Myths, Misunderstandings and Misinformation about S&OPBob Stahl508-226-0477www.RAStahlCompany.comwww.tfwallace.com

With apologies to Charles Dickens . . .Worst of Times . . . These are perhaps the worst economic conditions in a generation or two . . . and it may get worse.

Best of Times . . . For those who choose to use them, we have terrific tools in our hands today to deal with the massive uncertainty!

Myths, Misunderstandings and Misinformation

S&OP Morphing Terminology(causing confusion)At first -- S&OP meant an executive led process for balancing demand & supply at the volume levelThen -- S&OP meant any process that dealt with balancing demand & supply at both the volume & mix levels, blurring the distinctionToday -- S&OP is no longer exclusively a term that describes any specific process, but rather a set of words that mean anything you want it to mean

How Much?RatesThe Big PictureFamiliesStrategy/Policy/RiskMonthly / 18 - 36 MosExecutive Resp.Which Ones?Timing/SequenceThe DetailsProducts/SKUs/OrdersTactics/ExecutionWeekly/Daily 1-3 MosMiddle Mgt. Resp.Very different, separate, & distinct practicesbut integrated!The Four Fundamentals

Sales & Operations PlanningDemandSupplyVolumeMixExecutive S&OPDemand PlanningSupplyPlanning

Myth #1:S&OPs a supply chain thingReality: Executive S&OP is a Supply Chain thing. and a Sales & Marketing thingand a Finance thingand a Manufacturing thingand a Procurement thingand an Outsourcing thingand a New Product thingand a General Management thingSept 2007 -- HBR -- Are You the Weakest Link in Your Companys Supply Chain? It is a company-wide, collaborative decision-making process, reaching up to the top levels in the business.

Process Driven versus Personality DrivenExecutive S&OPManaging the White Space

Soft BenefitsEnhanced TeamworkImproved Communications - Defined & DisciplinedBetter Decisions with Less Effort and TimeBetter $$$ Plans with Less Effort and TimeTighter Linkage with StrategyGreater AccountabilityGreater Control Update to the Annual Business PlanWindow into the FutureMaster of own destinyTop Managements Handle on the Business

Myth #2: S&OPs all about balancing demand and supplyReality: S&OP does help to balance demand and supplyand integrates financial and operational planningand links strategic planning to ongoing operationsand shortens the annual planning processand enhances risk managementand can impact strategic plans

Strategic Planning . . . forward in reverse Robert HayesHBR-Nov/Dec 1985Strategic Planning - forward in reverseExecutive S&OPStrategyTacticsExecutionExecutiveS&OPMaster ScheduleDoingTheRightThingsDoingTheThingsRight

Myth #3: S&OP takes too much of Top Managements time Reality: Monthly Time Requirementfor the Leader of the Business ~ 1.5* Executive staff time could be more than this.hours*

The Executive S&OP ProcessStep #1Month End DataEnd of MonthFinancial InvolvementNew Product InvolvementCreates a Disciplined Rhythm

Myth #3A: S&OP is too much detail for Top Management to be involved Reality: Thats a misunderstanding of what Executive S&OP should be.

If youre trying to set policy & strategy while living in the suicide quadrant, youll not succeed.

Planning PerspectivePTFHorizonDetailISuicideQuadrantIIIBuilding toCustomerDemandFullGranularDetail

Problems PerspectiveMix Problems Scream for AttentionVolume Problems Barely WhisperCreates the illusion that all problems are MIX problems -- therefore need a forecast for full granular detail for full horizon.

Myth #4: Well Never Get S&OP to Work; We Dont Have Enough Teamwork Reality: Teamwork is not a PrerequisiteIts a Result

Soft BenefitsEnhanced TeamworkImproved Communications - Institutionalized Better Decisions with Less Effort and TimeBetter $$$ Plans with Less Effort and TimeTighter Linkage with StrategyGreater AccountabilityGreater Control Window into the Future

Myth #4: ContinuedQ. What if youve implemented Executive S&OP but teamwork hasnt improved?A. You flat didnt do it rightGaining teamwork must be one of the objectives of implementing Executive S&OP from the get-go. Harbinger = Teamwork starts in and within the Design Team.

Myth #5: S&OP Is Too Rigid; Our Business Changes Too Rapidly For S&OP Reality: Executive S&OP is all about change.Its a coordination tool

Tools & TechniquesIncreaseReliability

Six Sigma, Total Quality, Poka-Yoke, ISO+ others

Lean Mfg., Just-In-Time, Quick Changeover (SMED), Flow + others

Sales & Operations Planning, ERP, Kanban, VMI,+ others

XXX

Complexity, Change and CoordinationComplexity and the Rate of Change Need for Effective Coordination ProcessesExecutive S&OP is the Primary Coordination Process

Coordination is all about:Alignment of Human Energy AccomplishmentAccomplishment

Myth # 6: We Cant Use S&OP Because Were Totally Outsourced Reality: Executive S&OP Doesnt Care Who Owns The Factory.Heavily Outsourced Companies May NeedExecutive S&OP More Than Others.(i.e., Just Bats). . . nor do Customers care who owns the resources of production! Outsourcing is a vital contributor!

Myth #7: Our Company Is Too Big (Too Small) for S&OP Reality: Executive S&OP operates independently of company sizeProcter & Gamble~ $80 BillionMicrosoft~ $60 Dow Chemical~ $55 Homac~ $40 MillionJust Bats~ $30 Million

Myth #8: Our Forecasts Are Not Accurate Enough For S&OP Reality: Executive S&OP Does Not Require Accurate ForecastsBut by working on the process, it often helps to improve the forecasts

Forecasting1. Reasoned2. Reasonable3. Credible4. Reviewed FrequentlyForecasts that are:ProcessInputs -- Process -- Output

Reconciliation Process(The DAM Meeting)ConsensusForecastCompare to Annual Business PlanApplying Puts & TakesCompanyForecastForecasting . . . A Three-Legged Stool

Myth #9: S&OP Is Simple; All You Need Is A Few Spreadsheets Reality: Implementing Executive S&OP Is All About Change Management

Research finding . . . Lora Ceceri, Altimeter -- Boston, September 2010The effective use of S&OP is:60% Change management30% Process improvement10% Technology

Myth #10: We Cant Do S&OP. THEY Will Never Participate Reality: Never Say Never

People Can and Do Change - But . . . It doesnt happen by accident!

Myth #10: Continued Who Are THEY? Top Management?Sales/MarketingManufacturing?Finance?New Product Development?Outsourcing? All of the above?

Myth #10: Continued Why not? Are they bad people?They dont understand it.They dont understand it, because they havent been taught.Its counter-experiential.Thats why education and buy-in from the get-go is important!Its all about changing mind-sets!

Gravitational Force Needed . . .CustomersEmployees(Suppliers, Community, Country, Planet)OwnersExecutiveS&OPDesired Force = CentripetalNatural Force = Centrifugal

Executive S&OP is . . .APICS Dictionary, 13th Edition, October 2010The executive portion of the overall sales and operations planning set of processes. It is a decision-making activity involving the leader of the business (president, general manager, COO, managing director), his or her staff, and a number of middle managers and specialists. Its mission is to balance demand and supply at the aggregate level, align operational planning with financial planning, link strategic planning with day-to-day sales and operational activities. It is a multi-step process involving demand planning, supply planning, and middle and top management meetings for decision-making and authorization.

Pick up your at the APICS

With apologies to Charles Dickens . . .Worst of Times . . . These are perhaps the worst economic conditions in a generation or two . . . and it may get worse.

Best of Times . . . For those who choose to use them, we have terrific tools in our hands today to deal with the uncertainty!

Myths, Misunderstandings and Misinformation

Done Properly . . . Simpler(Not Easier)Better(in 90 Days!!!)Low CostLow RiskHigh ImpactQuick Results

Book Signing . . .Book Store @ 5:30 today

Thanks for ListeningBob Stahl508-226-0477RStahlSr@aol.comwww.RAStahlCompany.comwww.tfwallace.com

Boston S&OP Summit = confusion. -- Some dont differentiate between volume & mix-- Boston S&OP SummitHalf TruthBlurring the BoundariesCommunications = defined and disciplinedVince Lombardi - work on the process; not the results! Half TruthWicham Skinner = Manufacturing StrategyGeorge Gage - EG&G Staff StrategyMaster Schedule ~ Operational S&OPFull GranularFull Horizon*Just Bats = Scott Hendrick*AMR merged with GartnerIts not doing what you do better -- its doing something different to be better.

Like American Express -- Dont leave home without it. Boston S&OP Summit = confusion. Simple does not = EASY!!- Are you already doing Sales & Operations Planning ??