GRA Partner Luke Tomkin and Telstra’s GM Planning Carlee McGowan recently presented 'Establishing S&OP at Telstra – The journey to date' at Strategy Execution via IBP in Melbourne.
Their presentation covered:
- The pillars of success: Organisational capability and organisational culture
- How complexity and uncertainty were managed via the implementation approach
- Challenges, learnings and outcomes
View the presentation below:
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Carlee McGowan: Good morning, ladies and gentlemen. Firstly, I'd like to acknowledge the traditional land owners and recognise the past and present leaders of this land. Matthew, thank you for that. You've done my presentation so I'm not exactly sure what to present from here, but we'll see how we go. And I love this podium. I feel like I'm about to say the gospel according to S&OP. So, please listen.
So I'd like to share with you the journey that Telstra's been on for the past two years with GRA in implementing S&OP at Telstra. But firstly, I'd like to actually just tell you a little bit about Telstra because we're a bit of an unknown brand, so just need to, I guess, share a little bit about Telstra. And hopefully the button works here. Ah, excellent. All right, here we go.
All right, well, Telstra, we have been connecting families, friends and businesses with a little bit of, a couple of telemarketers, for the past 31 years. But our history stems a lot further than that. In 1900 was the first time the Postmaster General's Department started up with the telco industry.
Now, to put that in perspective, our government has only been operating since 1901. So we're about a year older than our government. So if you think about change management in S&OP with change management, Telstra is older than our government. Now, you might tell me, yes, but Carlee, look at how much change our government has had lately. Surely Telstra can get along on board and the answer is yes. So let me take you through that. So, we've been the leading telco in Australia since we've begun, we did have an unfair advantage in the start. But one of the leading telcos in the world brings a lot of responsibility.
We currently support over 30,000 Australian employees in Telstra and many other contractors as well. And we are, well, our history really stems in government as well. So we've got a lot of history and a lot of stable employee working there. So, our total income that was reported in the annual report last year was $29 billion. So there's a lot of opportunity there. And there's lot of savings. And we've been able to tap into some of those savings. Now, before I start to get into our journey, I just wanted to Luke up just to introduce GRA as well.
Luke Tomkin: Thank you Carlee. And thank you Mike for that introduction. It was as if I writ it myself. You neglected to mention the thing about being declared bachelor of the year, but that's okay, next time. Just probably I need to introduce GRA a little bit more than Telstra. Unfortunately, we can't claim to have a $29 billion revenue.
- [Carlee] You're working on it?
Luke Tomink: We're working on it, correct. And we've got number of our clients here today so thank you for attending but for those of you who aren't familiar with us, we're Australia's leading boutique supply chain consulting firm in Australia. We've got about 50 or so employees and offices in Melbourne, Brisbane, Canberra and Sydney and we've been on this journey with Telstra for quite a few years now, as you've heard. So, looking forward to talking to you a little bit later in the presentation.
Carlee McGowan: So, we look after Telstra's retail supply chain. So, just to give you a bit of perspective on our supply chain. We have eight channels. We have 250 branded stores, actually a bit more than that and we supply to over 6,000 stores but, you say, okay, well, yeah, that's all right but of that, we have 46 million units that we procure from our suppliers and they cover over 6,000 purchase orders and over 50 suppliers, so just to give you a perspective of how complex we're starting to delve in here.
So we have 45,000 pallets delivered into our warehouse and we have 8,400 deliveries a year and we are currently in the process of changing our warehouses. So we're changing from Bright Star to Toll and going through that change management process now, which is a lot of fun. We have a production facility, now, this production facility is not like what you would think as the production facility.
The production facility is, we have a phone, we have a couple of cables and we put them in a box, so it's really not all that complex or we have some phones and we want to put a SIM card with the phones. We deliver over 3.8 million shipments a year and only .62 million of those actually go to our stores. So, we've got 2.9 million direct-to-customers and then we have business orders as well and it makes it quite interesting to measure your KPI's when you have that many and do the root cause analysis of, well, hang on a second, where did we miss this one customer order? It makes it very interesting conversations to have.
So, I guess I just wanted to give you a bit of a scale because when you think of Telstra retail, you go, yeah, just a couple of phones, she'll be right. Just a couple of modems, how wrong could you get that?
But then when you actually have a look at this, you say, okay and then you get the actual returns as well, so from that, you get, my modem's not working or my phone has got a cracked screen, can I borrow a phone in the meantime and it means that we get quite busy and it's really good that we're here today because it means I'm out of the hair of my team who are currently in the midst of taking delivery of a few Apple phones.
It's just a little launch that happens once a year for us and it's not a very busy time of year but we seem to get around about 18,000 orders per day around about this time of year, so it's a little busy and exciting and no, I haven't got one of the new phones and no, we can't get them earlier because, I know, I've tried .
Okay, so that's a bit about us. That's just a bit about our supply chain and the complexity of it. So then, on to S&OP, something that we're all here for. What I found is really, gets S&OP working is a reason for change because with your stakeholders, there's a lot of people that have got a lot of work on and they say what do we need to change? What's in it for me? So, I'll take you through that.
It's the people, it's the stakeholders. It's a continuous journey of stakeholder management. We have had many, many opportunities for that over the launch of S&OP in Australia and I'll take you through a bit of that as well and what I wanted to do was actually take you through the learnings because I think the best thing that I can add to our supply chain community is share the learnings that we're been on so that we can all learn from them or maybe be a bit kinder on ourselves when we actually face the same learnings internally and then what I want to do is show you the benefits of what we've achieved so far.
Okay, so, something helped us a little bit on our change journey and that would be the national broadband coming in, it would be our share price dropping off the cliff, it would be competitors coming in as well, it would be Amazon coming in as well and you say, okay, something needs to change and all of a sudden Telstra's gone, okay, we can't just sit here and do the same thing and expect the same results all the time. We have to do something different. We have to look at some ways to do things differently.
You would have even heard the recent announcement of Telstra actually looking at 8,000 jobs to actually put Telstra in line a lot more with, I guess, industry expectations and I've got to say, there is nothing better than a change, then an announcement like that.
So, it's created an excellent platform for us to actually really drive S&OP because people actually want to see the improvements coming through. What we also found is as these improvements or as these opportunities presented themselves. There were a number of departments within Telstra that were making decisions in isolation and what we did was, we grabbed those decisions that were being made in isolation and showed how.
If you actually include the rest of finance and supply chain and channels and products all within the same area, to all look at these decisions rather than in isolation, then we can make much better decisions. So, there was an example that was a particularly large purchase order that came across our desk and we went, why are we doing this and then we started to go down into, well, what are the cost benefits of this and actually did some scenario plannings and presented it back to the business. And it actually changed the way the business looked at some of the strategies they were doing and then they all of a sudden went, oh, wow, actually, you know what, there's a lot of benefit in us actually getting together and actually making these changes. And once people actually started to see that, that really started to drive the efficiently, it really started to drive the conversations and it really started to drive the collaboration in between all the different departments.
But, Telstra is extremely complicated and I guess if you look at the traditional model of, you have your sales targets and you turn those sales targets and you have your forecast and you compare the gap and you see what's going.
In Telstra's environment, the sales targets are built on activations and connections, so not actually on the units. So, we're trying to compare the sales targets of something which is, in some ways, links up to the physical units but there's no real, 100% correlation between the two, so that was our first challenge. So, we had to say, okay, all right, so how do we get these stakeholders on board when they're focused on connections and services and we're focused on physical units? How do we actually show them that gap together and so, the way that we did was we just got a lot of people talking.
So, we got people talking in the demand reviews. We got people talking in the supply reviews and we got people talking in the NBR's and we started to bring in business case studies to say, okay, well, these are the proposals that are coming through, this is what we're seeing and this is the longer term effect on the business if you do that and I know you say, well, that's kind of fundamental, isn't it, to business? It's not, you know. If you're steeped in tradition or something that you've done all the time, it's not and it's been a huge change journey for us.
So, coming to the importance of stakeholders and I bring this up to you to show you how much change that we've actually had to deal with at the moment. The first one in April 2017, which was the first NBR meeting. These were the key participants of that meeting. Within six months, that was the change to the stakeholders. Within another six months, that was the change holders and now, we're just dealing with a whole new bunch of stakeholders. All right, so this is every six months change of the senior executives that we need to have buying into our S&OP process.
So if you're talking about the ability to do stakeholder management, this is stakeholder management on Apple, really and this has been one of the biggest challenges. The best part about it that I can say is that people have seen the success on this, so the best way to get stakeholders on board is to include them in the successes of what you've been achieving. The key thing is, you'll see that there's one smiling face in the corner there, Paul Pavlides. Paul, do you want to stand up for a second here?
So this is Paul, so Paul's my S&OP manager who's been on the S&OP journey the whole way and I wanted to see whether or not there was any headhunters on the list before I actually introduced him.
But Paul's been one of the driving forces and the consistent forces behind our S&OP process the whole way and the key thing is that what we have done is we have briefed up every single one of these stakeholders before they joined the S&OP process.
We've taken them through the journey that we've been on, we've taken them through the benefits that we've been on, we take them through, what is your role within the S&OP process and what are the key decisions that we require of you in this process? What are the inputs from your people within this process and how can you actually make a lively contribution to it?
The other interesting thing that we've been quite, I guess, careful to do is to make sure that these people don't delegate the meeting at all and you might say well, why do you do that? The amount of times we've seen people delegating something or bringing along their 2IC, and all of a sudden, it takes the responsibility off them to actually know the subject, to take charge and to make decisions.
So, we've been very, very portent to say, it is very important for you to be at the meeting to the point where, if the chair of the meeting, which is the top people there, is not available, then we'll even change the meeting date, which is, given these executives, is a very, very big call. But what they have learned is that the value that they get out of this meeting they actually turn up to the meeting and come along but that's been a really interesting, key learning for us.
The other thing is, KPI's. KPI's are extremely important and the key learning that I've had with the KPI's is that forecast accuracy, even though I've lived it, I breathe it, everything is around forecast accuracy and improving the forecast accuracy. A lot of these executives have no idea what forecast accuracy is and the amount of times I've actually tried to explain, this is your forecast accuracy measure and they go, oh, all right and that's really important?
Yes, this is really important, but then we started to learn, okay, well, instead of forecast accuracy, how 'about I say, all right, if you buy too much stock, you're not going to get the money back fast enough for us to actually get the stock, all right?
So, if you tell me to buy too much stock, we're going to have a cash problem. That, they get. If I say, if we don't actually buy enough stock, you're actually not going to hit your revenue targets because we won't have the finance to support these plans that you're putting it on, that's what they understand.
If we say, your net promoter score is not going to be as good because we don't have the modems ready there for you to do the connections, that's what they understand. So when we're actually talking to the different levels in the different environments within the NBR and so forth, those are the key messages that we put across and so we say, if we buy this product, the amount of money that we'll have tied up in all these phones will mean that our working capital targets are going to be up here and you won't achieve the target that you wanted to achieve. And that's what they understand.
So, we really, really looked at changing the language and although we might actually have the measures there, what we'll do is we'll actually concentrate on different things in the different meetings, depending on who the stakeholders are and what they understand and this, I guess, is where we start with the journey going from S&OP to IBP because then you start turning all the targets that you have into financial targets and financial measures.
What are the key learnings?
The first thing is, timing. Make sure that there is a reason for change. If you try and implement these things and try and put another meeting in people's diaries and try to get that done without a reason for change, you're going to have a very hard, uphill battle and if you don't have a reason for change, create a reason for change.
The second one is make sure your key performance indicators are relevant to your stakeholders and take them through it. I think Paul has taken various executives through one KPI around about five times already but he's still on there, he's still passionate and still going.
Pre-brief your stakeholders. These are high executives who have a lot of things on. We find what the key issues that are going to presented in the meetings and we pre-brief them so that they can come into the meeting and not feel like they're on the back foot, so that they have a reply that they can actually give to the other executives when they're being asked things in the meetings.
Have the right reporting tools. This is such an underestimated thing. If you don't have the KPI's and the tools to actually show or demonstrate the scenario planning that you're trying to do, if you don't have the right tools to say, okay, well, this is the risk and this is the returns, then it's going to take a lot of time a lot of effort to reach the same conclusion, or you'll just go around in circles and you won't actually reach a conclusion and data, data, data.
I cannot emphasise how important data is and how, I'm only 25, so I wouldn't say grey hairs but, that we get because we don't have the right data to drive the right outcomes. So, make sure you have the right data because otherwise you'll have people in there picking on your data rather than focusing on the key issues.
So, that's great and you say, well, yeah, okay, a lot of that's obvious but what have we actually achieved in the last year? Well, the first thing we've achieved is a 28% reduction on the retail working capital, in a year?
- [Man] Yeah.
- In a year. So, not bad and Sally Rooney, can you please stand up? So, Sally Rooney is my demand planning manager, once again, no recruiters in this room, but within the past year, she's been able to, with the team, increase forecast accuracy by 20% and improve forecast bias by 60% through this process. We've been able to, within the first six months, we were able to avoid 150 million dollars in decision making.
Now, then we stopped counting because then it just became BAU and our team, the supply chain team, had one of the highest engagement scores in the whole of Telstra. There was a question before as well, how do you measure your success of S&OP?
We actually got Gartner to measure us because we like benchmarks and within the first year we got a measure of 2.9 rating. Now remember, we have only just launched this and Gartner suggested that they've actually never seen such a large jump in maturity in such a small amount of time but I say, you create the need for change, you get people together, you get them working collaboratively, which is what S&OP is all about, you get the results and people want to get onboard and then you just keep on going.
It's been a phenomenal journey that we've been on but we haven't been on it alone, we've had the support of GRA along and they are still very, very much part of the business and part of the team and the only thing that I haven't been able to do is do their performance ratings and things like that but it's with a lot of appreciation that I will hand over to Luke, to actually take you through the fundamentals and the framework that we've put through. I wanted to talk to you about the softer side and he can talk to you about the technical side.
Luke Tomkin: I just wanted to start off with a few quick thank you's. Firstly, thank you to Carlee, whose ability to navigate Telstra and all those stakeholders is nothing short of magnificent and I don't think we would not have got where we are today, like Carlee, thank you to Paul Pavlides, who has been on the project since day one and his understanding of business processes and systems within Telstra really made this process workable and to a couple of GRA consultants who are here as well, Dan and Adam, who were from day one and really helped deliver the results, so thanks, guys. So, I've got some good news and bad news. Who wants the good news or bad news first? Anyone?
- [Woman] Bad news.
Luke Tomkin: Bad news? The bad news is I want to talk to you about S&OP theory. The good news is my section should be a lot shorter than Carlee's. Why do I want to talk to you about S&OP theory? Well, mainly because it's a sort of topic that makes you very unpopular at parties and barbecues. So, where else can you get to do it?
But secondly, I think a theme that's coming through today is how S&OP needs to be flexible and responsive and you've got to evolve over time and having an understanding of some of those fundamentals will allow you to do that, so you don't have to just lift and shift.
Okay so, Carlee spoke a little bit about the project catalyst. You have a very, very large purchase order, we're talking eight figures here and it was questioned, quite rightly why we're spending this amount of money and then, an investigation had to go through to work out, was that the right sum to be purchasing?
That investigation probably took a little bit longer than it should of and that kind of probably raised a few questions in terms of how does the business process work, have we got the right accountability in place and those sort of things.
So I think like most people in this room because of our backgrounds, would immediately think that perhaps a S&OP process might be the solution to this problem and here we can see the basic four step meeting that you see in a monthly S&OP cycle. In this case we've got PLM, product life to help our management because of the importance of technology for this company. It could be a new activities meeting, the demand review, supply review and the exec SOP and we would agree.
S&OP would be the right solution to this problem but as a firm, we have another view as well in terms of S&OP for us isn't just that monthly meeting structure and how that rolls. And most people in this room would probably have that sort of understanding as well.
But certainly when you speak to other executives outside of the supply chain, when they think S&OP, they might only think about those meetings, so I wanted to talk a little bit about something else that we would consider as core and essential to delivering the sort of results that Carlee spoke about earlier today.
So, a question and once again, I feel like I need to apologise to you, it's a little bit corny but I thought I'd go with it anyway. Originally, I had a picture of three little pig's houses but anyway, I just went with this one instead. What does building a house and implementing S&OP have in common?
Have a little think about that, a little thinking music, perhaps, Muzak, we should put it on. Here's a hint, with the Leaning Tower of Pisa there, yes, that's right, both need solid foundations. If you don't have a solid foundation to your S&OP process, you won't get a lot of value out of those four meetings. And we've seen that before with some of our clients that have implemented an S&OP process 'cause, quite rightly, the CFO or the CEO said, I had an S&OP process in the other firm that I worked, I want one here and they try and throw one in. But you need to do a little bit more to make sure that that's going to be a success. It's not just about that monthly meeting cycle. It's also about all the work that goes into making sure that they're productive and successful.
So this is GRA Supply Chain Excellence Framework. This is how we, in a nutshell, would look and think about supply chains. So, GRA works in the areas of supply chain strategy and planning or operational planning which is all about S&OP and also execution, which is more about the traditional logistics areas of supply chain and this summarises our view of the world.
At the top there you can see a business strategy. So, most businesses will have a strategy, a three to five year plan in terms of what they want to do within the market. That might be growing national, increasing their product range, whatever the case may be. What's really important is whatever that business strategy must translate to a customer value proposition. So, why does the customer come to you in this space? Business strategy are typically quite well-defined in most companies.
The customer value proposition often isn't but we really need to understand, in very detailed terms, what the customer value proposition is in order to deliver the right supply chain strategy. So, some of the things you want to think about when you talk about a customer value proposition would be, for instance, what level of service are we going to provide? So, how responsive are we to our customers? How willing are we to have stock outs?
Those sort of questions will then inform how you want to set up your network, whether you want to outsource activities or in source them and then you see down there to the bottom right, that will define your network and infrastructure where you're going to actually invest your capital.
That then gives you the structure in which the S&OP is trying to optimise. So you have a network which is reasonably fixed and the S&OP process is trying to deliver the best possible outcome within that and that's where we move into the light blue and the purple.
The purple is what people frequently talk about and that's that, that kind of meeting cycle. That's at the top, that's what I call the framework. There we have the S&OP meeting cycles, we have accountabilities, now we often use the RACI sort of approach, we set the KPI's as Carlee mentioned before, but underpinning all that is the planning capability and what we'd say there is that's the foundations.
The planning capability is that day-to-day, week-to-week operations that often the supply chain teams are at the heart of but needing support from other departments, that actually feed up and into those meetings to make sure that the right decisions can be made.
So typically what we would say is that the S&OP framework would be about 20% of the effort. So defining what those mid-year agendas should be, who should be there, getting the RACI in place, getting the KPI's defined and the planning foundation where we're actually delivering the on-the-ground capability would be 80% of the effort.
I have to admit, in Telstra's case, this wasn't necessarily true 'cause, as Carlee pointed out, the management stakeholder changeover was very significant. So there was a lot of effort and Telstra's certainly a very, very large ship, so it probably wasn't a 20:80% but as a rule of thumb. That's the sort of numbers we go with and I think this is an important thing when you are talking to people back outside of your particular area and they say they want a S&OP process, an IBP process, is that yes, the meeting's are one thing but we've got to make sure we've got everything in place to support those meetings.
So, what are some ways to tell whether you have a solid foundation? Forecasts and supply plans re-calculate daily. Okay, so what we're hoping here is that you have a systemized process and you get a new forecast and if you made any change to that forecast, a supply plan or a replenishment plan, it would automatically update on a daily or nightly basis.
Second, is it easy to articulate the cost of inventory. Once again, this is an area that we often see requiring some work with our clients. When we talk about cost of inventory, we're talking about the cost of holding inventory, of carrying costs, you know, in our industry's term, and cost of the moving or flowing inventory or receiving cost is a probably a more textbook definition.
If you can't easily articulate the cost of holding inventory within your business, typically as a percentage, so most businesses will have a holding cost of somewhere between 15 to 25%, potentially much higher if you've got a perishable product or you need cold stores or it's a higher obsolescence rate.
If you can't articulate what that is then you can't really optimise your inventory because you don't actually know what's the trade-off between moving, flowing into and throughout our network versus holding it and buying large sums.
Third, my team understands the concepts of DRP, MRP and time-phased replenishment planning.
This goes back to the people questions, so, you know, as supply chain professionals, most of us here probably. I won't say fell into the role, but we probably didn't think about that when we were growing up in kindergarten that I want to be a supply chain professional. As I get older and that speaks to the fact that it's only now just getting some more professional recognition but with that, there's been a lack of training within our industry and you want to make sure your people understand these fundamentals because if they're not, they're probably not always making the best possible decisions.
Fourth is if service level targets change, safety stocks automatically update. So, once again, what we're trying to do here is that we manage the inputs and the outputs manage themselves, so if you go back to the customer service promise, what we're saying there is perhaps we have a customer service promise of any in stock 98% of the time.
What you want to be able to do within your system is say, I want a 98% service level and your safety stock should automatically fluctuate based off of that number. Now, if that's not the case, then we've got what we call a broken link within our business processes.
As Carlee mentioned, reporting is very important and what we try and look for there, reports can be dynamically grouped and filtered. You must be able to have that sort of flexibility within your S&OP process to respond to a particular question an exec might have and if you can't easily modify your reports, then it can be quite hard to drill down.
It also speaks to an inability to manage by exception if we don't have the dynamic reporting capability. Carlee mentioned this one as well, thank you, Carlee, is master data ownership is very important. So, once again, in the supply chain, we rely on many master data elements, so these things might be lead times, product life cycle codes, costs and it must be clearly defined who owns those, if it's not then often we'll find that data's poorly managed and finally, there's a daily/weekly heartbeat that is synchronised across departments.
So, within the planning team, obviously we tend to follow a certain rhythm, so what we'll be doing is often at the start of the week we'll be looking at our forecasts, maybe mid-week we'll be starting to manage the replenishment plans and purchasing plans and towards the backend of the week we're starting to look at supplier management and those sort of questions and reporting. Obviously we need input from other departments throughout that period, so what we look for there is that we're getting the right inputs at the right time from those other departments and that is well understood across the organisation.
This is another way to access your foundation maturity. I just picked three dimensions 'cause they'd be pretty common across most industries, demand planning, inventory planning and supply planning.
Often you can add other dimensions depending on what industry you're in, so if you're in a retail business, you might add merchandising planning, for instance. For an innovative company, product management would probably go through there too and if you were to generalise, you could say, where do you fall into the laggard, average and leading buckets. In the laggard bucket, what we're really thinking about there is that we have systems and processes that are either ad hoc or highly dependent on individuals and quite manual.
Okay, so that's, typical size of that would be having spreadsheets, using last year equals this year forecasts, basic min/max replenishment methodologies, so really, if you're in that end, you're really at the bottom five to 10% in terms of organisations.
Once we move to average, we're starting to standardise our business process systems. This is where we typically have ERPs that will do most of our replenishment planning and we'll have a certain level of sophistication and then in the leading area is when we're starting to implement specialised systems and we're starting to use more sophisticated techniques.
What's important as we look at these different dimensions is that we try and raise them all across. So, sometimes in organisations we might be leading in the demand planning area. For instance, we implemented a specialist forecasting system but that forecast doesn't flow through, the error in that forecast doesn't flow through to our safety stock settings, for instance.
So, in that sense, I think someone mentioned it earlier, the Rolls Royce, I think that was Matthew, you've got sitting in the shed, we might have a Rolls Royce but we're not getting all the value out of it because we haven't actually connected it through to the rest of our planning decision making.
So, back to Telstra, so I got a little heavy on the theory there, as I'm want to do. What did we initially observe, well, we initially observed issues both at the framework level and the foundation level. Carlee's already spoken a fair bit about the framework issues but initially back when we started a couple of years ago, the approval process for things was quite ad hoc. For instance, that large purchase order, it was a little bit unclear in terms of who actually owned certain forecasts or who signed off on certain decisions and unfortunately, the execs sometimes had to make decisions from incomplete information.
There just wasn't that foundation feeding up the reports that they needed in a timely fashion. At the foundation level, there was gaps in the end-to-end planning process. Now this could be seen particularly in that inventory planning process in terms of the setting of stocking policies.
There was constraints in trying to improve this due to outsourcing, which limited the business's ability to manage master data and it was a short planning horizon of only 13 weeks and obviously everyone in the room would be thinking an S&OP process should be at least a rolling 12 month horizon.
That's hard to deliver when you've only got a 13 week forecast. So what did we try and do to rectify that? Well, basically, five areas we focused on. Obviously, area one was in structure and frameworks, setting up those monthly S&OP meetings, making sure that the agenda was correct, having those KPI's that Carlee referred to.
Two was to enhance the planning process, so we implemented daily weekly routines so people knew what they were doing on particular days of the week and second, started to focus on the exception-based planning, so really just trying to put in systems that look at what you need to do, look at what needs to be done based off outputs from the system.
Third, and we're still in the process of doing this, is implementing a planning solution. So this planning solution's going to extend the planning horizon from the 13 weeks out to at least 12 months, possibly 24, depending.
Implementing statistical forecasting using multi-algorithm tournament forecast selections to improve the quality of that forecast. And also implementing inventory optimisation, starting to use, statistical safety stocks to set those inventory policies that were previously set by a days or weeks cover. And finally, improve that data foundation, so, define the master data ownership, which Carlee's been fantastic at delivering. Also a big job from Sally and Paul's team in terms of actually data acquisition and cleansing.
The fifth thing was to provide some delivery support to the people. This was done both at the structure and framework level where we participated in the first three S&OP cycles and now Telstra's been running it for many, many more than that and also providing on the ground support to the team who are actually asking to do some new things that they hadn't done before.
Second to last slide, I picked this because I love the guy with the phone at the end, I thought that was really quite fitting. Let the process evolve and I think this is another theme that's come through today as well is that an S&OP process isn't stagnant, it's got to be responsive.That's one thing to draw from this slide.
The other is to not wait for everything to be perfect 'cause that perfect day will never come. Quite intelligently, the business decided to pilot it with one business unit with a stakeholder who was identified as supportive of the process and to make it a success before rolling it out across other areas.
That also gave us the opportunity to refine that process and so, as it expanded out, if it was of a higher quality we'd find less resistance. So, last slide, bringing it all together. You're often told to only have three points, you know, on a slide pack but anyway, the first two are probably the same, so that's okay.
So, first is stakeholder buy-in and Carlee referred to that in her section. Obviously, absolutely essential and other speakers have spoken about the same thing today. Make sure that it is flexible and relevant at that executive level. So, Carlee spoke about using forecast accuracy and how that might not have got the traction, talking about cashflow was of much more interest. That's an example of being flexible and listening to what the stakeholders want and making sure that what we're talking about is relevant to them.
Third is what I've been banging on about for the last 10 minutes is the S&OP foundation, not neglecting that and making sure people understand the importance of it and the last one is don't wait for perfection. So, you've seen the results that have been delivered and those results have been delivered 'cause we haven't set back but we've, we got on the ground and went running, we fixed problems as they came up. So, with that, I'm going to pause and say thank you and see if there are any questions.
- [Audience Member] The challenge around forecasting versus plans, so, how do you manage between either a rolling 12 month forecast, 24 month forecast, versus having a target, do you have a target or is your target the forecast because what are you actually measuring the executives against?
- [Audience Member] Otherwise you'll always make your forecast right, so might as well have a target.
Carlee McGowan: Yeah and that's a really, really great question and it's a cultural thing within Telstra that we're just on the journey of changing at the moment.
Some areas it's a lot easier than others, and the tact that we're taking is very much, this is what the stats and the data tells us. So if we look at past history, if we're looking at the stats and the data, this is actually what it tells us and then let's add the events and the changes and the competitive activity and the cannibalization on top of that.
But let's start with the the cleansed forecast and then add from that and then once we've got that. Let's have a look at what the percentage of the sales targets are and are they aligned or are they misaligned. And then let's actually try to understand that and then have that conversation. Many times there are very robust conversation as to what that is, but I need to be honest with you and say that we're still very much in the infancy of absolutely educating our business on this because traditionally, Telstra hasn't owned a lot of its supply chain. Now we've actually brought in a lot of the knowledge and a lot of the experience within the team, all of a sudden the channels are going, oh, what do you mean that I can't have 10 units per store. And then we go back to them and say, but every single other time we've launched a product, it's only two units per store, guys. So what's the delta and then they go, oh, okay, well, maybe two units per store.
All right so, it's just educating them and I cannot emphasise about winning people's trust and once you win their trust, and show them how we're actually there to help and support them. Then they actually start to come on the journey with you. But as you can see, I demonstrated the number of stakeholders that are changing over at the moment. It's a constant battle and it's a constant thing that we have to keep on doing and keeping on showing the results and keeping on showing them the forecast accuracy results of when they actually look at us for support.
Luke Tomkin: I have something to say. As Carlee said, that's a really, it's a challenging, challenging problem. The focus initially was just on demand and supply balancing at a unit level.
What the business is trying to do is bring those activations in and you can think about those activations maybe like as a sales budget and so what we're now trying to look to do, is there a delta between the number of activations and what our demand unit forecast is?
The trick with this though is that you've got to consider the fact that some activations are with existing mobile phones, some are with BYO devices, so, it's got that added complexity of thinking about those two other factors and trying to work that through, so there's, we talk about big data and stuff, that's definitely a big data opportunity there.
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