S&OP Leadership Exchange: Harnessing Innovation & It's Planning Challenges

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May 23rd, 2012

S&OP LEADERSHIP EXCHANGE: HARNESSING INNOVATION & ITS’ PLANNING CHALLENGES

The Web Event will begin

momentarily with your host:

Andrew McCall

plan4demand

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Goals for the session

Overview – Innovation & Planning: Conflicting Goals & Priorities?

Planning for Innovation – Objectives, Goals, & Realities

Typical Issues Encountered by the S&OP Process when these two converge

Leveraging S&OP to Harness the Innovation Process and solve these issues

Cross Functional Visibility

Creating a Common Language

Aligning & Harmonizing Goals

Case Study: Using S&OP to drive the NPI/Stage Gate process & Shorten

Launch Cycles

The Bottom Line

Q&A/Closing

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Create an Awareness of the importance of innovation in today’s business

and some of the issues and challenges this presents to our Business Planning

Process in the near and long term.

Outline the different ways that S&OP and Innovation Management can not

only co-exist, but enhance both processes.

Identify the Inputs and Outputs from each step in the S&OP that interact

with the Innovation engine of our business.

Outline what you can do to tie these two processes together in your business

without re-inventing the wheel.

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Oct 1995 – Apple stock price is at $5/share

“Fall of an American Icon” - Business Week

“Apple: A chaotic mess with no strategic vision, and certainly no future” – Time

Feb 1996

“I’d shut it down and give the money back to the shareholders” – Micheal Dell

“The cure for Apple is not cost cutting. The cure is for Apple to INNOVATE it’s

way out of its current predicament” – Steve Jobs, Returning as CEO in 1997

Since 2003 – Apple has become the #1 Music Retailer, iPod dominates the

category

2007 – Apple reinvents the Cell phone with the release of the iPhone

2011-Q4 Global PC sharply negative (9%) – Apple Computer sales up 26%,

iPad sales up 111%

Earlier this year, Apple posted a record quarterly revenue number of $46B

Feb 2012 – Apple stock price tops $500/share – “Innovation has made Apple

the most valuable company in the world” – Forbes Magazine 2/16/2012

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Innovation

Speed

Big Splash

Initial Scarcity Drives Demand and “Buzz”

“Let’s not let the details constrain our thinking”

Planning

Orderly

Detail Oriented

Accuracy

Predictability

Thoroughness

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What problem does your organization struggle with the

most that is being driven by Planning for Innovation?

Structured Stage/Gate process that gives the organization the time and the

data it needs to smoothly transition new products into the portfolio?

High levels of SLOB (Slow Moving & Obsolete product) as a result of

inaccuracy of initial volume projections or inventory transitions?

Forecast accuracy issues surrounding innovation that creates production

volume issues (either too high or too low?)

Missing Launch Dates?

Master Data issues as a result of late or prolonged planning decisions?

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Master Data

Volume Projections

Launch Strategy & Planning

Test & Repeat Processes, Study

Groups,

Treating all Innovation the

Same – Breakthrough, Disruptive,

Sustaining, Event Based

Cannibalization

Supersession Management

SKU Rationalization/Proliferation

Impacts

Delays, Short Planning Windows

High Resulting SLOB/Inventory Right Offs

Slow to Market/Expansion

Launch Bureaucracy

Unintended Consequences on other

Brands/Products

Too Many New Products without subtractions

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Leveraging Existing Activities in both processes

• Launch Projections &

Assumptions

• Volume

• Cannibalization

• Brand Volume Plans

• Pricing Strategies

• Sales Planning

• Sales Volume Impact

• Initial & Follow up

Distribution Drives

• Demand Forecast

• Customer Volume &

Adoption Projections

• Capacity Availability

• Production Readiness

• Operational Standards

• Raw Materials & Packaging

• Supplier Readiness

• Initial Quality Trials

• Plan/Changes to Plan?

• Gap Closing?

• Opportunity Deployment

• Financial Projections

• Strategic Innovation & Pipeline

Approval

• Communicating the Plan

• Stage Gate Integration

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Portfolio Review: - Create Linkage from Stage/Gate

process into Portfolio Review

- Longer Range Visibility

- Size of Prize/Volume Inputs

- GTM Assumptions

- Link SKU Rationalization Process to

drive use up and end of life

processes to conclusion

- Establish Feedback loop into both

of these processes to output S&OP

assumptions and decisions back to

NPI and SKU/RAT teams.

- Publish Innovation Funnel and

Stage/Gate status from one source

in both processes

Demand Review: - Take & act upon Innovation Data

from the Portfolio Review, Not both

sets of processes

- Volume Assumptions

- Geographic/Market Launch

data & timing

- Update forecasts based on

planning data from PR

- Normal pass of forecast and

innovation impacts down stream to

Supply

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Establish & Maintain Separate Disciplines

Harmonize & Leverage each process strengths & audiences

Create Process checks that provide balance across both areas

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Initial Situation:

Beverage Company – 160MM Case Equivalents/Year

New Product’s accounted for ~ 15MM cases a year – Predominantly Line Extensions, Packaging

Changes & Season/Promotional Packaing

Usually a 5 month planning cycle including suppliers

SKU proliferation – 40 SKU’s > 104 SKU’s in 3 years

New Product Launch:

New Brand into North American Market

Initial Launch into Midwest Market (Test)

Followed by Limited National Rollout (Repeat)

Ran thru same processes as Line extensions

12 Month Launch cycle

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How did it go?? Test – High Volume

Repeat – SLOW compared to optimism created from Test Market

Repeat/Rollout ended up with 5MM cases of write off (3% of total business!!)

Too Much Product, Expiration Dates, Wrong Packages??

What went wrong??

Post – Mortem Test ran too short

High Volume was determined from Channel positioning, not sales

Stage/Gate Process was modeled on Line Extensions, had no “New Brand Launch” intelligence built

into the Volume projections

Repeat went into market expansion too quickly Sales Planning & Execution did not have the time to get distribution right

Market Expansion used assumptions from Test, not new assumptions

Stage/Gate process did not get folded into planning and forecasting windows until last

minute, creating an “Inventory as the buffer” solution which backfired as product neared

expiration dates

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Changing for the next time… Segmentation – Launch types

Line Extension

Seasonal/Event

Net New

Created Assumptions and Reporting Base

for each time Timing

Approvals

Data Reviews

Linked Stage/Gate to Portfolio Review Gate Status Report

Decision Summary

Innovation Dashboard – R/Y/G on key planning inputs

Linked Demand Review Forecast Assumptions back to

Stage/Gate Process Volume assumptions by Region fed back to Marketing/Innovation

Supply Planning Inputs from DR also updated into Launch Team Process

Closed Loop on everything

Next Launch: Post – Mortem Write Down reduced by 85%

Faster Ideation to Launch Time

Window 14 Months down to 8 Months

Sales Plan Error was cut in half on

New Product (49% to 24%)

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Set up these two critical business processes to feed each other – not to take

over one or the other.

Establish closed loop feedback between the Stage/Gate or Innovation

process and the Portfolio Review – don’t allow this data to enter the

planning cycle everywhere. Make a single point of connection, single

moment of truth between the two processes, and then it run through the

cycle.

Segmentation – Don’t try and fit everything into the same mold. Different

levels of rigor for different needs.

Establish the “Owner” of Innovation in your company – make sure they are

tied into the Portfolio Review and Executive Review.

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June 27th Global Rollouts – Balancing

Standardization & Localization

September 12th S&OP Technology – Matching

Capabilities with Maturity

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