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Top 10 Success Factors for Sales and Operations Planning

Joachim Schulte, Senior Sales Consultant

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The following is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making purchasing decision. The development, release, and timing of any features or functionality described for Oracles products remains at the sole discretion of Oracle.

Agenda

Challenges with Sales & Operations Planning Oracle Demantra overview

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Using Oracle Demantra

National Brands Ltd.

Consensus demand and supply plans
Company
One of South Africas leading CPG companies, producing tea, coffee, biscuits, and snacks Many new product introductions Extensive promotional activity

Planning problem solved

Consensus demand and supply plans

Unique aspects of implementation

Introduction of an integrated Sales and Operations Planning Process

Improved forecast accuracy by 13% Cut finished goods stock levels by 20% Improved service levels from 94% to 96% More effective production planning

Demand Driven Significant Benefits

Demand Driven leaders have: 15% less inventory 17% stronger order fulfillment 35% shorter cash-to-cash cycle times Which translates to: 60% better profit margins 65% better EPS 2-3x the ROA
350 300 250 200 150 100 50 0
Strong Weak

Improved Demand Management is the first important step !

Perfect Order Cash-to-Cash

Inventory SCM Costs

Source: AMR Benchmark Analytix

Traditional Approach Disconnected

High latency, limited collaboration, no consensus forecasting
Your Company
Financial Planning Production Planning New Product Planning Sales Quotas Marketing Forecasting Measurement and Reporting

Manual processes Multiple data sources

Multiple, non-integrated systems

Low forecast accuracy Departmental orientation to demand forecasting Misalignment between metrics and objectives Not tied to Sales and Operations Planning process

Better Approach
Real-time demand sensing and collaborative consensus forecasting Eliminate decision making latency by focusing on excellence in demand visibility
Sense demand more frequently and closer to the point of consumption Replace spreadsheets with one number demand management Collaborate with all constituents

Improve your forecast accuracy

Use advanced analytics and statistics

Shape demand
Promotion excellence and decomposition Leverage granular demand signals (customer, channel, store, shelf) Identify and simulate cross selling opportunities

Evolve to real-time S&OP

Profitable demand response Identify supply side opportunities Define and monitor customer based metrics Get real time visibility to sales tactics (price breaks, promotions, deals)

Top 10 Success Factors for S&OP

3 Critical Success Factors -- Tools

1. Use graphical presentation 2. Make it easy to grasp what has changed and any issues 3. Ensure an integrated tool is used -- same tool for each step in the process

Adapted from Top 10 Success Factors for Sales and Operations Planning by Oliver Wight

Sense Demand Real-Time

Involve all constituents and forecast closer to the point of consumption Sense demand real-time, at more granular level, and closer to the point of consumption

Report and measure demand in the ways important to your business role-based Collaboration Workbench for coordinated demand response Support different demand data for each customer and channel Easily add additional sources of information, such as external syndicated and POS data, using data integration profiles Use multiple units of measure and multiple currencies Collect information from multiple source ERP instances Out-of-the-box integration for Oracle EBS, JDE E1

Leverage built-in intelligence to automatically select which levels data to use for forecasting
Roll up data across unlimited hierarchies Forecast at any level of time, product, and location aggregation Completely meta data driven change on the fly Weekly and daily forecasting support Simulate and compare different demand scenarios

Automate collaboration through workflow

Ensure all constituents submit numbers on time Configurable push exception management automates review process

Improve Forecast Accuracy

Designed for planners, not programmers (PhD in a box)
Bayesian Estimator Historical data

Superior Bayesian-Markov Analytics

Multiple causal factors

Bayesian combined model

Forecast

Estimators models Bayesian mix modeling 15 model library

Auto-regressive moving average (ARMA) Regression integrated winters Logistic and logarithmic models Ridge regression, Markov chain regression Intermittent regression Seasonality, weather, market indicators Base + price + multi-event lift decomposition

Promotion effects
Cross-product and cross-location effects Pre and post event

Unlimited causal factors

Automatic outlier detection Trend long, short, dampening Missing data interpolation Shape modeling and auto-correction Regime change Fit and forecast validation

Shape Demand for Profitability

Leverage Advanced Forecasting and Modeling to understand the real impact of promotions and sales incentives
4000 3500 3000 2500

Past

Future

2000 1500 1000 500 0 Period 1

Period 6

Period 11

Cannibalization Pre- and post-effects Competitive switching Category growth Baseline Actual

What incremental volume will result from a marketing program? Cannibalization How will it impact the sales of other products? Pre- and post-effects How does a marketing program at a brand or Competitive switching Category growth product family level impact a specific item? Baseline Actual What were the indirect effects such as cannibalization and consumer stockpiling? What is the ROI on my marketing and trade spending? What is the predicted impact of future activity? How does a promotion impact shipments and DC replenishments?

Period 11

Cases

Welchs
Live on Demand Management, Trade Management
Company
Leading producer of juices and jams

> Mio $750 Mio. revenues world-wide

Thousands of different promotions per year

Planning problem solved

Promotion planning synchronized with demand planning

Unique aspects of implementation

One-Number Forecast as base for improved forecasting Promotion planning integrated with demand planning > 100 sales reps plan promotions Post event analysis of promotions

Increased forecast accuracy at SKU level Enables trade promotion planning to be integrated with RT S&OP Reduced supply chain costs Improved HQ and sales planning productivity

Top 10 Success Factors for S&OP

3 Critical Success Factors -- Process

1. Roles and responsibilities are defined and communicated 2. Manage by exception and focus on the key issues
Gap closure (volume, revenue, and profit expectations) Resource issues Alignment of demand, supply, and new product plans Performance issues

3. Implement quickly and improve each month

Adapted from Top 10 Success Factors for Sales and Operations Planning by Oliver Wight

Top 10 Success Factors for S&OP

3 Critical Success Factors -- Leadership

1. Senior executives do not delegate their participation in the S&OP process 2. Senior executives utilize S&OP as their process for managing the business 3. Senior executives insist on the truth

Adapted from Top 10 Success Factors for Sales and Operations Planning by Oliver Wight

Consensus Planning
Inclusive consensus process improves plan quality and acceptance
Sales: Plan by Product Line Sales Reps Marketing: Plan by Region Asia Americas

Sales Mgrs
Marketing Forecast Sales Forecast

Create consensus plan through continuous collaboration across sales, marketing, finance and customers Each participant gets tailored view
Configurable worksheets

Operations Forecast Finance Forecast Plant Mgrs Manufacturing: Plan by Plant Finance: Budget in Dollars

Combine top down business planning with precise bottom up forecasts to project payments Automate process with workflow
Send reminders Task notifications in dashboard

Evolve to Real-Time S&OP

Each S&OP participant has a configurable rolebased view

Inputs display from entire collaboration group Finance, Marketing, Operations, Key Customers and Suppliers

Integrated approval workflow process Review historical accuracy for each input

Interactive Management Review

Typical S&OP Management Review agenda
Sales and Operations Planning Process

Demand Review

Product Review

Management Review

Shape Respond Sense

What has changed since last month? Are we on plan financially? How are we performing to performance metrics? What new risks do we need to consider? What decisions need to be made now? What decisions need to be made in the near future? How are product families performing? Are we on track with product development? Do we have any critical constraints? Is there any need to revise long term plans?
Adapted from Enterprise Sales and Operations Planning by Palmatier & Crum

Execute and Measure

Supply Review

VTech
Live on Demand Management, Real-Time S&OP
Company
$1 billion in revenues, operating worldwide Leading provider of cordless phones and electronic childrens toys 85% of US revenues through Wal-Mart, Target, Best Buy, and Circuit City

Planning problem solved

Real-time S&OP process driven by one demand number Seasonal demand plans

Unique aspects of implementation

Generates forecasts from customer POS data Web-collaboration with customers Automatic forecast evaluation and exception management Implementation within 90 days Increased order fill rate from 55% to 95% Increased inventory turns by 100% Reduced price protection claims by 40% Reduced logistics costs by 65%

Top 10 Success Factors for S&OP

People

Tools

Process

Adapted from Top 10 Success Factors for Sales and Operations Planning by Oliver Wight

Oracle Closed Loop S&OP Planning

Demand Planning
Demand Data

Supply Planning
Constraint-Based
Consensus Forecast
Production Scheduling Strategic Network Optimization

S&OP Meeting

Market Demand Forecasting

EDI 867 IMS data Excel Pedigree xml New Product Forecasting

S&OP Review Evaluate Supply Constraints

Promotion Planning

S&OP Outputs:
Inventory Optimization Safety Stock Demand Service levels Profitability Inventory Levels Promotions DRP MPS

Measure Financial and Customer Service Level Results

Execute

Oracle Demantra Overview

Complete, best-in-class and integrated planning process platform
Trading Partners Best in class Business Processes

Supply Chain Demand driven Risk Management adaptive planning

Real-Time S&OP

Operational Excellence

Multi-Enterprise Collaboration
Role-based Portals

Network Design

Integrated Planning Functions

Demand Sensing And Shaping

Postponement Optimization

Holistic Supply Planning

Promise, Distribute, and Replenish

Preconfigured Worksheets and Workbenches Execute to plan

Products

Strategic Inventory Network Optimization Optimization

Real-Time Sales & Operations Planning

Demand Predictive Management Trade & Advanced Planning & Forecasting Optimization

Advanced Supply Chain Planning

Production Scheduling

Global Order Promising

Collaborative Planning

Platform
WFL

Connectors Common planning data model

Embedded Analytics

Future

E1

EBS

Legacy ERP

Demantra

State-of-the-art and Scalable Architecture

Scalable
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w& s kflo Wor ception Ex

Handle millions of combination

P OL A

Bu s

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e ictiv Pred eling Mod

Web-based user interface personalization

GUI

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/ atio ser Serv U ministr bject O d s A es usin B tack gy S P(S) o l o T hn L / HT Tec ise ML / HTM r p r /X r Ente AP e SO E Serv E 2 J S DBM R

ry sito epo R a t d Da ces ma n e ervi D S d n e i io Unif grat Inte a t a D e s ctur e struty Servic ation a r f r i n r I u u g i a c ntr ole Se & Conf es R ic ema n

imiz O pt o n i at

Dynamically configure Drag-and-drop

Tailor workflow processes to unique company requirements

Demand Management adapts to your business process

Create alerts and exception rules Customize reports on-the-fly Dynamic open link to MS Excel Work in disconnected mode

Wendy's has ~1M combinations, 730 history daily buckets, 48 half-hour buckets per day for 90 historical days and 90 future days - over 9B data points

Proven Success Many Live Customers

Oracle Demantra Demand Management

Evolve at your own pace to a best-in-class solution
Start anywhere
Forecast based on attributes and product characteristics Compute promotional lifts and analyze impact of demand drivers Assumption based forecasting

Leverage POS and channel data

Forecast new product introductions Collaborate with customers Use advanced statistics and causal factors Complex alerts and custom worksheets

Leverage POS and channel data

Forecast new product introductions Collaborate with customers Use advanced statistics and causal factors Complex alerts and custom worksheets Manage rolling forecasts Collaborate with all constituents on one number Use basic statistics, alerts, and seeded worksheets Tailor worksheets for individual users

Eliminate spreadsheets

Manage rolling forecasts Collaborate with all constituents on one number Use basic statistics, alerts, and seeded worksheets Tailor worksheets for individual users

Manage rolling forecasts Collaborate with all constituents on one number Use basic statistics, alerts, and seeded worksheets Tailor worksheets for individual users

From less complex to best in class

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Summary

Oracle Demantra Demand Management

Real-time demand sensing and collaborative consensus forecasting

Sense demand real-time

CHANNEL DATA Sense demand more frequently, closer to the point of consumption Capture demand and forecast at more granular level (store, shelf, attributes, product characteristics) Achieve consensus demand number more quickly by involving all constituents at the same time, including customers Quickly identify and react to demand changes and exceptions

Collaboration Workbench Marketing forecast Order history

Improve forecast accuracy

Leverage advanced statistics for more accurate demand number Use any combination of quantitative or qualitative data to establish your base line forecast High precision statistical forecasting, no statistical background required Superior Bayesian-Markov forecast analytics Forecast based on attributes and characteristics Leverage Advanced Forecast Modeling for promotion lift decomposition and causal analysis

Customer sales

Shipments

Shape demand for profitability

Plan new product introductions Plan promotions and sales incentives Identify cross selling opportunities

Demand Hub and Seeded Worksheets

Evolve to real-time S&OP

Profitably balance supply, demand, and budgets