Integrated business planning

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Information about Integrated business planning
Business & Mgmt

Published on February 27, 2014

Author: Genpactltd



Demand and supply analysis to simulate the impact of volatility and support risk-optimized planning of finance, sales, marketing and supply chain.

Integrated Business Planning Demand and supply analysis to simulate the impact of volatility and support risk-optimized planning of finance, sales, marketing and supply chain Gianni Giacomelli Senior Vice President, Genpact Gaurav Agrawal Assistant Vice President, Genpact

A Global Business Process Services Leader: Process Transformation and Outsourcing, Analytics, Technology What we do How we do it Our impact We help leaders of some of the largest enterprises transform and run their processes and operations, including the very complex and industry-specific Unbiased, agile combination of process science, related technology and analytics limits upfront costs and enhances future adaptability We help enterprises to be more competitive by becoming more intelligent: adaptive, innovative, globall y effective and connected… Right critical mass: • we are large (64,000+ global staff) but our solutions appropriately flexible • our top management is directly involved in our client partnerships …by enabling tighter management of costs, risks, regulations, and supporting growth The results: US$22B* of impact for 800+ global clients PROCESS • ANALYTICS • TECHNOLOGY © 2014 Copyright Genpact. All Rights Reserved. 2

THE CHALLENGE PROCESS • ANALYTICS • TECHNOLOGY © 2014 Copyright Genpact. All Rights Reserved. 3

Complexity, volatility, and lack of value-based integrated business planning (IBP) squeeze margins Increasing complexity of products and of the global supply chains Vertical integration; business/product line restructuring due to merger and acquisitions Missed market opportunities due to the lack of capabilities to assess opportunities Cumbersome tools; poor visibility of data and poor end-to-end synchronization of SC across different planning levels Value based planning is not integrated into the S&OP process Rising raw material costs and regulatory issues Poor demand planning; increasing volatility of demand while customers require agile response and better service Shorter product lifecycles require faster introduction of the new products Gaps in people‟s capabilities prevent companies to capitalize on their investments Business responsiveness becomes paramount in this customer-focused culture PROCESS • ANALYTICS • TECHNOLOGY © 2014 Copyright Genpact. All Rights Reserved. 4

Challenges for effective IBP process fundamentally lie in the way organizations have been operating Divergent functional agendas • Different objective legitimate functional goals for sales and marketing, supply-chain, and finance • Teams chasing „optimal KPIs at functional level‟ • Behavioral pressures aggravate divergent behaviors Mis-aligned incentives Silo-based planning processes Inadequate data and systems Non-transparent financial reporting PROCESS • ANALYTICS • TECHNOLOGY • E.g. sales provides conservative sales and promotional uplift forecast, over-target performance is rewarded regardless of incremental costs and difficulties in supply-chain • Functional planning exists almost as a discrete activity; integration, if any, is only an afterthought • More iterations in forecasts; almost guaranteed sub-optimal outcome at overall level • Lack of data readiness increases workload significantly • Extended time to iterate and coordinate different perspectives makes S&OP less agile; quality of analysis likely to be compromised due to time pressures Geographical complexities, intra-company trading, FOREX adjustments etc. often obfuscate relative performance measurement, impairing effective IBP © 2014 Copyright Genpact. All Rights Reserved. 5

Limits of traditional mid-range planning in the “new normal” Typical process • Lean cross-functional teams • ERP systems of records with no detailed scenario planning capabilities • Standard cost (product accounting) in ERP from past data only • Aggregate (S&OP) and ad-hoc forecast input from sourcing and other cost owners (e.g. logistics), in excel • Reallocation of marketing resources happens nationally PROCESS • ANALYTICS • TECHNOLOGY Implications in the “new normal” • Imprecise forecasts for brand P&L and category roll-ups for next 6-9 months • Future cost volatility isn‟t fully used to optimize product P&L by neither Sales & Marketing nor Finance • Potentially suboptimal marketing mix optimization and spend allocation, and optimization sought only at local – not regional – level • Re-pricing analysis not granular enough - marketing asked to “raise price” across the board © 2014 Copyright Genpact. All Rights Reserved. 6

THE SOLUTIONS PROCESS • ANALYTICS • TECHNOLOGY © 2014 Copyright Genpact. All Rights Reserved. 7

IBP integrates planning activities and scenario modeling for profitability into the end-to-end decision-making process Areas for industrialized support for IBP process A Demand analytics and planning Demand Analytics Support • Product/Geo/ Channel Mix change scenarios • Demand and inventory forecast/ scenarios • Price/ promo scenarios Business Planning • Sales revenue goals • Margin/profit goals • Geographic strategy • Brand/channel position and pricing • Brand/channel events/promotions calendar Category Planning • Product mix/placement/pricing • Product lifecycle plan • Product sales forecasts • Statistical demand forecast • Historical demand Supply analytics and planning Supply Analytics Support Operations Planning • Supply Chain finance Supply Planning • Order fulfillment • Merchandising • Sourcing analytics • Supply forecast • Replenishment plans • Lead time variability • Manufacturing throughout • Logistics analytics Distribution Planning PROCESS • ANALYTICS • TECHNOLOGY IBP Process Support Conduct Review performance and root cause C Discuss IBP optimal scenarios Probabilistic Scenario Modeling Agree on demand, supply, m arketing and pricing plans Marketing Planning Demand Forecasting B D • Inventory development • Capacity constraints • Transport costs • Profitability scenarios • Pricing scenarios • Product/channel/ geo mix scenarios • Capacity/ manufacturing scenarios • Inventory cost • Root cause of plan to actuals • Demand shaping opportunities Prepare Collect and analyze Scenario results Conduct preliminary S&OP activities IBP Develop agenda & distribute plans Execute Modify plan Communicate plan Execute plan Measure performance and profitability © 2014 Copyright Genpact. All Rights Reserved. 8

A Demand analytics support • Pricing and trade promotion scenarios PROCESS • ANALYTICS • TECHNOLOGY Tactical competitive moves can be modeled on need basis depending on data availability Aggregated and stratified forecast modeling at product/category/PPG level for fast-moving, slowmoving, non-moving items • Advanced algorithms factoring demand volatility, qualitative market inputs, industry nuances for improved forecast accuracy • Demand and inventory forecasting • • Product/Geograph y/Channel mix modelling scenarios Category, brand, and SKU level revenue scenarios by geography and/or channels leveraging historical and projected data on volume, price, promotion, and other marketing spend sensitivities Analyses of historical volume, region, price, and promotional spend and mix data to discover associations; understanding profitability profile of demand • Scenarios for projected volumes at different levels and mix of promotion/pricing combination © 2014 Copyright Genpact. All Rights Reserved. 9

B Supply Chain Analytics • • Sample product development Supplier performance management Network optimization* • Carrier sourcing analytics* • Freight lane analytics* • PROCESS • ANALYTICS • TECHNOLOGY Commercials support • Supply Chain Finance • • Logistics Supplier selection support • Sourcing Sourcing strategy support BOM/ Material master management • Forecasting, budgeting and standard product costing • Factory accounting, period close and reconciliation • Reporting and analysis © 2014 Copyright Genpact. All Rights Reserved. 10

C IBP Probabilistic scenario modeling • Profitability scenarios; pricing scenarios; product/channel/geographic mix scenarios; capacity/manufacturing/sourcing scenarios; inventory cost scenarios • Root cause analysis for scenario trends • Prioritization of „at-risk‟ products/SKUs based on relative scales of „value at risk‟ and „impact on profit pool‟ and client inputs • Refining marketing decisions for prioritized „at-risk‟ product/SKU categories to maximize profits • Implications of scenarios at module/functional levels • Building hypothesis on „optimal consensus zones/ranges‟ for key metrics. E.g. what are the ranges of inventory levels, service-level, manufacturing capacity utilization, etc. – for maximum profit Scenario based category/SKU level profit projections Prioritization for “atrisk” products; profit maximization decisions Analytics support to individual S&OP module probabilistic scenarios PROCESS • ANALYTICS • TECHNOLOGY © 2014 Copyright Genpact. All Rights Reserved. 11

D Industrialized analytics can provide help to prepare for, conduct, and execute the IBP process • • Execution and monitoring of IBP PROCESS • ANALYTICS • TECHNOLOGY • Develop agenda with the IBP owner informed by overall analyses (e.g. crucial conflicting/diverging metrics), and distribute plans to functional stakeholders Performance review and root cause reports • Develop overall optimized profit scenarios (at enterprise level) to facilitate objective discussions • Quantitative reports on „implications of overall profit optimization‟ at module/function level • Conducting of IBP sessions Analytics support to upstream preliminary S&OP activities such as demand planning and supply planning • Preparing for IBP sessions Collect and analyze scenario results Monitor and report IBP execution progress, variance reporting to ensure alignment with IBP goals • Measure performance and profitability periodically and publish executive dash-boards; recommendations on corrective actions, target metric modification © 2014 Copyright Genpact. All Rights Reserved. 12


About Genpact Genpact Limited (NYSE: G) is a global leader in transforming and running business processes and operations, including those that are complex and industry-specific. Our mission is to help clients become more competitive by making their enterprises more intelligent through becoming more adaptive, innovative, globally effective and connected to their own clients. Genpact stands for Generating Impact – visible in tighter cost management as well as better management of risk, regulations and growth for hundreds of long-term clients including more than 100 of the Fortune Global 500. Our approach is distinctive – we offer an unbiased, agile combination of smarter processes, crystallized in our Smart Enterprise Processes (SEPSM) proprietary framework, along with analytics and technology, which limits upfront investments and enhances future adaptability. We have global critical mass – 62,000+ employees in 24 countries with key management and corporate offices in New York City – while remaining flexible and collaborative, and a management team that drives client partnerships personally. Our history is unique – behind our single-minded passion for process and operational excellence is the Lean and Six Sigma heritage of a former General Electric division that has served GE businesses for more than 15 years. For more information, visit Follow Genpact on Twitter, Facebook, and LinkedIn. PROCESS • ANALYTICS • TECHNOLOGY © 2014 Copyright Genpact. All Rights Reserved. 14

Thank You Gianni.giacomelli[at] Gaurav.agrawal1[at]

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