What S&OP Capabilities Matter Most? An Overview of User Requirements and Technology Offerings

Lora Cecere, Partner, Altimeter Group
Trevor Miles, Director, Industry and Applications Marketing, Kinaxis

Sales & Operations Planning. Letter Perfect. Practice Imperfect.

One of the things I've noticed, as companies have realized the importance of Sales & Operations Planning to the term Sales & Operations Planning, and what I want to do today is take us back to the essence of what does S mean, what does & mean, what does OP mean and when we think about Sales & Operations Planning how do we focus on Letter Perfect and make some changes so that our practices move from imperfect to perfect. This is Lora Cecere and I have been talking about Sales & Operations Planning for over five years with over one hundred and fifty companies and I've seen it grow up and I've seen it become more and more important. Let's get into the meat of the discussion. What we have is a time of change. If we look at the National Bureau of Economic Research and we look at the current recessionary period we see that we are in a recession that we have never seen before. And the Sales & Operations Planning and supply chain management matters more than ever. If we look at this recessionary period what we saw in 2009 was that 68% of companies saw deterioration in working capital based upon the recent results of The Chief Financial Officers Working Capital Study. And companies that were unable to really align horizontally and move from a very vertical function to a more horizontal function to make trade offs in Sales and Operations Planning found it more difficult to really align in this uncertain time, which is not over yet. If we look at the bumpy road and our need to keep our hand on the supply chain rudder, we've got a lot of bumpiness ahead of us and perhaps a 2:01 of the recession. So Sales & Operations Planning matters more than ever and when we look at what happened in that first period of the recession we se that supply chain leaders sense market changes five times faster than the laggards. And you might say, why is that? I recently was at an IBF conference where I heard Peter Murray speak and I remember visiting Dupont and Peter Murray runs the Demand Centre of Excellence back during the recession and Dupont had their factories down and they were facing a downturn in the economy they had never seen before. Dupont's primary value chains feed into the building and the home industry and of course those industries have seen a great downturn. Because Dupont had focused on a more traditional view of demand planning where they had based demand on history not on the market, they were not able to sense the changes in the downturn that they needed to. So one of the things that Peter and his group did was they focused on how could they become more outward facing, market driven and in the presentation that I saw Peter give last week he talked about how the greatest challenge for companies is how to become market facing, focus on market drivers and the companies that were able to sense the market drivers actually sensed the downturn in the recession five times faster. So who did it best? Cisco did it very well. Cisco who had seen the downturn in 2001 had built systems to sense demand really focused on those market drivers, something that Peter Murray at Dupont learned how to do in this downturn and Cisco had built strong horizontal capabilities to do what-if modelling. To really sense the market demand, translate the market demand into supply plans and to not only understand the numbers but to understand the rate of change and impact of the what-if analysis. Now in some cases, when I present this data people say, “Wow, those are long supply chains. Why did it take so long to turn those supply chains around?” And yes, most of our supply chains are very long and it takes a long time to translate demands in these supply chains. And as we move on to looking at this what we find is that companies don't have the ability to sense demand and orchestrate demand in the way that they would like to. And it requires the rethinking of Sales & Operations Planning to be able to look horizontally at these changes. So who did it best? The companies that had a focus on true north. Being able to scrub the demands of the outward facing and to be able to design the supply chain with the focus on true north. What do we mean by true north? True north market demands and in these times we can't just look at history we have to look at market drivers, we've got to look at the basis of the demand plan and focus on true north. In a study that I did that I showed you earlier I actually interviewed 35 companies that were Fortune 500 companies. I found that one company had a 33% bias because they believed that if they over forecasted that they would have higher sales. But what they found was that extra bias caused them to have a bigger issue in the translation of demand so companies that were able to have a demand accuracy focused on true north outside in did the best. Those that had strong horizontal processes like Sales & Operations Planning and also those that were clear on what is supply chain excellence, so you might say to me, well doesn't everybody know what supply chain excellence is? And the answer is no. In fact many times people feel that the goal of the supply chain is efficiency, and they confuse efficiency with effectiveness. And the companies that did the worst in the downturn were out of balance in metrics with a strong focus on asset management causing them to be out of balance. So the clarity of the supply chain strategy is very important. A clarity that says what is important, how many supply chains do I have, what defines each supply chain as good, and what does good look like in terms of balance in the supply chain and how do I get there. So as we look at the future 2009 was all about demand. 2010 is all about supply. It's about the weak links we have in the supply chain the alignment in the supply chain that sense supplier risk and to look at demand error and the translation into the supply chain we have much weaker supply chains we have weaker supply chains. We have weaker supply chains at the ports, we have weaker supply chains with our suppliers, we have weaker supply chains with basic raw materials and we're going to see a tightening of supply and a rise in prices and it causes supply chain uncertainty. So as we think about supply chain and we think about this need for balance we have to start at the bottom and we have to say how many supply chains do we have and what is the goal of each supply chain? And then when you're selecting technology which companies that did the best in the recession had technology and despite what many people will tell you that you don't need technology I will tell you that based upon the research it's absolutely necessary. And when you think about the goal and think about the goal of the supply chain you must ask yourself which of these technologies have an underlying data model that best supports what am I trying to do with my supply chain, around growth, around efficiency with how the processes are basically working. And as I think about this need of balance because the best Sales & Operations Planning processes have balance. They have balances in these go to market strategies, the understanding of the S, which isn't just go ask sales it's understanding your go to market strategies, the market drivers, the competition, how you are going to market. And then to be able to look at OP which isn't just assets, it's operations, it's make move source and it's demand orchestration. And ask yourself not only what is the right level of inventory rather what is the right form and function of inventory, what is the best network strategy for that network and what are my commodity strategies? And when you do that, you have a wakening is letter perfect. That instead of just go ask Sales we need to focus on market drivers and we need to focus on how we go to market and determining the best way of going to market. And instead of & direct integration to supply we have to ask ourselves what is the design of the value chain, optimize the trade offs to minimize the risks, balance the cycles and orchestrate demand and instead of just OP in terms of tied to a manufacturing plan we have to ask ourselves, what are the trade offs between make source and deliver and where are the constraints? And as we do that we move from a process that is very accessed focused or focused on factories to a process that is very market focused outside in, focused on what drives value in the chain, what drives the true balance in the supply chain and really aligning horizontally. So in the work that I've done with companies two parallel companies that made a difference — if we look at Campbells Soup and DelMonte back in the early days of fighting about demand driven value networks, DelMonte quickly aligns to what were the market drivers and focused outside in and built horizontal processes to be able to not just integrate data but to look at the risk in the demand era and the demand chain and then to do cross functional coordination with logistics on the logistics plan and also sourcing so through Monte Carlo simulation they were able to drive an understanding of what the real issues were in sourcing and where they had sourcing issues. This horizontal process of demand orchestration of looking at the probability of demand and being able to do those what-if scenarios for sourcing was able to help them to say what shall I promote. For example, in the recession I followed two cereal companies. One cereal company promoted corn products which were very very price intensive at that point in time and one promoted oats. So with the oat product they were able to make more profit on. So thinking about not just how I have historically gone to market but how should I go to market in these uncertain times, but the commodities have more risk more volatility and as we continue to see S & OP make a difference as people look at demand translation, demand orchestration and thinking about the design of the supply chain horizontally across these processes. S &OP matters. Let's do a little audience polling – as we think about what-if analysis how does one know, has what-if analysis grown in importance into your supply chain in 2010. If you can rate it and let us know we can see that 33% have rated it 5 and it changes a little, bit 62% say 4, one of the things we see in the researches is that it isn't just enough to have numbers it isn't just enough to connect numbers it's this what-if analysis it's the ability so see what-ifs for supply what-if is for demand. Now with that let's look at our next question. If you think about what is the primary driver of why what- if analysis has become more important. If you can pick just one, is it because demand the demand has become more volatile supply reliability has become a bigger issue inventory options require more analysis alternate sourcing becomes more problematic. You want to look at risk analysis for suppliers because you're worried about this weak link. You've got to get new product launch variation a reconciliation with financials. So we see a strong preference around demand and really dealing with demand volatility which pushes us against that uncertainty of demand the fact that it isn't just the numbers it's the rate of change, it's the probability of the demand error. Since the facts that are the basics of the supply chain demands have changed it's no longer represented by historic demand. So when it comes to that what-if analysis we'll just stay on to this theme a little bit how do you feel about the technologies we're using. Do you feel there's a large gap in what you need run what-if analysis or do you think you're just beginning and you really don't know. Do you think you have what you have what you need to perform this what-if analysis. Yes this is very much representative of what we see in the data that the goal of running what- if analysis to do this demand orchestration is actually a gap that needs to be closed. And one of the things that I have found in the recent research and looking at this whole area around technology is I have found that we have to really think about the & in S & OP with the end in mind and as we think about the & in S & OP with the & in mind if we go back a chart and we think about S and we move from asking sales to focusing on market drivers like DelMonte like Dupont has done and we think about that & and we think about the design of the value change we really optimize these trade offs, minimize the risks, balance the cycles and orchestrate demand we need this what-if analysis we need the ability to ask what if the demand changes as we see or what if sourcing changes or what if new product launch changes and then we have to be able to ask ourselves how those changes manifest itself across operations, across not only manufacturing but sourcing and delivery options and that what-if analysis has grown in importance. So let's step back and say where are we with technology? So I say that in a survey that I did of over 35 companies of Fortune 500 there was no leader that was able to sense demand five times faster and align the supply chain that didn't have technology. And there was no leader that was able to do this that wasn't good at this horizontal processes around what-if analysis and asking themselves not just what the number meant but what if this happens and what is the probability of demand. And the gap has grown based upon the recent research that I've done and let me tell you about the research and let me tell you about the results. In the month of May and June I have been in the process of interviewing references and interviewing technology providers who provide Sales & Operations Planning technologies. And the time has come where Sales & Operations Planning is just not an adjunct but it is a technology area all to itself. It is no longer just an extension of supply chain planning or an extension of ERP we now have a technology set that is truly Sales & Operations Planning. And the gap has grown between what I'm going to call best of breed providers that are typically pretty industry specific but industry specific data models and what I'm going to call the ERP expansionists, the guys that have ERP and decided that they were just going to hold onto a system or a data model on top of ERP. The gap has grown in terms of the ability to determine what is best in Sales & Operations Planning and the key is really three things. It is the ability to have an industry specific data model that fits. Many times companies have been lulled to sleep saying 80% is enough, or I want one system. Let me tell you, you need a data model to be able to really manage the industry specificity of the what-if analysis and that's number two. The ability to easily and readily run what-if analysis; to be able to determine what are the risks and what can we do about it because we can see in the data that it's important. I think that the myth of tight integration actually set us back in Sales & Operations Planning and Succession Planning in general. People felt that if they had tight integration that they would be able to drive supply in excellence, but actually in the process of Sales Operations & Planning there is a need for what I am going to call a lot of sandbox activity, a lot of determination of what the best plan is. A lot of determination about the risk of the plan and how to really calculate the trade offs because one of the things that happens in Sales & Operations Planning because it's a horizontal versus a vertical process, is you've got to have active discussions about what is supply chain excellence, what does it look like, what is the best option for each of your supply chain. And tight integration doesn't help us get there. It really requires ease of use, the ability to have a sandbox for people to be able to work in and the ability to have collaborative work flows. And that's the third point. Now, with that excel types of interfaces have found new homes. Excel stand alone is more of a maverick approach and anyone that's worked in excel in isolation knows that there's lots of issues coordinated across global supply chain with excel spread sheets on stand alone. But what we find in the newer technologies is that excel has found a new home. We have 19:48 like capabilities within excel workbenches and we also have 19:54 and we have software as a service that is growing as an option for the Sales & Operations Planning processes overlaid on top of existing behind the firewall technologies. So my primary point of this paper that I'm in the middle of writing about Sales & Operations Planning Technologies which is in front of a firewall at my website www.supplychain.com, is selected technology with the & in mind. Think about what it is that you are trying to do in what-if analysis, what it is that drives the punch in excellence, what technologies in terms of the data model and how easily can you actually run the what-if analysis to determine what the & is. Because it isn't site integration it's the determination of the best fit, the best model and the data model does matter. There's a big difference between reversible materials associated with process industry and configurations associated with or to be able to look at process based upon mix and packing of consumer products. It does matter; 80% is not good enough, you need something that works for your industry and if you have multiple chains you may need multiple technologies and that's one of the beauties of software as a service. So when you think about what-if capabilities they're really the cornerstone in its capability to sense and to orchestrate demand horizontally and get the alignment. Think about the selection of the technology with the & in mind and what-if capabilities that you need and how you built those so that you have reuse and have acceptance in how you can build collaboration. So Sales & Operations Planning is no longer balancing demand with supply thinking about what is the best scenario. It's thinking about how do I get the best balance in the supply chain between my go to market strategies and operations and how do I basically drive the right value in the supply chain, balancing things like tax deficiencies, sustainability, go to market strategies, new product launch and innovation. It isn't just about making sure that plants run efficiently, or that inventories are at the lowest level, it's about form and function of inventory, it's about the right use of the design network and the mitigating risk. So, S &OP Letter Perfect, Practice Imperfect. Let's think hard about those letters. In tough economic times this horizontal excellence that is paramount and the practices can change when we think and rethink and set the paradyms and one of the most essential elements is focusing on the & with the end in mind. With that, let me turn it back to Kinaxis to basically go through some of our next slides.

I just wanted to remind everybody that they can submit their questions at any time and there's a Q & A button in the top of menu item and you can submit your questions and we will answer them toward the end or some time during the process. So Lora has given us a very good introduction on some of the key things to be looking at in Sales & Operations Planning around both market drivers and what I want to do is really give our view of how Sales and Operations Planning can be supported by technologies and some of the aspects you need to be looking out for within the technologies that you would be evaluating. So let's start with the fundamentals. There is no doubt about it that we are seeing a great maturity of S&OP and in many cases when we talk to prospects and customers we also see quite early on in the development of that maturity some of them are at very basic demand supply balancing, some of them are actually not talking across the walls that exist between these different functions that need to be participating in. So there is quite a lot of process work in many cases that needs to be done very early on. Lora is absolutely right. When we look at many of the more mature companies; market leaders, the people who really making a change in effect a difference within their supply chain. Their S&OP level of maturity is considerably greater where they are very much looking at market drivers and sensing how those market drivers and are going to be effective in their supply chain and then orchestrating the manner in which they respond to that. So some key aspects that I'd like to bring out from our perspective is, without a doubt, we have the normal day to day demand management inventory, capacity management, demand management and supply management activities carried out within the supply chain at the operational level. These feed up into the S&OP process which is really doing a lot more of the orchestration, forward looking in many aspects also taking into consideration things like new markets to penetrate, new products to be brought to market, but fundamentally within the umbrella of the financial management of the organization. So what are the targets for revenue, what are the targets for margin, of course there are many aspects of financial management such as the debt load, and servicing that debt, but now outside of the arena of supply chain then of course I'm referring to those aspects of the operations which have a direct effect on the financial performance of the organization, and the S & OP layer is there to primarily identify insights as to how the company could operate differently so many of the examples that Lora brought out were directed in the more advanced companies making great use of the S&OP process to gain insight into demand changes etcetera, and associating those with of course risks above in terms of capturing demand but also the ability to deliver to that demand and opportunities all around, such as being able to look at the oats products as well as the corn products and be able to capture as much of that market as possible. But a key aspect of it and Lora has mentioned this too, is the horizontal nature of S&OP of being able to go across demand supply engineering to look at new product introduction and to finance to be able to ready keep the organization directed towards the financial goals of the organization. But another aspect that I've heard repeatedly in talking to prospects and listening to people at conferences, is that my sense is that the S&OP process is actually beginning to get to that position of driving the reporting out into the market and into the financial markets of what the future projection of revenue is going to be and actually guiding to a large extent the budgeting process of the operating plan for the next fiscal year. So it's beginning to not only take those levels of inputs from the AOP and be able to try and orchestrate the chain that best meets that AOP could in fact be a mechanism by which the AOP is influenced in going forward into the future. So if we look then at this cross-functional requirement and how organizations need to really orchestrate that in many of the more traditional representations of the Sales & Operations Planning process we often see a cascade where you gather data, analyse the demand and then you push that over to Supply and you have a consensus meeting in which you try and bring this together. Technologies enable you to do all of this in parallel while keeping all of the organizations synchronized. There's no doubt about it that there needs to be a process in which you can see the first stage of each of the functional groups where they're looking at how they have performed in the previous months or the previous quarters and then there's the question of how they're actually going to be able to orchestrate some of that in the future. So there's the aspect of learning from the past and deciding what assumptions have been made which worked and which didn't and why they didn't work. Were these assumptions made about market drivers, about market shares, about the selling price, were they assumptions made based upon the quantity prices, fuel prices. All of those types of things have to be taken into consideration because the typical S&OP cycle goes well past the current fiscal year and therefore you need to be able to really understand the influences those market drivers are adding on your long term financial performance and operational performance and then from that really being able to sense where those market drivers are going and what influence they are going to have in evaluating any sort of risks and opportunities that might present to you and fundamentally then within your function, coming up with trade-offs between the make source and deliver but always within the context of maintaining a balance in the orchestration of the supply chain focusing on the & that Lora was talking about, not just on each of your functional boundaries very much a continuously keeping those different organizations informed and involved in the process. Already this is collaboration, it's a cross functional collaboration is what you need to be able to get to, to really drive key capabilities and get to the next stage of S&OP evolution. And a key aspect that we see many of our key customers working with this is that it is not sufficient to simply operate the entire S&OP at the volume level. There's a real need to understand in times of capacity constraints and material constraints and in the current situation so many of our existing customers and prospects tell us that they simply cannot get enough supply of key components. So some of them are talking about bringing purchasing in because purchasing can either work with current suppliers to try and work out how to get additional supply or identify different suppliers to be able to bring them in, but that shortage of supply is so important that they cannot simply work at the volume level and be able to come up with a feasible plan against which they are going to execute. And we are not talking about in the next week, we are talking at about the next three months were talking about the next six months because that's how far out many of these material shortages have been projected. And the same thing would be true for capacity. We were talking to one customer that are currently planning systems takes about three months whereas it takes them over two years to bring on new capacity. Well the S&OP cycle has to go a long way beyond that three months to be able to evaluate when they're going to need capacity but their decision on bringing in the capacity isn't only within the supply organization or manufacturing organization it has to involve finance, because finance has to work out what this means in terms of the company's ability to pay for that capacity and service the debt that would be incurred, it has to bring in sales so that you can ensure that the market is ready out there for that particular set of items and marketing has to come in to work out the average selling price is so this is truthfully a cross functional collaboration that needs to be orchestrated in order to be able to arrive at a solution. But fundamentally the whole point of the orchestration is to meet company objectives, or as I have mentioned before it could well be to satisfy or influence the future operating plan to work out what that should be upon based upon the realities of what is going on. The other aspect we have heard, and Lora brought this out too about the sensing and how the best companies were able to sense the changes in the market conditions a lot more quickly and there response was a lot more effective as a consequence. There is this need to bring in the day to day information and understand what that is telling you about the future; what that is telling you about the market drivers and the assumptions you have made about those market drivers and whether or not you need to be reassessing those because there could be a situation that's telling you very clearly that the current S&OP plan that could be going out eighteen months; two years, three years out, there's some fundamental assumptions that you've made which could make a radical difference far out. So you need to be able to bring that lower level information in and be able to propagate it all the way up into your financials and be able to understand your S&OP plan in that context.

So where does technology really enable the S&OP. One thing is being able to plan quickly and to do it more efficiently than you've been doing it in the past so the aspects of the collecting all the data, we've talking to many prospects and customers who spent an awful lot of time just gathering the information out of the ERP systems and massaging that data to get them into an Excel spreadsheet and once they've got it into that Excel spreadsheet as Lora had mentioned already sending that information around an organization is just infeasible because the moment one person makes a change to the Excel spreadsheet then everybody else is out of sync. So that brings up the second slide; the planning collaboratively and being able to make sure that everybody's in sync so that when the data gets changed in one location anybody else within the organization or in fact in many cases external to your organization will be alerted to those changes and will be aware of them and can respond. The best we see in S&OP is where people are actually bringing their customers and suppliers into their S&OP process. As it's got todo with what-if, it most certainly in terms of collaboration, in terms of a long term sales forecast and long term supply commits we see quite a lot of involvement taking place on that side from the collaboration perspective, so there is this need to actually be able to bring everyone together in into a single workspace so that everybody can be aware of the current what-if and what's being proposed and what's being carried out in that what- if analysis. Does this monitoring the plan continuously – in my view being able to understand the consequences of your S&OP at the end of the cycle is too late there really needs to be this ability to understand how your market drivers are progressing and how your plan is progressing according to the assumptions you have made if nothing else it gives you a head start at the end of the month or end of the planning period to have already formulated some ideas on how you are going to adjust those assumptions, what scenarios you are going to run to be able to accommodate the mismatch between what is actually happening and what you had planned to happen. So that demand sensing and monitoring of the plan continuously is the key aspect of being able to drive future performance. And that comes down to then assessing the future risks and opportunities. There's nothing like the what-if analysis that we've been analysing or that all of you have responded to in terms of being able to take the balance between future risk and opportunities, and as everyone has identified, probably the key risk apparently in everybody's mind is demand volatility. So whether you are in an HP environment or you are in a PC environment or even in a retail environment there is clearly a great deal of uncertainty in that demand and the further out you go in terms of the 37:56 scales of the S&OP demand becomes less and less certain so the best companies we've seen running S&OP will typically have an optimistic and a pessimistic forecast, so they'll have range forecasting and be able to plan their entire supply chain based on those ranges, but of course ultimately they still work to a particular plan but the optimistic and a pessimistic plans are used as a way of really evaluating the risks if they satisfy demand took off do they have the capacity, do they have the suppliers already lined up to be able to satisfy the component needs if the demand picks up. If the demand drops off what is going to be the inventory liability? What about their long term contracts they have with suppliers? What is that going to mean in terms of costs that they are going to incur which they might have otherwise been able to avoid. If they fall short of their contracts will they still then be able to pick up on the upside? So this is the type of trade off that they are doing. Not today, but in terms of the longer term analysis of how they structure their contracts and their overall supply chain to be able to do as Lora was saying; orchestrate supply in order the meet the demand that you anticipate because of the market drivers. Lastly I just really want to pick up on the seamless integration between what alignment between the financial aspects and the operational aspects. With S&OP, if you like, being the meat between the sandwich bun; financial on one side and operations on the other side, you have to consider that S&OP slice in the middle is supporting your company; you really need to be able to bring those two things, or three things together to be able to drive, using the technologies efficiencies in the S&OP so that you can get to that enabled effectiveness in the S&OP process. So using technologies to do things more quickly, being able to analyse more risks, and being able to include more functions. All of those aspects are about the efficiency of the S&OP process with the end in mind of being able to have a far more effective S&OP process. And with that I think we'll turn it over to some questions and a number are coming through so if any of you have any questions, please enter them and we'll get to as many as possible. Lora, most of the ones that are coming in are really directed in your direction so let me please take you through some of those and you can respond. So the first question is, who does S&OP best? I'm not quite sure if they are talking markets or specific companies but I will leave you to make that decision.

Trevor, the company that do Sales & Operations Planning the best are companies that have a focus on margin and it is either leaders in the chemical industry where they have very tight margins or leaders in the High Tech and Electronics where they are really looking at the margin on these new product launches; but margin makes a difference. And also to short life cycles, to the companies in my experience that do Sales & Operations Planning the best are Intel, Cisco; I talked about Consumer Products and I'm very impressed with the progress that Del Monte has made, I also think that Nokia does Sales and Operations Planning very well and again you see very laser focus on short life cycles and margins. Thank you. Just a follow up question on that because at another conference attended there was the statement made that many of the leaders in S&OP have actually gone away from calling it S&OP and Cisco might be one that would come to mind but there could be some others as well – is that the trend you are beginning to see as well? Well I think people are attaching letters on S&OP sort of like ornaments on Christmas trees, but I think the essence of go to market for S, the & and what do I need have to have analysis to minimize risk and uncertainty and the OP how do I design operations that are still there, I think that as people try to move from the very traditional view of maximizing assets or OP is all about operations or S is about asking sales they feel the need to put lots of letters on the process instead of returning to the essence.

So do S&OP leaders really use technology?

Yes, in the analysis I've done I have not found a leader and I'm talking about a process leader that does not use technology and that does not have an industry specific data model that either they've filled or they've purchased from a third party to help them with what-if analysis so when people will say well you really don't need technology I just kind of laugh because this is much too complicated to not use technology it's much too detailed to not have the what-if capabilities to be able to run the optimization engines or to look at constraints, so therefore many of the only approaches, business intelligence only approaches that are only viewing the data or the ERP and MRP 2 type of approaches that really deal with consumption and either ERP and MRP fall short or the Excel spreadsheets of having everyone doing their own thing fall short it really requires a focus on those three elements that I talked about, the modelling, the what-if analysis and the collaborative work flows.

Thanks Lora. There's one that's come through here that I think is quite interesting specifically one that as a vendor we are quite interested in as well just a small chuckle there so how do companies build a business case for S&OP IT solutions. We are a large corporation in process of reviewing S&OP solution, however we find it very hard to build a business case around it.

Yes, many times people stub their toe on this Trevor and it's because they've implemented lots of other technologies and maybe haven't gotten the benefit there, but in the research and I've actually done two quantitative studies that support this and the recent reviews that I've had of companies through the recession support this because the number one benefit of Sales and Operations Planning is improving revenue. And I'll take you back to Peter Murray's presentation last week at IBF, Peter said that in the implementation of a true market facing Sales and Operations Planning, Dupont reversed the twelve year earning slide with a 2% improvement in revenue and that's because of the very focused market driven approach and this increase in revenue to be able to seize opportunity is the number one benefit that I've seen in the research, time after time, after time.

Thank you. How do you see S&OP evolving from its current state?

I see it evolving with even deeper capabilities in the what-if analysis. As we look at the assimilation of push-pull type of optimization technologies or Monte Carlo simulation for risk catching or the ability to look at what-if capabilities for demand planning, I think that we're really laser focused on the building of what-if and the collaborative work flows and putting in more visualization on top of S&OP and the third element I would say is the closing of the loop of planning to execution in different ways, so connection to manufacturing strategies or connections to more real time inventory strategies.

Thanks Lora. One more here, I think we have a few minutes more to go so is it best practice to have a separate S&OP function or is it normal to have this function varied within the supply chain or sales — where is S&OP?

So in the research in talking to companies through qualitative interviews, the companies that were able to sense demand and align demand through orchestration techniques had a Sales & Operations Planning group that reported through either a chief customer officer, a chief operating officer or a chief strategy officer. It was not tied to the CFO was not tied to manufacturing or procurement it was very much focused on someone that was leading the charge around alignment of the entire organization to the good market plan.

There is one here that is maybe directed to me but let's see if we can answer jointly to that, and could you please elaborate on risk assessment. So if you can answer this first and I'll follow up.

So the research shows that the number one risk for supply chain is demand error and it's the probability of demand and so many times companies that are very successful at this will look at the items that have very high demand error and have very high issues with volume and volatility as well perhaps it's seasonal, perhaps it's new product launch and will model different scenarios around what that could look like to understand where the inflection points are; where the inflection points are for manufacturing or for suppliers. Another thing that I see done a lot is the translation of that demand plan into hedging strategies so in the case of Del Monte that I talked about where they take the demand error and through Monte Carlo simulation actually walk through different hedging scenarios and they look at what's happening in the commodity markets for the things that are really critical to them which is glass and aluminum and sugar from time to time and them risk of those plans and how that ties to go to market strategies so they can avoid promoting something that has high market risk. I also see that companies that take contracts and made to order often look at risk mitigation against different scenarios around suppliers or different scenarios around how they actually did those contracts based upon the risk of the supply chain. And there are a number of companies who are actively monitoring supplier risk through unstructured text or through supplier surveys or supplier development programs and actively monitoring the risk assessments for suppliers. So the first question on risk is what is the risk in your supply chain and then modelling to understand where the inflection points are for tradeoffs if those risks occur and being able to have those plans in your mind or in your supply chain toolbox to execute if that happens within the supply chain. Does that help Trevor? Yes, we are just going to bring up one concrete example of one customer we have that brings in new products fairly frequently and many times these new products have different technology that is associated with them. At one stage there were faced with serious raw material or product inventory liability because they are in an outsourced manufacturing environment and they had purchased some items that had not had sufficient communication between the engineering, marketing and production organizations and ultimately purchasing so they had committed to buying a fairly large quantity of product material because they anticipated in continuing with one product line but a new product had superseded an existing product and as a consequence they had nowhere to put this component inventory that they had purchased and essentially had to go out and sell it on the spot market. So it's this type of risk analysis that they need to be able to do and collaboration that brings out the collaboration as much as it does the risk analysis in those particular periods. But a key part of the MBI is if you are going to be bringing in new technologies what is your risk on the supply side and how are you going to be able to mitigate that. There is one last question, Lora, I think we can get to. How to drive a successful S&OP process up the chain from the bottom up and most companies that are successful that have done it due to executive management focus. I actually see Trevor, it's bottoms up and the tops down, and in companies that does Sales & Operations Planning the best are very disciplined around the steps bottoms up to be able to look at the data what-if analysis and the inflection points in terms of what drives the significant change and then to be able to develop what they think are the best plans that can then be reviewed with the executive team and then ask the executive teams for help on critical strategic questions. Likewise I see that it is important for the executive team to define what's important in the supply chain and this is something that I find that most companies don't really think enough about it. What drives the inflection excellence, how many supply chains do they have and what does good ones look like and so the executive team really has to help the supply chain team drive that downward so that when it comes bottoms up they can ask the question, Is this as good as it gets? And is there a better way and what other things could we do to really be able to raise the trade offs of effective frontier of the supply chain.

Thank you very much Lora and in closing I thought there are still some questions and I know that and those of us who have not had their questions answered, we will do that first thing after the webinar but I wanted to just quickly go through the polling questions and just validate where we had got and just look at some of the responses or see if you can respond to how these match with your research or are there any surprises here. Actually no surprises; the research that I am doing right now which really says that companies that are in the market right now looking at S&OP are really driving these business decisions by what-if analysis very focused on the data models for those industry specific data models. So this question about what-if importance didn't surprise me at all Trevor, and this one, demand volatility caught us, many people say that we've had hangover in 2009 to 2010 still hanging on. I think if we had asked for multiple choices here we would have seen a lot of supply reliability. As we get into 2010 the supply reliability issues because we've got really weak links out there, is going to become more important.

And the last question. The current capabilities in what-if and this is I think a message for all of the technology providers, not to think about Sales & Operations Planning as an add-on to traditional supply chain planning but really think about it in terms of flexibility for what-if analysis and usability and if this represents where we are at in the market very well. And the ability to help people to drive what-if analysis; see the rates at change in demand, see the probability of demand, tie that to risk catching, tie that to manufacturing scenarios in execution whether its the rhythm wills or whether it's different ways of configuration, help with network design, pull-push scenarios, help with inventory form and function analysis, doing all that what-if analysis underneath this is really what's going to I think define the next generation of S&OP and we are already starting to see some of that which I think is great. Thank you Lora.

I see we are at the top of the hour. Just to repeat there are some questions that have come through that we have not been able to answer, we will get that information back to you and one asking specifically for your last name. It's Lora Cecere. If you google her you will be able to find many many references for you to contact her but we will send her information through to you as well. With that I will pass back to Angie for closing comments.

Thank you everyone for joining us today. A copy of today's webcast will be available on demand on Supply Expert Community. We will send out the link in the follow up email. Once again thank you to both Lora and Trevor and everyone who attended the webcast. If you have further questions you can email us at info@kinaxis.com.