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Informative guides on industry best practice

Integrating
Product Management

into the
Business
Planning Process

Inspiring
Business
Performance
T H E O L I V E R W I G H T – W H I T E PA P E R S E R I E S

Is Product Management properly integrated with


your business planning processes?

One of the lessons to come out of the global recession is that effective management and
control of the product portfolio is critical to sustained success. Regular innovation is vital
for profitable growth. At the same time substantial cash, time and resources can be tied
up in obsolete or unprofitable SKUs, or lost in the mistimed or misplaced launch of new
products.Integrating product management into your business planning process ensures
By Mike Reed you are able to move quickly to exploit new opportunities, and close business gaps.
Oliver Wight Partner The problem is that traditional business planning processes like Sales and Operations
Planning often do not allow for the integration of product portfolio management; they
focus instead on balancing demand and supply, with product development as a separate
‘creative’ activity; the domain of R&D or the Marketing department, working in isolation
on the next big idea, often with no consideration of real demand or capacity.

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T H E O L I V E R W I G H T – W H I T E PA P E R S E R I E S

The tell-tale signs of poor Product Management integration

If you recognise any of these characteristics in • Product launches are late, and/or there is
your own organisation, the chances are your enormous effort required in the launch phase
Product Management process is disconnected with activities rushed to get the launch on
from the rest of your business planning time. This often results in poorly executed
processes. launches.

• New product introduction is a problem • The portfolio has grown and grown. There
area for some parts of the organisation – are an excessive number of “tail-end”
especially the supply side. New products products. This is causing problems in
are “squeezed” into supply plans at the last Supply with either lots of short runs, or
minute. Little is known about them until they excessive inventory whenever one of these
are almost ready to launch at which time the products is made, risking obsolescence
supply team has to move heaven and earth issues. On the Demand side, forecasting
to ‘commercialise’ the product on time. these products is more difficult and the sales
team have difficulty focusing on what is “key”
• There are numerous new product to the business.
development (NPD) projects – more than
there are resources for. Those who have to • NPD seems to be focused on a lot of low
support the development and launch of new value launches – causing further “noise” and
products seem overloaded and are reacting compounding problems in the portfolio.
to the latest “urgent priority”.
• New product launches all too often result in
obsolete inventories of finished product, raw
materials, or both.

S&OP is not sufficient

Most companies these days have something in organisation to the next. Even in its purest
place they recognise and describe as a Sales form i.e. where there is some form of financial
and Operations Planning (S&OP) process. integration, S&OP has its shortcomings in
From its early days, S&OP was seen as the today’s business environment.
top management planning process, ensuring
a single set of numbers for the organisation to Today, an increasing number of companies are
work to, but its original definition and purpose adopting a more mature S&OP model. To many,
have been corrupted over time and as a this means evolving to an Integrated Business
result, S&OP can vary considerably from one Planning process.

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T H E O L I V E R W I G H T – W H I T E PA P E R S E R I E S

Integrated Business Planning

Integrated Business Planning (IBP) can most typically been assigned as a supply chain
simply be described as advanced or next- process, balancing supply and demand over
generation S&OP. However, integration is what a one- to 12-month horizon, with no product
distinguishes IBP from its predecessor and it management or financial integration; the focus
brings a truly strategic perspective. If S&OP is on the short term and on the numbers,
is a process designed for the supply chain to rather than the issues. IBP on the other hand
plan the factory, then IBP is designed for the brings with it a truly strategic perspective,
executive team to plan and integrate the plans integrating diverse processes – in the extended
for the entire business. supply chain, product and customer portfolios,
demand and strategic planning – into one
One of the key characteristics that differentiates seamless management process. Lead by the
IBP from S&OP is that it includes the full executive team, Integrated Business Planning
integration of product management into is designed for effective decision-making. It
the business planning process, enabling allows senior management to plan and manage
organisations to understand the direct impact the entire organisation over a 24 month horizon
on the business of planned product changes or or more, aligning strategic and tactical plans
key initiatives, and monitor whether they are on each month, and allocating critical resources
track to deliver against expectations. – people, equipment, inventory, materials, time
and money – to satisfy customers in the most
Over the years conventional S&OP has profitable way.

Integrated Business Planning Model


The Oliver Wight Integrated Business Planning model is used by some of the world’s best known
organisations. It integrates diverse processes – in the extended supply chain, product and
customer portfolios, demand and strategic planning – into one seamless management process.
Product Management is one of the three core processes which underpin IBP; it comprises the set
of processes by which the company’s portfolio of products and services is managed and is the
core process that Creates Value for the company.

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T H E O L I V E R W I G H T – W H I T E PA P E R S E R I E S

S&OP and IBP: Decades of Evolution


Integrated Business Planning represents the evolution of S&OP from its production planning roots
in the 1970s into a fully integrated management and supply chain collaboration process.

The Class A Checklist


The Oliver Wight Class A Checklist for
Business Excellence, widely recognised as
the industry benchmarking tool, defines the
purpose of Integrated Business Planning
as “a process that realigns company
plans in response to change, including
the integration of financial plans. It drives
gap-closing actions to address competitive
priorities, upper-quartile performance and to
deliver management commitments. In short,
it deploys the business strategy”.

“Integrating product management into your business planning process ensures you are able
to move quickly to exploit new opportunities, and close business gaps. The problem is that
traditional business planning processes like Sales and Operations Planning often do not allow
for the integration of product portfolio management”.

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T H E O L I V E R W I G H T – W H I T E PA P E R S E R I E S

So which are the company plans that need to be integrated?

The answer to this question comes from an Supply Management is the set of processes
understanding of the core processes that must by which the company’s products and services
be managed inside any business: Product are supplied to meet demand and provide
Management, Demand Management and a profit to the company. These include the
Supply Management. planning and management of the capability
of in-sourced and out-sourced supply points;
Product Management is the set of processes management of the extended supply chain; and
by which the company’s portfolio of products management of suppliers. Collectively these
and services is managed. This includes make up the core process that Delivers Value
defining what the portfolio will look like; how for the company.
it will change over time; the identification,
development and introduction of new products; Each of these core processes must have
management of product lifecycles; identification plans associated with them, with underpinning
of product roadmaps; management of projects assumptions, opportunities and vulnerabilities,
related to product development and product explicitly documented. Additionally, there will be
change; management of the resources financial plans (including the annual plan and
associated with doing this; and rationalising and any longer term financial plan); a longer term
improving the portfolio over time – including strategic plan; plans for improving performance;
deletions, changes and cost reductions. and plans for providing new capabilities
Collectively these make up the core process (knowledge, people and infrastructure).
that Creates Value for the company.
Integrated Business Planning means these
Demand Management is the set of three core processes are all brought together
processes that create and influence demand. and aligned on a monthly basis. Traditional
These include sales management; marketing S&OP attempts to keep the demand and
management; sales and marketing activity supply plans in alignment. However, the
planning; the identification and management other elements are often missing or weak. In
of customers the company wishes to deal particular Product Management is all too often
with; and demand planning and forecasting. “invisible” or “floating”. Without this element in
Collectively these make up the core process place, it is impossible to make progress on the
that Exploits Value for the company. journey to a true Integrated Business Planning
process.

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T H E O L I V E R W I G H T – W H I T E PA P E R S E R I E S

Maximising the value of the product portfolio

So the first step on the journey is to create a the delivery of strategic growth initiatives,
series of integration points. The first of these maximising the value of the product portfolio
is the Product Management Review. The main and balancing the resources required to deliver
purpose of the Product Management Review projects against available resource. What are
is to provide an effective connection and the changes taking place (and when) over
management control over the core process of the horizon, to ensure an attractive product
Product Management. Here we are concerned portfolio that will deliver market share and
with the creation of the most valuable portfolio profitability objectives? Which new products will
of products and services within the company. be introduced; existing products discontinued
As we described earlier, processes within or changed; and what will be the effect of
this sphere include new product introduction, marketing-led promotional activity? And what is
product deletion and portfolio rationalisation. the time-phased plan?
This is the area of the business where a
significant amount of project activity takes
place. Key issues of concern here are ensuring

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T H E O L I V E R W I G H T – W H I T E PA P E R S E R I E S

The Product Management Review: accurate data


and a cross-functional perspective

So how does the Product Management clean and accurate data, because it most
Review work? This should be positioned as certainly should. However it is not the function
the first point in the monthly IBP cycle (there of the Product Management Review itself to
are five in all: Product Management Review; focus on a status review of individual projects
Demand Review; Supply Review; Integrated within the company. Rather, the aim is for a
Reconciliation; and the Management Business holistic approach that allows the company to
Review). Typically this review is completed see that the product innovation and technology
within the first week of the month. As with all strategy is being effectively executed in terms
other meetings in the IBP cycle, the Product of the mix of project types (e.g. new-to-world,
Management Review is based around product versus line extensions or margin improvements)
families. These are suitable aggregates of and flow (are enough projects coming through
the business that enable effective review and at the right time), that resources are correctly
discussion without descending into micro- balanced and that any gaps to strategy are
management. That is not to say that the detected early and appropriate action taken.
aggregate view shouldn’t be built on detailed,
The Product Management Review is a cross-
functional review meeting. The meeting is
chaired by the executive responsible for the
product innovation and technology strategy.
For many companies this will be the Marketing
Director. In others, it will be the R&D or
Innovation Director. The key question is which
executive owns the Product & Technology
strategy. Attendees will include decision-makers
from technical/design, marketing, sales, supply
chain, purchasing, project management and
finance. It is not a discovery meeting but a
review to orchestrate those who are business-
accountable to present and communicate
progress and change. The meeting should
be action-oriented and it demands rigorous
preparation to identify issues and scenarios
for consideration in advance of the meeting,
so decisions can be made and the revised
Product Master Plan agreed before it is made
visible across the entire Integrated Business
Planning process.

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T H E O L I V E R W I G H T – W H I T E PA P E R S E R I E S

Outputs from the Product Management Review

The key output of the Product Management them. Changes that have occurred during the
Review is an updated Product Master Plan. month are recognised and key issues affecting
This plan has all projects prioritised and the business plan have been identified for
filtered to align with strategic objectives. Key reconciliation through the process. All resources
assumptions have been reviewed and updated; required to execute the plan have been
whilst opportunities and vulnerabilities have checked for capability, balanced and aligned
been tabled and plans put in place to manage to the prioritised project list.

Clear visibility and understanding

The outcome of this review point is therefore Resources required for new product
a clear understanding of the current Product introduction, changes or deletions are balanced
Management plan within the company. Most to capability. The Supply Chain is more firmly
importantly, there is now clear visibility of the connected to the activities being undertaken
activities being undertaken within this core by those responsible for product portfolio
process of the organisation and the impact of and lifecycle management. Key performance
these on the business plan and the strategy. indicators for product management will be
A forum now exists for cross-functional reviewed on a monthly basis, which is likely
discussion to take place on recommendations to lead to improvements in the process and,
for portfolio improvement. “Noise” is reduced, most importantly, in the speed at which new
there is less error and waste, and new product products can be launched.
launches are more likely to be successful.

“Integrating Product Management into your business planning process is an imperative


for sustainable performance in today’s business environment. IBP is an effective means
of doing so and those organisations that successfully implement Integrated Business
Planning routinely outperform their peers”.

Benefit Area Improvement Range How Product Management Integration Contributes


Increased Forecast 18-25% Better integration of NPD forecasting across the planning horizon
Accuracy
Increased Sales 10-15% Better management of launches and managing a portfolio of ideas to
Revenue market and speed to market (velocity improvements)
Increased On-Time 10-50% Better integration to make product available in line with launch plans
Delivery
Improved On-time 50-75% Better visibility and prioritisation of projects
Launches
Inventory Reduction 18-46% Improved forecast accuracy of NPD?
Increased Productivity 30-45% Reducing waste and improving velocity in NPD
NPD Time to Market Reducing Better visibility and integration of project activity
(Time to Profitability)
Reduced Obsolescence 50-90% Better management of post launch activity and run-in run-out
scenarios

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T H E O L I V E R W I G H T – W H I T E PA P E R S E R I E S

Case study 1

After introducing a formal product management process as part of their Integrated


Business Planning (IBP) process, a large Australian FMCG organisation vastly improved
visibility and communication across its NPD process and more than doubled the success
rate of new products.

Before implementing the new process, the Oliver Wight, twelve months later, milestone
supply chain and operations teams described attainment had increased ten-fold, significantly
new product introduction as ‘last minute’. reducing the ‘crunch’ in latter phases.
“Launches would be communicated late and
volumes were nearly always significantly wrong, “Projects also became more visible across the
with variances of up to 100%” says The Supply company,” says the organisation’s CEO. “We
Planning Manager of the organisation. “This established measures to regularly balance
caused major issues, especially when trying resources and ensure all active projects were
to organise long lead time materials and re- properly resourced and progressing according
balance factory capacities and schedules to their milestone plans.” Monthly status reports
for existing products and customers.” from all active projects now mean appropriate
interventions can be made if a project is getting
When data was first collected for the new off track. And the NPD process was carefully
Product Management Review, it was found over reviewed to ensure information flowed to
50% of projects had missed monthly milestones Demand and Supply throughout the process
in the previous three months. Launch dates, – from the earliest stages. The result? No more
however, were rarely moved as customers surprises for the Supply team.
(the major supermarket chains) often had prior
commitments to the trade and/or marketing The organisation also became more focused
faced the challenge of getting the new product on which projects to develop. A rigorous
into the category review period on time – with priority setting mechanism was introduced to
supermarkets, new product launches are tied ensure projects are ranked according to project
to category review dates. Consequently, project attractiveness. This is based on a number of
activity grew exponentially in the last phases, factors, including strategic alignment, market
resulting in a 24/7 workload for the relevant attractiveness, competitive advantage, risk vs.
technical and production team members during return, feasibility and of course financial return.
this time. Only 30% of projects were achieving When the business first began implementing
90% or more of their stated targets. effective product management, more than
140 projects were in the pipeline. Of these,
Following its first major engagement with 95% were small, low value projects, focused
Oliver Wight, the business adopted an on the short term. Focus has now altered to
integrated approach which helped the business those with a greater return and the number
transform all this. A formal process, aligned with of active projects had more than halved,
IBP was introduced to manage new product to fewer than 70. The success rate of new
introduction. Results were quick to come and products has subsequently more than doubled.
by the time of its second engagement with

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T H E O L I V E R W I G H T – W H I T E PA P E R S E R I E S

Case study 2

A large multi-national food manufacturing company has improved on-time launch rate of
new products by approximately 100%, whilst greatly reducing research and development
(R&D) stress, through the implementation of formal product management techniques,
with the help of Oliver Wight.

The organisation, took the decision to add resource,” says the Technical Director.
implement the new formal processes, including “This has significantly reduced the stress being
a monthly Product Management Review, placed on R&D and the staff are a lot happier.”
as it wanted to achieve better resource Consequently, the need to re-work formulae
management, especially in R&D, which had and process specifications after launch has
been recognised as a bottleneck. “R&D reduced drastically, whilst on time launch rate
resources were constantly overloaded,” has improved by approximately 100%.
says the Technical Director of the business.
“Therefore, work was organised based on the
latest priority and resource would be shifted
around accordingly. Inevitably, this had a
detrimental effect on other ongoing projects,
which would regularly be delayed as a result.”

Additionally, significant strain was being placed


on the people concerned. “R&D team members
were working long hours to try and deal with
their workload,” he adds. At the start of the
new process implementation, the organisation
carried out a review of the resource requirement
from R&D to meet the demands of all ongoing
projects. The findings showed more than
100 hours per week was required from several
key people to meet current requirements.

This has improved dramatically since


implementing a monthly Product Management
Review. As part of the process, templates
have been developed to identify resources
required Vs resources available. “We now have
the ability to detect capacity overloads, and
make the decision whether to re-allocate or

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About Oliver Wight

At Oliver Wight, we believe sustainable business improvement can only be delivered


by your own people; so, unlike other consultancy firms, we transfer our knowledge to
you. Pioneers of Sales and Operations Planning and originators of the fundamentals
behind supply chain planning, Oliver Wight professionals are the acknowledged industry
thought leaders for Integrated Business Planning (IBP).

Integrated Business Planning allows your standard for best practice will determine
senior executives to plan and manage a tailored improvement journey for you to
the entire organization over a 24-month develop your organization’s processes,
horizon, while Oliver Wight’s extended and reach and sustain excellent business
Supply Chain Planning and Optimization performance. With a track record of
ensures your supply chain is designed more than 40 years of helping some of
and structured to deliver best-in-class the world’s best-known organizations,
customer service with minimal costs. Oliver Wight will help you define your
Using the Oliver Wight Maturity Model to company’s vision for the future and deliver
pursue our globally recognized Class A performance and financial results that last.

Oliver Wight Asia/Pacific


131 Martin Street, Brighton
Victoria 3186, Australia

T: +61 (0)3 9596-5830


F: +61 (0)3 9596-5840

information@oliverwight-ap.com

www.oliverwight-ap.com

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Maisemore, Gloucester GL2 8EY, UK

Oliver Wight Americas


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New London, NH 03257, USA

Inspiring
The information contained is proprietary to Oliver Wight International and may not be modified,
reproduced, distributed or utilized in any manner in whole or in part, without the express prior
Business
written permission of Oliver Wight International. Performance

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