Combining Supply Chain Integration with Sales & Operations Planning Mark Williams – Professional Services Consultant, Supply Chain Solutions Center – Demand Management, QAD Collaboration: Aligning Demand & Production Across the Enterprise

2 The following is intended to outline QAD’s general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, functional capabilities, and should not be relied upon in making purchasing decisions. The development, release, and timing of any features or functional capabilities described for QAD’s products remains at the sole discretion of QAD. Safe Harbor Statement Supply Chain Collaboration

The Situation -Case study -Search for solutions Customer focused collaboration -Defining the relationship -Joint forecasting Internal collaboration -Demand planning process -Supply planning process -Final agreement Agenda Supply Chain Collaboration 3

Surprise! Lose a customer? Plans, plans & more plans! Do You Need To Collaborate? Supply Chain Collaboration 4

Forecast accuracy = 27 percent On-time shipments = 85 percent New product sell- through = 20% Annual spoilage = $50 million dollars The Problems $400 million dollars in annual sales 4 major divisions 50,000 SKU’s QAD Mfg/Pro Customers -Mass merchants -Drug chains -Grocery chains CPG Company Case Study: The Situation Supply Chain Collaboration 5

Collaborate internally Detailed sharing of information Promotes responsibility Internal – S&OP Collaborate with major customers Detailed sharing of information Can be applied to suppliers as well as customers External – CPFR ® Tools for Collaboration Supply Chain Collaboration Let’s Look At Each – Starting With CPFR  6

Collaborative Planning, Forecasting & Replenishment  (CPFR  ) Supply Chain Collaboration 7

Collaborative Planning, Forecasting & Replenishment Developed by Voluntary Interindustry Commerce Standards association (web site: Useful for sharing data between major retailers and suppliers Our focus – the five collaborative forecasting steps of CPFR  Definition of CPFR  Supply Chain Collaboration 8

Arrange collaboration Joint business plan Create sales forecast Identify exceptions Resolve exceptions CPFR: 5-Step Collaborative Forecasting Process Supply Chain Collaboration 9

Goals and objectives Information sharing Confidentiality Expectations Problem resolution Output – published agreement Step 1: Arrange Collaboration Supply Chain Collaboration Arrange collaboration Joint business plan Create sales forecast Identify exceptions Resolve exceptions 10

Corporate & partnership strategies Item management Exception criteria Metrics Step 2: Create Joint Business Plan Supply Chain Collaboration Arrange collaboration Joint business plan Create sales forecast Identify exceptions Resolve exceptions 11

Both parties create forecasts Compare item forecasts in QAD Demand Management Viewer Step 3: Create Sales Forecast Supply Chain Collaboration Arrange collaboration Joint business plan Create sales forecast Identify exceptions Resolve exceptions 12

Two opinion line forecasts reviewed against exception criteria Differences within exception criteria – no problem Differences exceeding exception criteria – demand planner & buyer must resolve Step 4: Identify Exceptions Supply Chain Collaboration Arrange Collaboration Joint Business Plan Create Sales Forecast Identify Exceptions Resolve Exceptions 13

Step 4: Identifying Exceptions Supply Chain Collaboration Part #Customer Opinion Line Forecast Your Opinion Line Forecast % Difference A-76312,78614, % R-34936,47565, % F ,838132,4457.8% B ,789155, % S ,897222,7315.1% Agreed exception level: +/-15% Arrange collaboration Joint business plan Create sales forecast Identify exceptions Resolve exceptions 14

Step 5: Resolving Exceptions Supply Chain Collaboration Part #Customer Forecast (CF) Your Forecast (YF) % Difference Resolution A-76312,78614, % R-34936,47565, % YF based on last years promo – use CF F ,838132,4457.8% B ,789155, % YF based on RM allocation – use YF S ,897222,7315.1% Arrange Collaboration Joint Business Plan Create Sales Forecast Identify Exceptions Resolve Exceptions 15

Increased understanding of customers needs and promotional activities Improved communication channels Improved forecast accuracy from 27% to 70% in less than one year Now for the hard part, internal collaboration! Benefits of CPFR  Supply Chain Collaboration 16

Sales & Operations Planning – Internal Collaboration Supply Chain Collaboration 17

The Monthly S&OP Process Supply Chain Collaboration Run reports Demand planning Supply planning Pre-S&OP meeting Executive decision 18

A monthly process Performed at aggregate level Reconcile all supply, demand, new product and financial plans Goal: ONE plan for executing business strategy Key Elements of S&OP Process Supply Chain Collaboration Run reports Demand planning Supply planning Pre-S&OP meeting Executive decision 19

Key players – demand planning & IT Update sales, production, inventory information from the month just ended Provide statistical forecast information needed to revise forecasts Provide actual production & inventory information Vs. last month’s goals Step 1 – Run Sales Forecast Reports Supply Chain Collaboration Run reports Demand planning Supply planning Pre-S&OP meeting Executive decision 20

Key players – demand planning, sales, marketing Demand planning analyzes statistical data to provide input to marketing Sales & marketing review last month’s performance and explains significant misses Step 2 – Demand Planning Process Supply Chain Collaboration Run Reports Demand planning Supply planning Pre-S&OP meeting Executive decision 21

Sales – A Bit Soft Supply Chain Collaboration Run reports Demand planning Supply planning Pre-S&OP meeting Executive decision *Data obtained from QAD Enterprise Applications ** Data obtained from Demand Management 22

Promotions not meeting targets -Review advertising budget and methods Product shortage -Review cause – determine preventive steps Unexpected customer promotion -Determine reason for lack of notification Document Causes & Corrective Actions Supply Chain Collaboration Run reports Demand planning Supply planning Pre-S&OP meeting Executive decision 23

Old forecast + growth in market - + New customers - + Promotions + New product launches 1 st Pass Spreadsheet Developed Supply Chain Collaboration Run reports Demand planning Supply planning Pre-S&OP meeting Executive decision 24

Key players – demand planning & operations groups Review last month’s performance against goals Examine reasons for variances against goals and determine actions to compensate Revise product level operations plans Step 3 – Supply Planning Process Supply Chain Collaboration Run reports Demand planning Supply planning Pre-S&OP meeting Executive decision 25

Production– Getting Further Behind Supply Chain Collaboration Run reports Demand planning Supply planning Pre-S&OP meeting Executive decision * Data obtained from QAD Enterprise Applications 26

Supplier issues Capacity issues Personnel issues Document Causes & Corrective Actions Supply Chain Collaboration Run reports Demand planning Supply planning Pre-S&OP meeting Executive decision 27

1 st Pass spreadsheet forms baseline Review 1 st pass spreadsheet against capacity, labor and material constraints Must by achievable Operations Produces 2 nd Pass Spreadsheet Supply Chain Collaboration Run reports Demand planning Supply planning Pre-S&OP meeting Executive decision 28

Key players – department heads Review 1 st & 2 nd pass spreadsheet differences Resolve differences if possible Determine areas where agreement cannot be met Step 4 – Pre—S&OP Meeting Supply Chain Collaboration Run reports Demand planning Supply planning Pre-S&OP meeting Executive decision 29

Key players – top company executives Review of last month's sales & operations metrics against plan Review status of new products Review major problems/opportunities Step 5 – Executive S&OP Meeting Supply Chain Collaboration Run reports Demand planning Supply planning Pre-S&OP meeting Executive decision 30

Approve changes on each product family Approve changes in product/procurement rates that have a major impact Approve decisions made in Pre-S&OP meeting Output – One Sales & Operations Plan Step 5 – Executive S&OP Meeting Supply Chain Collaboration Run reports Demand planning Supply planning Pre-S&OP meeting Executive decision 31

The situation -Case study -Search for solutions Customer focused collaboration -Defining the relationship -Joint forecasting Internal collaboration -Demand planning process -Supply planning process -Final agreement Agenda Supply Chain Collaboration 32

Improved forecast accuracy from 27% to 70% Improved on-time shipments from 85% to 95% Reduced annual spoilage by 90% Reduced inventory investment by 15% Conclusion: In Less Than One Year… Supply Chain Collaboration Arrange collaboration Joint business plan Create sales forecast Identify exceptions Resolve exceptions Run reports Demand planning Supply planning Pre-S&OP meeting Executive decision S&OP CPFR  33

Metrics Affected Supply Chain Collaboration 34 ProcessBenefitValue Build forecast by territory, brand, product SKU, etc. Top down or Bottom up. Improved fill rates and customer service 5% to 10% Leverage sophisticated forecasting methods, and detect fluctuations in forecasts and demand as soon as they happen Inventory reduction-10 to 25% Comparison of forecast to actual with ‘best-fit’ analysis Reduced obsolescence -5% to 10% Web based entry points for all interested parties to give their forecast ‘opinion’ Improved customer service 20 to 30% Enables regional and customer review and input to forecast formulation Improved fill rates5 to 10%

35 Ask your account manager to arrange a Q−Scan Next Steps Supply Chain Collaboration

36 Mark K. Questions & Answers Supply Chain Collaboration

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