Volume 32 Issue 1
Spring 2013

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FEATURED ARTICLES:

Putting “M”arketing Back in S&OP
By Charles W. Chase, Jr.

Smart organizations share common goals and performance metrics. They are also nimble and work collaboratively, focusing on sustainable strategic objectives. They take a more balanced approach that looks horizontally across the supply chain, virtually eliminating silos and optimizing the process from market-to market and supplier-to-supplier’s supplier. The new focus on the value supply chain is how companies can listen to their customers, assess the market, and then create a more accurate demand response.

S&OP and Strategy: Building the Bridge and Making the Process Stick
By Duncan Alexander

Sales and Operations Planning has come a long way since its invention in the 1980s as a process to align sales and manufacturing volumes. But after early success, the process often falters. This article explains why building a strong bridge between strategy and S&OP will drive successful strategy execution and help build S&OP into the culture.

Developing Complete Software Business Cases
By Larry Lapide

This column discusses the performance elements that ought to be considered in a business case that is developed to justify the implementation of software systems. It espouses the estimation of benefits and costs in three areas of operational improvement: Efficiency, Asset Utilization, and Customer Response. This complete and holistic view is especially needed when justifying the purchase of forecasting and planning software systems.

What Is the Cost of Your Forecast Error?
By Sumit Singh

Forecast Accuracy, a metric that permeates throughout a company’s multi-faceted functions, impacts both the top-line sales revenue and the bottom-line profit margin. Even though managers of organizations are well aware of it, they are reluctant to go through the rigor required to reap its full benefit. This article explores why many organizations and their managers fail to fully capitalize on forecast-accuracy information and what can be done to change it.

How Many Demand Planners Do We Need?
By Robert Langenhuizen

There is no simple way to decide how many demand planners a company needs. The author posits and discusses six essential factors to consider when determining the answer: What is expected from a demand planner? What kind of demand planning process is in place? How many forecasts have to be prepared, and what level of detail is required? How much accuracy is needed? What kind of forecasting technology is available to do the job?

Book Review
By Chaman L. Jain

“Bricks Matter”: The Role of Supply Chains in Building Market-Driven Differentiation By Lora M. Cecere and Charles W. Chase, Jr.

From a Soft Patch to Recession for Industrial Countries
By Evangelos Otto Simos

The U.S. Economy…Stuck in Low Gear
By Jack Malehorn

Answers to Your Forecasting Questions
By Chaman L. Jain

 Click here to become an IBF member and get a JBF subscription FREE

The Journal of Business Forecasting (JBF) has been providing demand planning, forecasting, supply chain, and S&OP practitioners with jargon-free articles on how to improve the value of their roles and company performance from improved forecasting and planning for over 30 years. A subscription to the JBF comes with IBF membership at no additional cost.

Joy White

Panel discussions are most interesting when the panelists represent similar disciplines across a variety of industries. At the recent IBF Conference in Scottsdale, each of the 4 panelists were asked about various aspects of the planning process within their respective organizations. The range of topics included the single forecast plan (the one number plan), execution of the plan, use of metrics, frequency of the S&OP review and, of course, talent within the organization. There appeared to be a great deal of commonality and agreement on the various business approaches between the respective organizations. As we might expect, the degree of integration and frequency varied. Importantly, they all shared a very similar view regarding the “perfect candidate profile” and the increasing need for these individuals to develop and exhibit strong leadership skills.

In today’s highly competitive workplace, questions regarding the “perfect candidate profile” are always intriguing. The varying demographics of the workforce, coupled with the increasing use and sophistication of technology and the required “speed to market” make the “perfect candidate profile” an interesting discussion.  Of course in our field of business forecasting and demand planning, we know that sound analysis and mathematical skills are a prerequisite for success. However, the panelists resoundingly agreed that the number one skill required for success is the ability to lead and to confidently influence across the organization, and this ability requires “soft skills”.   It was also acknowledged that these so-called “soft skills” were not necessarily an innate attribute and required training and development. Randy Wilp, Leader of Global Commercial Forecasting at Merck & Co. Inc shared his experience utilizing an outside organizational behavior coach in his effort to build and foster the communication and “soft skills” of his team.

In my own prior experience with managing large inventory planning teams, it has been critical to the success of my organization to be able to not only build a solid forecast and replenishment strategy, but also to be able to communicate this plan to the appropriate business partners. The successful communication and “buy-in” lead to the best execution. This required the planners to be able to communicate their forecasts and plans in easy to understand terms, while clearly articulating the business benefits.  It is usually best to save the “geek speak” for like-minded peers.

As forecasting and planning organizations begin to take on a more front and center role within organizations, should we begin to consider the aspects of more robust leadership training? There is a recent post regarding new trends in Supply Chain Management Review which discusses preparing students for the work world in a pragmatic way. Perhaps it is also time to give greater consideration to the “soft skill” and leadership development as well. What are your thoughts?

Joy White
Supply Chain Leader
IBF Ambassador

Rishi Trivedi

Last week, we had a great first meeting of the Bangalore chapter of IBF, with learning sessions on S&OP process implementation and supply chain optimization. S&OP Process Implementation was led by Karthikeyan S who is S&OP Process Lead at Honeywell and played key role in the S&OP success at Honeywell.

Kathik’s discussion was extremely captivating, as well as interactive. He re-enforced many key principles of a successful S&OP process implementation with a live case study. At Honeywell, the term has been improvised to be called SI&OP or SIOP, with “I” standing for Inventory, which is given a very high level of importance in the whole process. In fact, the successful implementation resulted in a reduction in inventory carrying cost so huge that the savings was actually utilized in introducing new products, leading to a jump in revenue.

The real crux of Karthik’s discussion was the journey of process implementation, which wasn’t a path of roses, but the resilience of the team and management made it successful. The situation that existed before the implementation was quite common and many of us can relate to it. It was a factory, which was forecasting sales and not the sales team doing any forecasting. A lot of obsolete inventory routinely piled up. Planning was adhoc and mostly chaotic. Just 2 warehouses were catering to the entire country leading to unoptimized supply chain.

Post implementation, which took around 2 years, the scenario has been quite different. Now the sales team owns the forecast and it is based on customer demand (versus the supply focus earlier). They have a more optimized supply chain with more and strategically placed warehouses.  The product build is based on the replenishment model and meetings happen on a weekly basis.

Some of the interesting facts that were shared were the classification of the products into 4 categories with interesting names like Runners, Repeaters, Crawlers and Strangers. This helped in designing forecasting strategy for each category and achieving better accuracy. The other very important point stressed throughout the discussion was the support of the top management in implementation of the process. Leadership supported the implementation team and the statistical forecast in initial days to drive the point to the reluctant sales team. As we know so well, without this kind of management support, the process would fail before it began.

Behavioural challenges were galore too. There was less than 50% attendance in first few meetings and the SI&OP team was perceived to be the police by factory folks. Sales team’s resistance and excuses were something that made all heads in the room nod in agreement with familiarity of the situation. This gave birth to another interesting categorization of stages in the process with respect to the people involved. The stages with respect to people behaviour were named as Speculator, Spectator, Participant and Owner. The names themselves are self explanatory of the each stage and I think anyone who has gone through the rigor of this process implementation would readily relate to this beautiful description.

The participants of our first meet were definitely enriched by the discussion of the live case study and are eagerly looking forward to many more such sessions. Do you have any great S&OP lessons learned to share?  Please comment.

Joy White

At the IBF conference last month in Scottsdale Arizona, there were many interesting presentations and discussions regarding new product forecasting.  While the organizations were discrete, ranging from children’s clothing to pharmaceuticals, the challenges remain quite similar.  If accurate forecasting of new products is essential to a company’s growth and profitability, why is it so difficult?

Product forecasting is difficult, new product forecasting is even more difficult. Forecasting is tedious, time consuming, and error prone. However, new product forecasting can be very rewarding, because a large portion of sales comes from new products. The forecast is never 100% right, but it is possible to build a solid forecast and that is accomplished through integration and collaboration.

Steve Tribou, VP of Sales Forecasting and Planning at Carter’s/Oshkosh discussed how the development of “Account Plan Quantification” helped bring an analytical perspective and ultimately facilitate a more collaborative process. Steve’s narrative of events that took place prior to a more collaborative process appears to be very common amongst organizations.

Planning is hard, everything is constantly changing, and it is not as easy as developing the plan and executing to it. In the planning process we must deal with all of the interim change and therein lies some of the chaos we encounter. In an effort to achieve improved business results, we must focus on continuous alignment, realignment and synchronization.

For simplicity, although this is not a simple or linear process, let’s break this down into 3 stages. In his presentation, Steve acknowledged the presence of similar activities in the pre and post collaboration stages as well.

Pre-collaboration Processes

The pre-collaboration stage could be described as a bit chaotic. There was disconnect in the communication – in fact there were various methods of communications. Has anyone ever experienced this when attempting a seasonal planning session? Along with various methods of communication comes varying opinions. There is generally not a lack of people or opinions; it is generally a lack of the right actions. The move from pre-collaboration stage to collaboration is a journey and is often marked with some very tough discussions, distrust and challenging obligations.

The Transition Phase

We all know the difficulty of change should never be underestimated. For any process change to be effective there needs to be adoption across the organization. Generally, we see some early adopters, the meetings start to get interesting, the curiosity factor heightens, and there is movement. There is oftentimes a lot of “push -pull” in the organization.   It is during this time where the journey begins to take shape.

Post-Collaboration Processes

This stage is where the process begins to grow and mature. Trust, which is an essential component, begins to build in and across various business units.  A cadence starts to kick in and while this can be very subtle, it is increasingly felt within the organization and is ultimately manifested in an improved forecast. It must be noted a collaborative process requires continuous improvement and is therefore a continuous journey.

Implementing any collaborative process can be likened to Tuckman’s 4 stages of group development, Forming, Storming, Norming and Performing. The challenges are similar regardless of the industry or the size of the organization. The complexities however, do scale with size and with the degree of integration within the organization.   In my own prior experience, I was part of a large national retail corporation that went from a fully decentralized inventory management process to a centralized process. This was a huge undertaking that took nearly 6 years to complete. Much like the presenter commented at the IBF Conference, the initial period presented major challenges and very difficult conversations. This is all a part of progress.

Joy White
Supply Chain Leader
IBF Ambassador

Special JBF Issue on New Product Forecasting

New product forecasting is the most challenging activity in demand planning. It is also the most rewarding. It is challenging because new products have no history to go by, and rewarding because a large of portion of sales come from them—one-fifth according to the latest survey by the Institute of Business Forecasting and Planning. Accurate forecasts help to optimize the reward and minimize the

risk. This special issue of IBF’s Journal of Business Forecasting (JBF) on new product forecasting shows not only how to develop better forecasts, but also how to optimize the results.

Download a preview version of this special issue HERE.

Patrick Bower explains the process to be used for new product demand planning and forecasting. It begins by gathering input from Sales and Marketing, then deciding on assumptions about product distribution, velocity, cannibalization, and media/promotion plans. Subsequently, forecasts are prepared and demand plans are developed. Nothing is certain when it comes to new product forecasting. Therefore, the process should enable the Demand Planners to respond quickly to new information that arises prelaunch, during launch, and post-launch.

Michael Gilliland describes some worst practices in new product forecasting, thinking that if businesses realize what they are doing is wrong, they may do something about it. Many new product forecasts reflect nothing more than aspirations because they are generated either to pass the hurdle of approval or to tie forecasts with the management targets. He emphasizes that point forecasts are often developed, but the range forecasts along with them can provide additional information about risk involved.

Larry Lapide discusses demand signals drawn from the information gained from wholesalers, retailers, and consumers. This kind of data can be very helpful in developing new product forecasts. The job of Demand Planners does not end at the launch of a product. To assure its success, they need to follow the market feedback to see how it is doing; if anything needs to be fixed, it should be fixed right away. The author states that in addition to the market feedback from Sales and Marketing, Demand Planners can get valuable information from online ratings and reviews, such as seen on Amazon.com and various social media websites (for example, Facebook).

Jonathon Karelse describes how new product forecasting is done in the tire industry, which is very unique. In this industry, new product launches are few and far between, making branding difficult. As such, a large percentage of decisions are made by retail salesmen, not by consumers. What matters most in this industry is that new product developments and production timelines are consistent with the dealers’ expectations, while creating enough difference among products in the minds of consumers. (READ FULL ARTICLE)

Michael Kelleher shares his experience about new product forecasting and planning, which he regards as partly art and partly science. The art part includes investigating the assumptions made by Marketing in preparing the forecast. Is it a perfect or less-than-perfect forecast? Is this product viewed as revolutionary or evolutionary? And does this forecast take into account the availability of inventory? The science part includes searching for a real and unbiased forecast based on the past experience. He also describes

step-by-step what should be done before and after the launch. Demand planning and forecasting are important, but the success of new products will be further improved if the process of conceiving and developing them is sped up, because what matters is not just a new product and how it is marketed, but also which one is first. The first one gets a premium price and immediately gains a significant share of the market.

We encourage you to DOWNLOAD a preview version of this special issue HERE.

Tracy Cherba

S&OP is such a basic concept, yet so difficult to implement effectively across the globe.  It’s hard enough trying to get one S&OP process created, but how do you go about creating a process that works together across time zones, language barriers and cultural differences?  It’s a journey that takes time, patience and consistency.

Elanco is a world leader in developing products and services that enhance animal health, wellness and performance across the globe.  In order to make sure that everyone understands the impacts of demand and supply decisions around the world, we had to develop a process that would facilitate the communication and decision making process and make sure that the right conversations were taking place at the right time.

I was brought into the role of S&OP Global Leader with the assignment to create a process that would enhance our level of communication, create a consistent process that could be replicated across 5 geographic regions and provide tools / training that would work for all levels of the organization. S&OP is not a new concept to Elanco and has evolved over the years to mean many different things to different people within the company.   The key is working with all of the S&OP levels (Executive, Affiliate, Site, External Manufacturers, etc.) and S&OP participants (SC, Marketing, Finance, Quality, etc) to come up with a process that can work for everyone!

The first thing I did was ask for S&OP packets across the different areas of the organization – examples from a manufacturing site, a sales affiliate and an external manufacturing hub.  Who knew that this request would produce so many inconsistencies?  And in some cases it proved to be impossible to locate the packets at all.  Those packets I did locate, didn’t necessarily tell anyone what needed to be done next but included numerous amounts of slides.  Many of the meetings were long, didn’t include the right people and really didn’t have concrete actions coming out of them.  There were some examples where the S&OP processes were very good and could be replicated to other areas.  Developing a set of tools and training to facilitate the S&OP meetings was a necessary first step.  This includes setting expectations on what metrics will be reviewed, who will participate, what information will be communicated and the timing of the meetings.  It can’t just be left to up to those with “Supply Chain” in their title!

The Elanco S&OP structure includes an Executive level, 5 regions, sales affiliates located all over the world, 5 manufacturing sites and 5 external manufacturing hubs. If we didn’t have the right people in the room with a clear understanding of what the goals were – this was never going to work!  We couldn’t have “part-time” players…  and we HAD to have leadership support throughout all levels of the S&OP structure.

We’ve learned a lot along the way…  The S&OP rollout continues to be a journey that evolves as we learn more.  We’ve learned a valuable lesson along the way that one size does not necessarily fit all.  We’ve also learned that the global nature of this effort means that patience and flexibility need to be your friend!  While S&OP may be a basic concept – creating an S&OP process that people across the globe feel is valuable isn’t so basic!

I will also be elaborating on our Global S&OP Journey at IBF’s Supply Chain Forecasting & Planning Conference, February 24-26, 2013.  Hopefully, we’ll see you there.

Tracy Cherba
Supply Chain Global Leader – S&OP/OSSCE
Elanco Animal Health/ Eli Lilly & Co.

Chintan Shah of BIC Inc.’s supply chain operations recently led an IBF webinar  for Asia on December 24, 2012 in which he outlined new models for driving sustainability programs at the company. Chintan has successfully implemented a S&OP process at BIC Canada with the purpose of eliminating human error and improving the supply chain process, which he refers to as Soft-S&OP. Earlier at BIC the forecast numbers lacked consensus as every function had its own approximation of demand vs. what the customer really wanted and what it would take to meet demand.  The S&OP process was created to foster consensus and corrected this problem. BIC created a more structured, three tier process: Collaborative S&OP, Supplier S&OP and Soft S&OP.

BIC implemented its new S&OP process in about 1 year.  The key aspect of implementation was collaborating with the customers to get needed data and win their buy-in. To maneuver through this successfully, Chintan engaged with key customers to start such as Walmart and Staples and interacted with the management and IT teams. The customers were required to share the sell-through data of BIC products to enable the company to see the real pulse of consumer demand. Once this data was gained, the next step was a pilot testing of the S&OP process with the customer to show them the benefits, as not only to BIC, but to them. The efforts paid off tremendously  and customers soon experienced great benefits of the process and in Chintan’s words they ‘just love it today’. In fact, as testimony to their success, Walmart and Staples have both recognized BIC’s process as value to them. To keep customers engaged, they are now involved in the decision making process through quarterly meetings.

The internal challenges like selling the idea to the sales team and getting them on board was also won with a similar strategy. Each internal group was shown the benefits by piloting the project and getting them to realize implementing the process will actually save time that can then be used on, for example, their core job such as sales.  Chintan expressed that S&OP meetings were quite painful to start with and required a lot of deliberations and patience, but now most functions are very accustomed to using it and it has indeed become an integral part of the planning process. As a result, BIC has reduced the reaction time to consumer demand to just few hours from many days earlier. The entire process is free from human intervention except for the judgment over the results.

Beyond the examples, as part of the discussion, Chintan brought a very interesting definition of S&OP to webinar participants: “[the] objective of S&OP is to arrive at a business ‘Game Plan’ to help manage and allocate critical resources to meet the needs of the customer at the least cost”. At BIC he used this philosophy along with fundamental concepts like ‘forecast accuracy being better at higher levels of product hierarchy’ and ‘one forecast number is better than many’.

Chintan also had words of advice for the professionals in India. He reminded them that Walmart  was the company which redefined the supply chain processes and changed the game in North America and IKEA  had one of the most stringent supply chain processes in the world. Now with names like these entering the Indian market, it will definitely change the way things are used to working in this market, so far. This opens up great learning as well as professional opportunities for those in demand planning, forecasting, S&OP, and supply chain.

To learn more about other IBF professional development program, please  visit: www.ibf.org

Rishi Trivedi
Regional Country Manager – India
Institute of Business Forecasting & Planning, IBF

Volume 31 Issue 3
Fall 2012

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Featured Articles:

Successful Global S&OP: Leadership, Change Management, Behavior, & Cross-Cultural Differences
Niels Van Hove explains as businesses go global, the expansion of the S&OP process must follow. He outlines why cultural issues are so important and how to adapt to them. One of the factors in the success of Global S&OP is a company’s ability to adapt to the local culture, while developing and implementing S&OP. It is important to recognize we have the ability to change our company’s culture, but not the country it is situated in. Other key considerations include constructive behaviors, effective change management, and leadership support, all covered in this excellent and timely article.

Forecasting Performance For North American Consumer Products
Robert F. Byrne demonstrates another inventory reduction tactic utilizing forecast improvement and bias reduction by forecasting using daily instead of monthly data. His demonstration includes data from a who’s who of large companies including Procter and Gamble, Unilever, Kraft Foods, Kimberly-Clark, General Mills, ConAgra Foods, and Campbell’s Soup.

Ranking Professional Forecasters in an Unbalanced Panel: A New Approach
John Silva and Azhar Iqbal point out the flaws in the methodology currently used by Bloomberg in ranking forecasters, and provide a solution to improve the accuracy.

What Demand Planners Can Learn from the Stock Market
Charles Re Corr empathizes with the challenges faced by forecasters in industries like utilities, ranching and the stock market. His article details the connection of demand forecasting to the stock market.

Thanks to the IBF
Larry Lapide discusses the role the Institute of Business Forecasting & Planning has played in disseminating the knowledge of sales forecasting and planning over the last 30 plus years.

Taking the Worthwhile Trip from S&OP to SIOP
Sean P. Willems In his article, Sean P. Willems shows how an inventory optimization tool can help to reduce inventory in the S&OP effort.

Acceleration of Global Growth in 2013 Led by the Americas and Non-Euro Countries in Europe
Evangelos Otto Simos talks about acceleration of global growth, which he feels will be led by the Americans and Non-Euro countries in Europe. He also gives updated growth rates and inflation rates of 60 different countries.

The U.S. Economy…Stuck in Neutral
Jack Malehorn discusses why the US economy is stuck in neutral, and presents forecasts of 13 key economic indicators and predicts how they will affect economic growth

Click here to become an IBF member and get a JBF subscription FREE

The Journal of Business Forecasting has been providing demand planning, forecasting, supply chain, and S&OP practitioners with jargon-free articles on how to improve the value of their roles and company performance from improved forecasting and planning for over 30 years. A subscription to the JBF comes with IBF membership at no additional cost.

Read more: http://www.ibf.org/index.cfm?fuseaction=showObjects&objectTypeID=365

Larry has provided valuable input in the development of IBF’s body of knowledge that drives our certification, research, and training programs.  He has contributed over 60 articles to our Journal of Business Forecasting. He provides valuable insight and thoughts on improvement, enabling forecasting and planning professionals to succeed in this challenging environment.”

Larry responded:
“I am deeply honored and humbled to receive this award. While I greatly appreciate receiving it, it would be less meaningful if the IBF hadn’t evolved into what it is today — the preeminent professional forecasting and planning organization on the planet. So on behalf of the entire community I wish to thank Professor Jain and Anish for founding the IBF and for allowing me to be part of its success. And, of course, I personally thank the IBF body and both of them for this award.”

             

Andrew Avery, CPF

It was spring of 1999 when I was in Parkersburg WV looking for my next opportunity in Demand Management. I had just recently become a member of the Institute of Business Forecasting (IBF), and had begun using the career center to find possibilities for a more challenging position.

Looking through the recent job postings on the IBF Jobs page, I noticed a position in Boston MA that looked interesting. I had been born in the Boston suburbs, and I had an elderly grandmother still living in the area, so the position appealed personally as well as professionally. I went through the application and interview process, and landed a very exciting position with a company in the paper industry just starting on the path to Sales and Operations Planning and in need of a “startup” Demand Manager.

Needless to say I’m a big fan of the quality of positions posted in the IBF career center.

In the 15 years or so that I’ve been a member I’ve come to appreciate the organization a great deal more as I grew my career and expanded my utilization of the offerings of the IBF. I’ve attended conferences and seminars, and learned a great deal from practitioners who were expanding the value demand management could add to an organization. I’ve created network opportunities that I value many years later.

I’ve also taken advantage of the certification opportunity with IBF, first becoming certified in 2005 and since renewing. And I’m glad I did. While my paper industry career was robust over 13 years, the economics just weren’t sustainable and I found myself looking for new opportunities again this year. As you might suspect, IBF was among my first contact points. While I haven’t found the perfect opportunity just yet, several of the more challenging director level positions I’ve sought have required CPF certification.

I strongly recommend to forecasting professionals that they consider CPF, as it’s potentially an “order winner” as you compete with a growing number of skilled Demand Managers out in the marketplace. It’s a strong differentiator in a brave new world where software looks at your resume first and a machine decides whether or not a human being touches it. Every “key word” you can add to your qualifications helps, and there are few key words more critical to high level Demand Management opportunities than “IBF” and “CPF”.

Andrew Avery
IBF Certified Professional Forecaster (CPF)

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