1. business and industrial

sa le s and
mar k e t i ng
2014
r e por t
tit le s po ns o r :
s t u dy sp onsors:
A Supplement To
Consumer Goods Technology
New research provides a progress
update for initiatives in:
• Trade Promotion Management
• Downstream Data
• Consumer Engagement
• S&OP
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sa le s and
mar k e t i ng
2014
r e por t
publisher
Albert Guffanti
[email protected]
editorial
Executive Editor: Kara Romanow
[email protected]
edit note
At IDC Manufacturing Insights, we know that sales and
marketing organizations are working hard to serve their retail customers and
engage with consumers. Join us in a conversation about some of the most discussed challenges in the industry — trade promotions, downstream data, consumer engagement and keeping products on the shelf with sales and operations
planning. Our report shows that sometimes change is slow, but we believe 2014
is going to be the year many organizations start to see even more
progress from their investments in sales and marketing efforts,
making technology, market visibility and expertise work together.
—ki m kn i ckl e, IDC Manufact uring Ins igh ts
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contents
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6
The State of Things
10
sm
Online Project Manager: Whitney Ryerson
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marketing/events/circulation
Director, Event Planning: Patricia Benkner
[email protected]
Trade Promotion Management
Circulation Manager: Jeffrey Zabe
[email protected]
Downstream Data
Manufacturers and retailers are challenged to leverage new forms
of data, while not losing sight of progress still needed around more
traditional forms of downstream data.
18
sm
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14
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Director of Lead Generation
& Audience Development: Jason Ward
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An overview of where sales and marketing initiatives fit in among
a consumer goods company’s top business priorities and complex
challenges.
Despite persistent impediments, manufacturers report progress
and ponder TPO’s contribution to Integrated Business Planning.
sm
online media
Vice President of Media Integration: Rob Keenan
[email protected]
Direct to Consumer
22
Survey results indicate that a marketing relationship is favored
over a direct commercial one, but smart companies will explore
the mechanisms to facilitate direct-to-consumer sales.
S&OP
IDC explores the interesting notion of Integrated Business Planning
and its interrelationship with S&OP.
corporate
CEO/Chairman: Gabriele A. Edgell
[email protected]
President: Gerald C. Ryerson
[email protected]
Vice President: John Chiego
[email protected]
Founder: Douglas C. Edgell, 1951-1998
corporate office
Edgell Communications
4 Middlebury Boulevard
Randolph, NJ 07869-1111
(973) 607-1300 • Fax (973) 607-1395
www.consumergoods.com
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www. ed g el l c o m m u n i c a t i o n s. c o m
2014
sa le s
and
m a r k e t i n g r e por t
The State of Things
Sales and marketing plays fundamental role in meeting business
prioritie s and serving the “5 I” consumer • BY KI M KNI CKLE
onsumer goods (CG) manufacturers
tell us that their top three business
initiatives are expanding their geographic reach, improving customer
acquisition and retention, and introducing new products and services (Figure 1).
In each of these initiatives, sales and marketing
plays a fundamental role in serving the “5 I” consumer — instrumented with mobile devices, informed with access to the Internet on their devices,
interconnected in social communities, in place in
stores or wherever else they might be, and finally,
immediate in their ability to take action. This is the
first time we’ve seen expanding regions at the
top of the list, and we think it’s exactly because
consumers now possess all of these 5 I attributes.
We know that increasing the effectiveness and
productivity of sales and marketing in today’s market is the result of continued investments in people,
process and technology. Our IDC research finds
that application spend and customer relationship
management (CRM) spend show healthy growth
from 2013 to 2016 (Figure 2). Within the CRM segment, the strongest growth is in marketing automation (Figure 3). These investments should ultimately bring greater automation, more consistent
processes and easier access to relevant information.
Over the last few years, we’ve witnessed an
increasing use of new technologies such as big
data and analytics, cloud, mobile and social in
how CG companies engage with their customers
and consumers. While all of these technologies
are important to sales and marketing, we can’t
get around the fact that social, in the form of social
tools, social media and social networks, has fundamentally changed the way CG manufacturers can
work with and connect with the consumer and the
retail customer. We can see that connection in the
fact that integrating social and CRM is more common than any other type of integration (Figure 4).
Adding social interactions with consumers
and among consumers to more traditional data
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Top Business Initiatives in Consumer Products
Q. In 2013, which of the following initiatives will be significant in driving
IT investments at your organization? Multiple responses allowed
f i g u r e 1:
I N I T I AT I V E
42.6%
Expand into new geographic regions/countries
37.4%
Improve customer acquisition and retention
35.2%
Introduce new and/or improved products and services
Source: 2013 IDC Global Technology and Industry Research Organization IT Survey
U.S. Consumer Packaged Goods IT Spending,
2013–2016 ($M)
f i g u r e 2:
T Y PE O F S PEND
2013
2014
2015
2016
2013- 2016
C AGR %
Application Spend
5,001.67
5,277.21
5,575.00
5,900.11
5.7%
CRM Applications
574.38
604.91
637.00
668.06
5.2%
Share of CRM applications in
application IT spend (%)
11.5%
11.5%
11.4%
11.3%
Source: IDC Manufacturing Insights IT Spending Guide MI243424, 2013
This is the first time that
expanding regions ranks
as a top business priority,
perhaps because
consumers now
possess all of the
“5 I” attributes.
2014
sa le s
m a r k e t i n g r e por t
and
The State of Things
sources, like transactional (downstream) data
and promotion data, is definitely making sales
and marketing processes and decisions both
more complex and more data rich. That’s why
we’ll also share some of our thoughts on how
important it is to use new tools to analyze that
data. But we all know that technology is just an
enabler, and it’s how companies apply the technology in their organizations for business value
that really matters. For the rest of this report,
we explore how CG manufacturers are finding
opportunities for improved sales and marketing
across business functions and technologies in
four key areas:
1
The progress CG manufacturers are making in
Trade Promotion Management and its contribution to Integrated Business Planning;
2
How complementing Downstream Data with
other data and big data analytics can improve
demand visibility to better manage volatility
and drive customer service improvements;
3
How Direct-to-Consumer initiatives continue
to evolve by leveraging social and mobile, to
strengthen brand marketing and sales with personalization and consumer experience benefits;
4
How Sales & Operations Planning still faces
orchestration challenges, but as it evolves, will
better represent the perspectives of sales and
supply chain as one approach.
As in years past, we’ve based our analysis in
this report on ongoing conversations and research
with IDC Manufacturing Insights clients, IT and
vertical industry business priority and spending
data, and our 2014 Sales & Marketing Survey results.
We expect to see continuing progress in all of these
areas as they are among the key initiatives that
we believe will enable future sales growth and
continued expansion into new markets, improved
customer service performance, and greater productivity through sales and marketing.
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Americas CRM Applications Revenue by
Segment, 2013–2016 ($M)
f i g u r e 3:
APP LI C ATI O N
2013
2014
2015
2016
2013- 2016
C AGR %
Marketing Automation
3,177.50
3,486.50
3,794.20
4,119.50
9%
Sales Automation
3,708.00
4,005.60
4,287.80
4,579.40
7.3%
Customer Service
2,141.00
2,311.80
2,494.00
2,684.80
7.8%
Contact Center
4,225.80
4,413.50
4,601.30
4,805.20
4.4%
Source: IDC Manufacturing Insights and IDC 241293, 2013
Connecting Customer Details
Q. Which internal systems do you currently integrate with your social
software tools? Multiple responses allowed
f i g u r e 4:
SYSTEM
CRM
34%
ERP
33.2%
Analytics
Customer support
25.3%
21.9%
Source: 2013 IDC Global Technology and Industry Research Organization IT Survey
While technologies
are important to
sales and marketing,
social has fundamentally
changed the way consumer
goods manufacturers
connect with the consumer
and the retail customer.
2014
sa le s
and
m a r k e t i n g r e por t
Trade Promotion Management
Plenty of Improvement Opportunities Exist Despite Impediments
he practice of using trade promotion
funds to temporarily “buy down” the
selling price of a consumer product has
been and continues to be a major vehicle
for CG companies to drive sales volume.
Indeed, the use of promotional funds is so pervasive that for some product categories, the majority
of sales are driven by promotions and the underlying baseline volume can be difficult to assess.
Given the contribution trade promotion funds
make to CG companies’ performance and the
large expense this approach places on the P&L,
manufacturers are working to improve and
increase their insights into their performance
(transform the process; guarantee outcomes;
targeted results). The availability of purposebuilt tools, the massive amount of data now captured and a desire to better integrate promotional
planning into the broader notion of S&OP have
resulted in many businesses looking to truly
optimize rather than just manage the process.
In last year’s discussion of trade promotions,
we proposed a maturity progression from basic
spend management to truly collaborative promotion optimization. As with all maturity models,
most companies sit in the middle; with only a few
having moved up into the most advanced stages.
Impediments to effective promotional assessment
still exist, with the barriers indicated in Figure 5.
This year’s survey data is a bit of a mixed
bag. Forecasting baseline and access to promotions data continue to decline as an impediment,
which is certainly good news; yet more companies this year indicated they don’t have an effective tool in place versus last. We do have a larger
number of smaller company responses in this
year’s data, which may explain the difference. We
also hear, anecdotally, that many companies are
rethinking internally-developed TPM systems
in favor of commercially available alternatives
from the major software vendors, which could
also help to explain the difference.
In terms of improving trade promotions per-
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• By Sim on Ellis
Impediments to Effective Promotional Assessment
Q: What impediments at your company, if any, do you see preventing
better assessment of trade promotions? Multiple responses allowed
f i g u r e 5:
Im p e d i m e n t
2014
2013
2012
The forecast baseline is difficult to define,
so promotional lift is debatable.
35.2%
36.8%
58%
The data from promotions is either difficult to access
or inaccurate.
35.2%
42.1%
39%
No impediments; this process is a core competency
for us.
14.8%
26.3%
21%
We do not have an effective tool in place.
46.3%
36.8%
13%
TPM is a sales activity.
14.8%
15.8%
4%
Source: IDC Manufacturing Insights and CGT, 2014
Improving the Performance of Trade Promotions
Q. How are you improving your trade promotion performance?
f i g u r e 6:
Multiple responses allowed
I MPRO VE ME N T TA CT I C
2013
2014
We are collaborating internally
to design better promotions.
50%
We are working with our retail customers
to design better promotions.
44.4%
We have improved the way we analyze the
results so we can design better promotions.
42.6%
We are using new technologies for our trade
promotions management and optimization.
We are using new channels
for our trade promotions.
Source: IDC Manufacturing Insights and CGT, 2014
81.6%
73.7%
68.4%
52.6%
40.7%
21.1%
20.4%
2014
sa le s
and
m a r k e t i n g r e por t
Trade Promotion Management
formance, we see similarly ranked responses as
prior years, even though the absolute rankings are
down across the board (Figure 6). Again, this could
be skewed by a higher number of smaller companies, but it may also be that many companies have
worked through these improvements already and
taken the “low hanging fruit” such that further
improvements are now more difficult to get. We
would tend to dismiss that at IDC Manufacturing
Insights, as our view is that there are plenty of
improvement opportunities remaining.
One such opportunity is to better leverage the
value of big data and analytics. Technology plays
a key role in delivering true collaborative trade
promotion optimization, particularly in the abil-
figur e 8 :
Business Value of Big Data
Q. For these technologies that your company is researching, piloting or
currently using, what is the business value you expect to gain for your
organization? Multiple responses allowed
f i g u r e 7:
VA L U E
44.8%
Generate new revenue streams
40.3%
Enhance products and/or services
28.4%
Increase operational efficiencies
Source: 2013 IDC Global Technology and Industry Research Organization IT Survey
Integrated Business Planning
SC Pl a n
Supply Chain
Poor Forecast
Accuracy,
TPM
sa les Plan
Trade
Promotion
Planning
Master Data Accuracy,
Design-for-Supply Chain,
Flexibility
S&OP
Sales
Product Plan,
Promotional Plan,
Account Plan,
Share-of-Voice
R&D Budget,
Innovation Funnel,
COGS Challenges
Marketing
m k Tg .Pl a n
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R&D
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Finance
Innovation
Performance
and Churn
f i n . Pl a n
NPDI Pl a n
2014
sa le s
Trade Promotion Management
ity to manage these large amounts of data, and
to manage them quickly — often in real time.
While an optimized process will use historical
performance data to generate an improved “forecast” for all promotions, it is still critical to have
real-time visibility into the performance to ensure
that sales data is quickly analyzed to ensure that
additional inventory is available as required.
Certainly looking at the responses to the value
from big data in Figure 7, we see direct linkages
to the trade promotion process — whether using
advanced analytics to drive increased promotion-related sales or the ability to better manage
promotions for greater efficiency and lift.
When considering the future of the trade promotion process, the end game will always be a
moving target. As soon as a CG company arrives
at the point of collaborative promotional optimization, the most mature stage, there will be new
opportunities to seize. Three things immediately
spring to mind. First, with the growing power of
technology to analyze data quickly and provide
usable insights in real time, there are more ways
to engage consumers in the promotional process
and more forms for promotions to take. Second,
the omnichannel shopper is going to expect to see
promotions across channels in which they shop,
whether in store, online or some hybrid of the two.
Third, as CG companies take a broader view of
planning, trade promotion optimization will be
increasingly viewed as a key part of the Integrated
Business Planning (IBP) process. This last point is
particularly interesting (Figure 8).
and
m a r k e t i n g r e por t
Downstream Data
New Developments Make This A Hot Topic
Once Again • By Si mon Elli s
e’ve been talking about the use of downstream data for
what seems like an eternity — when it’s only actually
been a decade! Long enough to have debated its merits
and shortcomings, but also long enough to recognize that
the ability to “see” farther down into consumer demand
is transformative. Yet, I think most of us still consider downstream data
to be in the early stages of maturity. Two recent developments in the CG
supply chain reinforce the fact that the use of downstream data is incredibly critical:
• First, demand is more unpredictable than ever, and many companies
have seen a decline in forecasting accuracy. Better algorithms and clever math can certainly help, but we’d argue those only do marginally.
• Second, more and more companies are realizing that customer/consumer-centricity ought to be the “first principle” of their supply chains.
But to make better use of downstream data, one has to actually be
able to get downstream data, and frankly, the methods of disbursement
haven’t really moved much for years (Figure 9).
When we rank the various ways in which consumer products companies get this data, we can see that the sources of data have not really
changed much, and fewer companies are noting receipt from, for example,
the retailer (Figure 10).
Receiving data from a third party continues to be the major source;
however, the realities of how most third-party providers manage the data
and the fact that it’s not typically usable in real time minimizes the value
for service performance. The fact of the matter is that by 2014, we really
Methods for Receiving Downstream Data
Q. How do you receive downstream data for your products?
f i g u r e 9:
Multiple responses allowed
The end game of trade promotion
processes will always be a moving
target. Once consumer
goods companies
arrive at the point of
collaborative promotional optimization,
there will be new
opportunities to seize.
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METHOD
We receive the data we need from retailer portals.
We receive data directly from retailers.
We receive data from a third-party provider.
Source: IDC Manufacturing Insights and CGT, 2014
2013
2014
78%
60.7%
89%
67.9%
73.2%
100%
2014
sa le s
and
m a r k e t i n g r e por t
Downstream Data
would have expected a predominant amount of this data to come
directly from the retailer.
There is an 80:20 rule in play here — most CG companies
simply aren’t going to bother with downstream data much below their top 20 retail customers. Yet, our results clearly suggest
that even amongst the top 20, there is significant progress still
to be made in direct-sourcing downstream data. I’m not one to
spend a lot of time assigning blame, but the reality is that both
manufacturers and retailers bear responsibility. Many retailers
have not invested in the technical capabilities to enable portals
or efficient direct sharing; manufacturers have not adequately
demonstrated the benefits inherent to downstream data to facilitate these investments.
Before “throwing the baby out with the bath water”, it is clear
that things are improving, just perhaps not to the degree that we
might have expected five years ago. Among the downstream
data received by the various sources, data from the retailer has
increased, whether provided directly or via portal access (up in
total from about 50 percent in 2013 to 68 percent in 2014) and that
is clearly good news, but it should be higher. In my days in the
industry, it was my view that downstream data really needed to
be at or around 75 percent to provide the maximum impact — I
thought we’d have been there by now. I don’t have much doubt
that the industry will get there, particularly as data management
and analytics capabilities get so much better — “all dressed up and
nowhere to go” is not a particularly good refrain!
Enough criticism, though, let’s take a look to the future.
While traditional transactional data still has a ways to go, and
remains the single most analyzed forms of data (Figure 11), CG
companies are looking at some of the more interesting emerging forms of downstream data. Some of these are new forms of
quantifiable data, things like machine or mobile device generated, which can be used to directly affect quantitative demand
forecasts and supply plans. But most are unstructured forms of
data that cannot so easily be used to adjust forecasts. In some
cases, we are seeing these forms of data used to “attenuate” a
forecast. In other cases, they are used more for marketing and
product refinement purposes.
As we move into this brave new world of social media data,
it is incumbent on both manufacturers and retailers to leverage
these new forms of data as best they can, but also to not sight of
progress still needing to be made around more traditional forms
of downstream data.
f i g u r e 10: Methods for Receiving Majority
of Downstream Data
Q. How do you receive the majority of the downstream
data for your products?
METHOD
2013
2014
We receive data from
a third-party provider.
We receive data
directly from retailers.
We receive the data we
need from retailer portals.
69.4%
54.2%
22.2%
18.8%
2.8%
14.6%
Source: IDC Manufacturing Insights and CGT, 2014
f i g u r e 11: Top Data Types Captured and
Analyzed in Consumer Products
Q. What types of data are or will be captured
and analyzed today or in the next 12 months?
Multiple responses allowed
T Y P E O F D ATA
15.7%
Transactional data
Text from non-social
network sources
11%
Machine or device
generated sensor data
9.5%
8.4%
Web logs
Video
GPS data from mobile devices
Audio
Chatter on social networks
(unstructured data)
6.6%
5.4%
4.2%
3.4%
Source: 2013 IDC Global Technology and Industry Research Organization IT Survey
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2014
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m a r k e t i n g r e por t
Direct to Consumer
The Continuing Evolution of Consumer Engagement
his is a fascinating topic for continuing discussion,
as it tends to inflame passions — from both retailers
and from CG manufacturers. As we have noted in past
years, technological progress and retailer focus on
private label/brand products has conspired to force
manufacturers to explore direct to consumer. Yet, the approach
has been changing — from direct commercial relationships
(selling direct) to one characterized more by a marketing relationship than a direct commercial one. That hasn’t stopped
leading companies, like Procter & Gamble, from exploring
potential approaches, and partnerships (efforts recently announced with Amazon), to facilitate direct to consumer. But for
most companies, the preferred future appears to be to engage
with consumers on a brand and marketing level, but leave the
actual selling to traditional channels. This approach, if proven
true through the passage of time, seems visionary and foolish,
paradoxically both at the same time.
CG companies are not retailers, and while an increasing
number of them are actually looking at opening their own stores
(note the percent doubling since 2012), this is neither a trivial
undertaking nor one that necessarily leverages core competencies. So, engaging with the consumer through direct marketing
and sales efforts does make sense and is underpinned with core
competencies in those disciplines. Yet, consumers have clearly
shown that they want choice, and this choice is reflected in a de-
figur e 1 2 : Direct-to-Consumer Sales
Q. Are you currently selling products directly to
consumers?
STATU S
2012
2014
60%
58%
53.7%
Selling D2C today
33%
28%
40.7%
No plans for D2C
Planning to sell D2C
in next two years
2013
7%
14%
5.6%
Source: IDC Manufacturing Insights and CGT, 2014
• By Si mon Elli s
Technological
progress and the
retailer’s focus
on private label
brands have forced
manufacturers
to explore direct
to consumer.
sire to purchase their products across a broad range of channels
— the ubiquitous omnichannel. The eventual reality may end
up being both: The majority of direct to consumer is about brand
marketing and sales, but the ability to actually buy the product
directly is there for consumers who really want it!
Asking CG companies about their direct-to-consumer efforts
“shouts” indecision — companies appear to be unclear about
what really to do. As summarized in Figure 12, we have seen a
gradual decline in companies selling direct to consumer since
2012, and an increase in companies saying they have no plans
to do so. To be fair, though, 40 percent who say they have “no
plans” also means that 60 percent do. We also see a decline in the
number of companies planning to sell direct to consumer within
the next two years.
f i g u r e 13: Direct-to-Consumer Sales Channels
Q. How are you currently selling products directly to
consumers?
2012
APPROACH
60 sites. 58
Yes, through third-party Internet
33
28
Yes, through our own web site.
7 own
Yes, through our
physical retail outlets.
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41%
42%
53.7
22.2%
33%
39%
33.3%
40.7
11% 5.6
19%
20.4%
Source: IDC Manufacturing Insights and CGT, 2014
0
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2014
10
20
30
40
50
60
2014
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m a r k e t i n g r e por t
Direct to Consumer
If we look at the mechanisms through which
companies would sell their products, we again
see a decline in two of the three alternatives
(Figure 13). Selling “directly through third-party
sites” has declined the most, but so has selling
“through our own web site”. The only approach
that has grown slightly, as we noted previously, is
selling “through our own physical retail outlets”.
We are dealing with a modest sample size
in this survey, so the results must be tempered
by that fact, but the results from the questions
do support what we are hearing anecdotally in
the industry — that a marketing relationship
is favored over a direct commercial one. The
smart companies will explore the mechanisms to
facilitate direct consumer sales, just in case and
even if they also believe that a direct marketing
relationship is the more likely course.
This begs the question of the inherent value
of a marketing relationship — and its linkage
to social customer experiences. We asked two
questions, the results of which are summarized
in Figures 14 and 15, about the linkage between
business value and “social customer experience”
and between business value and “social innovation management”. The former is essentially the
role that social interactions play in the overall
brand relationship; the latter is the role social
interactions play in the brand innovation process.
The top responses are similar. The overall
relationship with the consumer is about generating greater levels of customer loyalty first, while
also enhancing products and services. The role of
social innovation management is, as one would
expect, more about the role and performance of
the actual products in enhancing and improving
the user experience.
As CG companies continue to explore the right
approach for direct to consumer, it seems reasonable to think that social business technologies and
engagements will play a huge role in facilitating
success. It also seems wise to at least explore the
available options for selling directly to the consumer, should such capability end being important to the future performance of the business.
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f i g u r e 14: Top Business Values of Social Customer
Experience
Q. What is the business value you expect to gain for your organization
for social customer experience initiatives? Multiple responses allowed
B U S I N E S S VA L U E
45.6%
Garner greater customer loyalty
44.1%
Enhance products and/or services
38.2%
Generate new revenue streams
More effectively manage suppliers
22.1%
Source: 2013 IDC Global Technology and Industry Research Organization IT Survey
Asking consumer goods companies about
their direct-to-consumer efforts “shouts”
indecision. Companies appear to be
unclear about their approach.
f i g u r e 15: Top Business Values of Social Innovation
Management
Q. What is the business value you expect to gain for your organization
for social innovation management initiatives? Multiple responses allowed
B U S I N E S S VA L U E
47.8%
Enhance products and/or services
38.8%
Garner greater customer loyalty
35.8%
Generate new revenue streams
Improve human capital management
22.4%
Source: 2013 IDC Global Technology and Industry Research Organization IT Survey
2014
sa le s
and
m a r k e t i n g r e por t
S&OP
The Journey Toward Integrated Business Planning
Sales & Operations Planning (S&OP) has suffered from an
extreme case of “alphabet soup” over its long lifetime. Perhaps this is to justify repetitive implementations (“we are
re-implementing S&OP as SI&OP because of the key role of
inventory”) or a desire to engage at a broader level. We have
seen, in no particular order S&OP, SI&OP, SM&OP (where M
= Marketing) and Integrated Business Planning (IBP). While
we here at IDC Manufacturing Insights find this pursuit of the
perfect acronym generally a bit silly, the notion of IBP and its
interrelationship with S&OP is actually quite interesting, and
we would like to explore it here.
One of the core challenges that we see in CG organizations is
the tension between the supply and demand sides of the supply
chain. Demand is becoming more and more volatile and forecast
accuracy is declining; at the same time global supply is becoming
more complex and long lead times are commonplace. Volatile
demand and extending supply are actually working against
each other — particularly where the delivery of service obligations are concerned. This is illustrated in Figure 16.
figur e 1 6 :
• By Si mon Elli s
The broader notion of IBP, as distinct from S&OP, is at the head
of the list in terms of ways to bridge gaps between supply and
demand. At the core, it is about managing the forecast, but also
about managing the ability of the business to respond rapidly to
changes in either the internal or external environment — across
multiple functions. IBP (illustrated previously in Figure 8) is the
holistic business process that connects all the various planning
functions across an entire organization to enable the alignment of
operational and financial performance goals. In the context of IBP,
S&OP is the key orchestrating capability that sits on top of, and
spans across, the demand, supply and fulfillment capabilities of
the business to ensure that a consensus plan is reached and that
all constituents in the business are operating against a common set
of targets. S&OP is a critical component of IBP, just like demand
or supply planning:
• S&OP – Key orchestrating capability; “Are we all working
to the same targets?”
• Demand Sensing & Planning – Used synonymously, but a
key capability to manage demand volatility and forecast-
Disconnects Between Demand and Supply Sides of Supply Chain
IBP - Balance Forecasting and
Responsiveness (Agility)
Complexity
Management
Agile Inventory
Supply
Complexity
Cost Control
Service
Centricity
Risk Management
Technology Pillars: Cloud, Big Data/Analytics,
Mobility, Social Business
Product and Service Proliferation
SM22
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Demand
Volatility
2014
sa le s
and
m a r k e t i n g r e por t
S&OP
ing improvements; “Are we capturing the best demand
signal possible?”
• Supply Planning – MRP and constraint analysis; “What are
our supply limitations, and can we support the proposed
business plans?”
• Production Planning – Factory scheduling and line planning; “What and when do we make on which lines?”
At the same time, fulfillment, inventory management and
network optimization are all part of the integrated planning
process. Our objection to adding inventory to the acronym
(thus SI&OP) is that it has always been part of the operational
process, just as network design and supply management are
— it is unnecessarily redundant. S&OP is, by its very nature,
a supply-chain-centric process, with critical input from other
functions, yes, but ultimately owned by the supply chain.
It essentially tries to solve the lack of coordination between
business functions.
Yet, as we stated earlier, IBP is much more than that, it is the
holistic business process that connects all the various planning
figur e 1 7 :
functions across an entire organization to enable the alignment
of operational and financial performance goals. It is not just
supply chain planning, but how far does it go? Is it also product
planning, customer planning and financial planning?
At IDC Manufacturing Insights, we’d argue that it is all
of these things (Figure 17). The overall ability for a consumer
products company to plan the business, whether at a strategic,
tactical or operational level, depends upon the timely delivery
of a marketing plan, a sales plan, a supply chain plan and a
financial plan. All are required, but they must all be done in
the context of each other and be strategically aligned. For example, the process of setting working capital targets cannot be
done in a vacuum. It must take into account factory capacity
and desired service levels. Very often we see companies whose
capacity and working capital targets are incompatible with
their service aspirations — and then they wonder why they
missed. S&OP manages the operational side of the business,
but it does not address the broader, cross-functional decisions
that are managed by the IBP process.
Holistic Integrated Business Planning
c u s t om e r
pl a n n i n g
Analytics
Sales & Operations Planning
p r od u c t
p la nning
de m an d
supply
fulf i llmen t
•Demand
Sensing
•Supply
Planning
•Production
Planning
•Order
Management
•Demand
Forecasting
•Fast
Planning/MRP
•Factory
Scheduling
•Warehousing
•Transportation
Inventory Management & Optimization
Network Optimization
SM24
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f i na nci a l
pl anni ng