Value Chain Planning

Posting on behalf of John Bermudez, Senior Director, Supply Chain Planning Product Strategy

Welcome to the Oracle Advanced Planning Blog. It is our goal to stimulate many spirited discussions on planning best practices, tips and techniques for using Oracle Advanced Planning applications and customer success stories. Bloggers will come from the Oracle’s extended global Advanced Planning team and we welcome commentary from our SIGs, customers and partners.

I would like to kick off Advanced Planning Blog with some thoughts on sales and operations planning and Oracle’s approach to supporting this best practice. Although as a business process, sales and operations planning has its origins in the 1970’s, it has not been adequately supported by enterprise planning applications. For the most part, sales and operations planning has been supported with reports and spreadsheets which often take weeks to generate and analyze. As a result, the sales and operations planning meetings are too frequently focused on fire fighting to address the crisis du jour.

Further exacerbating the problem, decisions made at the meeting are usually recorded in spreadsheets that are not easily translated into updates to the planning and ERP systems. Think about a decision to add a second shift to meet an unexpected increase in demand: planning resource profiles need to be updated; the demand plan needs to be updated; component inventory needs to be checked; suppliers need to be informed; and, purchase orders may need to be updated. Translating the update in the spreadsheet to changes to the ERP and Planning systems is a considerable effort and a likely opportunity for to introduce errors into the system.

The Oracle Sales and Operations Planning Solution was designed to address this problem by supporting the entire sales and operations planning process with integrated planning applications. While Oracle Demantra Real-Time Sales and Operations Planning provides the “glue” for a “planning-based” process, the Oracle Sales and Operations Planning Solution also leverages the Demand Management, Advanced Supply Chain Planning, Strategic Network Optimization and eBusiness ERP applications to ensure that decisions made during the sales and operations planning process are executed.

The advantage of this approach is that your company’s journey to Sales and Operations Planning can begin with an incremental project to improve sales and production forecasts with Demantra Demand Management and then move on to a “constrained demand plan” by tying Demand Management and Advanced Supply Chain Planning together. From here, companies may choose to add what-if simulation with Strategic Network Optimization and automate the consensus process with the workflows included in Real-Time Sales and Operations Planning. With this approach, the sales and operations planning process becomes part of the daily/monthly planning routines, not a separate process.

Most importantly, sales and operations planning decisions are based on current forecasts and supply plans, not static extracts from reports or spreadsheets. For customers that already have the Demand Management and Advanced Supply Chain Planning applications in place, Real-Time Sales and Operations Planning provides an incremental, but highly effective path to sales and operations planning.

How effective?

Two recently published reports on Sales and Operations Planning applications from Gartner and AMR Research ranked Oracle Sales and Operations Planning as one of the top solutions in the market place today.

We invite your comments on sales and operations planning and Oracle’s approach.

Information-driven Value Chain Planning is now available for APS Release 11.5.10 customers. This exciting new capability provided by the Advanced Planning Command Center Release 12.1.1 which has been back ported to operate against APS Release 11.5.10 without having to upgrade the full APS Suite to Release 12.1. (Customers who want to upgrade their APS instance to Release 12.1 can also run this against an E-Business Suite 11.5.10 release – this capability has been available for almost a year.)

Oracle Advanced Planning Command Center provides comprehensive prebuilt dashboards that enable you to analyze sales and operations planning performance and the health of your supply plan. The dashboards can be quickly configured for the various analyst roles in your organization and extended to show information from external non-planning data sources. Most importantly, Advanced Planning Command Center uses information previously buried inside our planning engines to provide forward looking metrics and key performance indicators at both an aggregate and detailed level. By presenting output of Advanced Supply Chain Planning, Inventory Optimization and Demantra Sales and Operations Planning at an aggregate business level, it enables managers and planners to see the business implications of the latest plan. It also supports side-by-side comparison of multiple plans at a business metric level. Advanced Planning Command Center engages managers and empowers planners!

Advanced Planning Command Center must be seen to be fully appreciated. Contact your Oracle account manager to arrange a demo today! Click here for a data sheet.

It is here and it will change the way you think about advanced planning -- Oracle Rapid Planning.

Today's dynamic and rapidly changing supply chains require planning tools that allow you to quickly react to unexpected events such as a rush order from an important customer, a product quality issue, a supply shortage, or a production line breakdown. Oracle Rapid Planning delivers powerful simulation and planning workbench that enables you to instantly assess the impact of supply and demand changes. You can simulate alternative scenarios and make the most profitable decision based on key performance indicators. Decisions are translated directly into action with seamless integration to execution. Rapid Planning can be deployed in heterogeneous environments and co-exist with existing planning and ERP environments.

Embedded analytics, robust exception management, and a spreadsheet-style user interface enable you to tailor the Rapid Planning environment to your unique planning requirements. Built-in integration to ERP and other Oracle Value Chain Planning applications brings all the required planning data to your tailored workspace. Capabilities for copying plans and mass editing enable quick, incremental analysis of even the most complex changes.

Most importantly, Oracle Rapid Planning is designed to empower you, the planner, to use your business knowledge and experience combined with the latest technology to create superior plans. Read what a recognized Industry Analyst has to say.

For more information, click here for the product data sheet.

For CPG companies, one of the most opportune areas to achieve ROI from an IT initiative is by improving the performance of trade promotion spending through promotion modeling analytics. ROI can be achieved by improving the effectiveness of trade promotions and synchronizing trade promotions with supply chain operations. These two areas are ripe with opportunity because of huge dollars spent on trade promotions and the lack of systems addressing effectiveness and synchronization. Synchronizing sales and promotions planning and supply chain planning is a core concept of value chain planning.

Let's start with trade promotion effectiveness. Making trade promotion spending more effective sounds great, but for most companies are struggling just to track trade spend more methodically. Many companies run the same promotion events year after year, afraid to tamper with the perceived success of last year's programs. Even in the face of declining revenues and margins. It is no surprise that retailers expect a bigger incentive to run the same tired event again.

For a growing number of CPG companies, business as usual is no longer a safe bet and they are aggressively deploying analytics-driven promotion planning tools to improve promotion effectiveness. Analytics-driven promotion planning systems allow sales reps to simulate the expected lift from different types of events against a live forecast in order predict volume, revenue, and profitability. This allows the sales rep to present the best possible deal to the retailer and know precisely how much trade funds will be consumed by the event months in advance. Since analytics-driven promotion planning systems maintain a live forecast by tracking consumption data, spending predictions are continuously updated and visible as the event executes. This mitigates the need to wait until deductions clear to understand the impact of an event on the account level budget.

Promotion effectiveness analysis is presented as part of the simulation results each time a sales rep plans an event and is a balance of positive and negative effects. The negative effects include trade funds expense, cannibalization (product and account) and forward buying. The positive effects include incremental volume, profits, category growth and halo effects. Accurately predicting the incremental volume requires that the simulation be done on a live baseline forecast that understands how the product or product group is currently doing in the market place, considers seasonality, and uses granular lift factors that are adjusted in real-time to customer and geographical differences. .

Analytics-driven promotion planning can improve effectiveness of trade promotions by as much as 5-10% in the first year measured by increased revenue and program profits. Even with conservative improvements in promotion effectiveness (4-5%), the payback on analytics-driven promotion planning can be three to four months. Longer term, potential cost savings will come from a reduction in the need for analytical services from syndicated data providers and possibly the data itself. This by itself could yield millions of dollars in additional cost reduction annually.

Our second area of untapped ROI, synchronizing trade promotions with supply chain operations, is essentially a side-benefit of analytics-driven promotion planning. By using an analytical forecasting engine as the basis for promotion planning, the daily efforts of the sales reps are producing precise sales forecast output that can be used by the supply chain group to more efficiently produce and distribute product to support the promotional volume. Synchronization ensures high customer services, with lower supply chain costs, and reduction in excess inventories. The ROI from synchronization comes from a variety of supply chain operational improvements including the reductions in excess inventories, in DC transfers (to cover out-of-stocks), in premium freight, and in safety stock.

As most companies are still managing trade promotion analysis with a non-integrated collection of spreadsheets, ad-hoc reports and fee-based services, the opportunity for improvement in this area is considerable. Couple this with the side-benefit of synchronizing promotion planning with supply chain operations and you have an ROI opportunity that any CFO or CEO can get behind. Find out more about how Oracle Value Chain Planning can improve the ROI from your trade promotions.