly: easy start with Microsoft Excel ® then more professional afterwards with John Galt’s Forecast X ®;
to conclude use the innovative Daisy Distributor Planning & Information Platform to tightly monitor local sales, “softly
manage” local stocks and “committed purchases plans” – all in units and currency.
Improve supply chain and introduce S&OP

14. INTRODUCING DISTRIBUTOR S&OP
14
A monthly or bi-monthly S&OP call of
maximum 30 min is taking place between
the FMCG manufacturer/supplier and its
distributor. The preparation is done by
the supplier’s S&OP team.
Call Participants:
FMCG supplier/manufacturer Business
Unit Head or Country Manager, regional
sales, marketing and customer service
managers with distributor sales and
logistic executives.
Collection of local
sales and stock data
Creation of full local
demand plan
(sales/ supplies)
Analysis of local
situation per
product/SKU
Update of local
demand plan
(sales/supplies)
S&OP call invitation,
demand plan
distribution to
participants
Discussion of local
demand plan
(sales/supplies) and
local stock levels
Discussion of
local sales result,
challenge and
opportunities
Agreement and buy-
in of participants on
final demand plan
Submission of demand
plan to supplier S&OP
sales review

15. 15
Emerging distributor markets (EDM) are now among the top performers in planning accuracy:
AT BNL CH CZ DE ES FR HU EDM IT NOR PL PT TK UK ZA
MAPE Dec 25% 14% 30% 142% 19% 33% 27% 52% 34% 15% 24% 152% 41% 51% 21% 22%
MAPE 2016 26% 14% 28% 53% 21% 26% 37% 56% 17% 15% 30% 50% 29% 71% 17% 30%
0%
40%
80%
120%
160%
CASE STUDY – RESULTS AT PROJECT END
PRODUCT DATA AND LOGISTICS PERFORMANCE START 2014
• Quantity of distributors/ship-to-locations
• Quantity of sold brands/SKUs
• Regular vs. costly rush deliveries
• Order to forecast deviation
• Local inventory level
52
136/6,700
141/36
Rank 16/16
3–6 months
2016
42
81/5,200
136/9
Rank 3/16
1–1.5 months

16. CASE STUDY – RESULTS AT PROJECT END
16
All that leads to more sales – proactive joint planning with Distributor S&OP creates key opportunities.
Visit our stand no. 9 for an easy to read leaflet with methodology steps and benefits!
Grey marketers are eliminated, fewer but
better-performing distributors
Distributors feel taken seriously so are
motivated to sell and share data
Strengthened partnership between
suppliers/manufacturers & distributors
Full integration of distributors in monthly S&OP
process eliminates separate, long-lasting budgeting
and latest estimates. It lets you focus on a true one-
number system with doable sales/demand numbers
24/7 online data exchange with Daisy
distributor planning & information
platform—an innovative link between
supplier SAP and distributor software
Economical orders and
production runs, well-planned
and uninterrupted sales, ideal
inventory levels

17. CONCLUSIONS: PAST VS. FUTURE WAY
17
WORLD CONSUMPTION – OLD PLANNING WORLD CONSUMPTION – NEW PLANNING
1 Euromonitor International, 2015
32% of emerging
market demand
assumed
68% of developed
market demand
managed with S&OP
100% of world-wide demand managed with IBP and
Distributor S&OP
Distributor
S&OP
Product
Review
Sales and
Operations
Planning
Product
Review
Integrated
Business
Planning

18. THANK YOU
TIME FOR YOUR QUESTIONS AND FOR A VISIT AT STAND NO. 9
18
Looking to boost your sales?
Put an end to blind treasure hunts.
Plan today to conquer the markets of
tomorrow – with Internel Distributor
S&OP

19. ABOUT INTERNEL
19
For over 20 years, Internel has delivered efficient
and well-developed supply chain solutions.
We have been rolling out professional S&OP for large- and medium-
sized manufacturers of FMCG and CPG with complex supply chains in
volatile business environments throughout Europe, the Middle East,
Africa and Asia. We’ve replaced disparate planning activities and
thousands of Excel spreadsheets through mutually beneficial supplier-
distributor partnerships.
• Pharmaceuticals
• Contact lenses and care products
• Surgical products
• Instruments and medical devices
Servicing a variety of
businesses:
Internel SA
Ankerstrasse 38
8004 Zurich
Switzerland
Rolando Casanova, General Manager
rolando.casanova@internel.ch
GET IN TOUCH OR VISIT OUR
EXHIBITION STAND
+41 79 629 66 67
www.internel.eu
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