Executive S&OP

Bob Stahl www.tfwallace.com

Four Points SheratonLeominster, MAApril 11, 2008

Four Points SheratonLeominster, MAApril 11, 2008

Bob StahlR.A. Stahl Companywww.tfwallace.com

Bob StahlR.A. Stahl Companywww.tfwallace.com

NSMGNSMG Northeast Supply Management GroupNortheast Supply Management Group

NSMGNSMG Northeast Supply Management GroupNortheast Supply Management Group

Executive S&OPExecutive S&OPWhat is it?What is it?

How to implement it successfully?How to implement it successfully?

Executive S&OPExecutive S&OPWhat is it?What is it?

How to implement it successfully?How to implement it successfully?


The MissionThe Mission

High Quality Low Cost (Low Inventory) Customer Service

Quick ResponseReliabilityWide Variety

MeetingWorld Class Standards

In

Getting to AND . . . Diminishing ORGetting to AND . . . Diminishing OR


The Four FundamentalsThe Four FundamentalsThe Four FundamentalsThe Four Fundamentals

Demand Supply

Volume

Mix

•How Much?•Rates•The Big Picture•Families•Strategy/Policy/Risk•Monthly / 18 - 36 Mos•Executive Resp.

•Which Ones?•Timing/Sequence•The Details•Products•Tactics/Execution•Weekly/Daily 1-3 Mos•Middle Mgt. Resp.

Demand Supply

Demand

SupplyDemand

Supply


The The Evolution . . . Evolution . . . The The Evolution . . . Evolution . . .

Plant Scheduling/PullPlant Scheduling/Pull

MSMS

S&OP / Rough CutS&OP / Rough Cut

PTF

24MonthsTime

Most Detail Aggregate OnlyExac Config. . .Precise Mat’l. . .# People. . .Capital Equip . . .Factory Space

VolumeMix

Detailed Forecasting &Detailed Forecasting &

Master SchedulingMaster Scheduling• Lost in the woods- Detail• Engage Top Management?• Added Little Value outside

the Planning Time Fence

Super MSSuper MS


Sales & Operations PlanningSales & Operations PlanningSales & Operations PlanningSales & Operations Planning

Demand Supply

Volume

Mix

Executive S&OP

DemandPlanning

SupplyPlanning

Master SchedulingDemand Pull


What is Executive S&OP?What is Executive S&OP?What is Executive S&OP?What is Executive S&OP?

Sales & Operations Planningis a

Executive Decision-Making Processto

Balance Demand & Supply(at the volume level)

isThe forum for setting Relevant Strategy & Policy

and Integrates Financial & Operating Plans

(update/validate the Annual Business Plan)

Top Management’s Handle on the Business


An Essential Point . . An Essential Point . . ..An Essential Point . . An Essential Point . . ..

Executive S&OP is essential for the other pieces of

Sales & Operations Planning

to work at their best.

Whether they be traditional or Lean techniques


Survival . . . Survival . . . Survival . . . Survival . . . PTF

Horizon

Detai

lSuicideQuadrant

Aggregate Only

Quadrant

ES&OP


Four FundamentalsFour FundamentalsFour FundamentalsFour Fundamentals

DemandDemand SupplySupply

MIXMIX

VolumeVolume


Step #5ExecutiveMeeting

Decisions &Game Plan

Step #4Pre-S&OPMeeting

Conflict Resolution, Recommendations &

Agenda for Exec. Mtg.

Step #1Data

Gathering

End of Month

Sales Actuals, Statistical Forecasts

&Supply Actuals

Step #2DemandPlanning Management Forecast

1st-pass spreadsheets

Step #3Supply

Planning Capacity constraints2nd-pass spreadsheets

Heavy

Liftin

g

The Executive S&OP Process


ES&OP’s Place . . . ES&OP’s Place . . . ES&OP’s Place . . . ES&OP’s Place . . .

Strategic PlanningStrategic Planning

Detailed Planning, Scheduling & ExecutionDetailed Planning,

Scheduling & Execution

Business PlanningBusiness Planning

Disconnect!!!Executive Sales & Operations PlanningExecutive Sales & Operations Planning

TurningDisconnected

Knobs?


Executive S&OP . . Executive S&OP . . . . Executive S&OP . . Executive S&OP . . . .

Executive S&OPA process to reconcile, agree

upon, & communicate thecompany game plan

Executive S&OPA process to reconcile, agree

upon, & communicate thecompany game plan

Sales/Marketing(Units or $ by Family)

Operations(Units/hours/

Material)

Finance(Dollars)

Product Dev.(New Product Issues)

President


Process versus Personality Process versus Personality Driven OrganizationDriven OrganizationProcess versus Personality Process versus Personality Driven OrganizationDriven Organization

Sales &MarketingSales &Marketing

Manufact-uring

Manufact-uring

ProductDesignProductDesign FinanceFinance

Logistics&

Distribution

Logistics&

Distribution

President/General Manager

Supply Chain ManagementExecutive S&OPExecutive S&OP

Managing the White Space


The Leader of the Business Unit (General Manager, President, CEO, COO) Needs to be Hands-On with Executive S&OP:

1. Stewardship2. Leadership

• Break ties• Set high standards• Motivate

Monthly Time Commitment: 1.5 Hrs.

The Role of Top ManagementThe Role of Top ManagementThe Role of Top ManagementThe Role of Top Management


The Real Issue . . The Real Issue . . . . The Real Issue . . The Real Issue . . . .

Understanding Executive S&OP is simple.The hard part is . . .

Organizational Behavioral ChangeChanging the way everyone does their jobs.

Keys: - Full cross functional buy-in

- Counter-experiential/intuitive

- Comfort vs Change- Path of low risk


Successful Successful Implementation . . .Implementation . . . Successful Successful Implementation . . .Implementation . . .

A - PeopleB - Data

C - Software


C - Software . . C - Software . . ..C - Software . . C - Software . . ..•Data “warehouse”

– ERP Operating System, Forecasting Software, etc. (transaction level data)

•Data Cubes . . . •Excel (or equivalent)

– Organizer– Presenter (tables & graphs)

•More complex software - later


B - Data . . . B - Data . . . B - Data . . . B - Data . . .

• Getting out of “Suicide Quadrant”– Forecasting in Families (Family Feud??)

• Simplifying Assumptions– for Rough Cut Resource Planning– for financial conversion (units to $$$)

• Single process -– tied together– one source for data


Graphical ReportGraphical ReportGraphical ReportGraphical ReportResource Requirements Plan - Dept #8

0

50

100

150

200

250

Oct Nov Dec Jan Feb Mar Apr May Jun JulAug Sep Oct Nov Dec Jan Feb Mar

2007 2008 2009

Hours Per Month

Normal Capacity Normal Capacity +25%Medium Widget Required Capacity Large Widget Required Capacity


Validating AssumptionsValidating AssumptionsValidating AssumptionsValidating Assumptions

RRP Run Rate ConversionUnits to Hours Control Chart

0.42

0.44

0.46

0.48

0.5

0.52

0.54

0.56

Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb

2006 2007 2008

Hours per Unit

UCL LCL Hours per Unit Linear (Hours per Unit)

AssumptionSensitivity


A - People . . . A - People . . . A - People . . . A - People . . . • Top Management “centric”

– The Leader of the business (CEO, President, GM, MD, etc.) must not only provide• Support• Funding• Commitment• Leadership

– They must also be “hands-on” each and every month(Top Management must not only support it, they must willing, ready, & able to do it!)

• It’s not doing what you do better, it’s doing something different to be better!

• Counter-experiencial & Counter-intuitive equals Discomfort & Risk


Engaging Top ManagementEngaging Top ManagementEngaging Top ManagementEngaging Top Management

•In Change, there is no Comfort(In Comfort, there is no Change)

Those who succeed withExecutive S&OP

are willing the endure the discomfort that is required!Ris

kRis

k


• Uninformed (before Go/No-go #1)

Boss: “Okay, let’s do an Executive Briefing.”

• Semi-informed (after Briefing: Go/No-go #1)

Boss: “Okay, let’s do a Live Pilot”

• Fully informed (after Pilot: Go/No-go #2)

Boss: “Okay, let’s go to full cutover.”

Low

RiskLow

Risk

Three Levels Three Levels of Commitment . . . of Commitment . . . Three Levels Three Levels of Commitment . . . of Commitment . . .


Implementation PathImplementation PathImplementation PathImplementation Path

1 2 3 4 5 6 7 8 9

Months

Business

Improvement

Phase IPhase IPreparation

ExecutiveBriefing

Go/No-Go #1

KickoffSession


Getting Started SessionGetting Started SessionGetting Started SessionGetting Started Session

Day #1Day #1 Day #2Day #2

Exec. StaffChampion

Design TeamSupporters

ChampionDesign TeamSupporters

Design Team

Education Planning

Objective: •Gain (regain) consensus in concept•Overcome Objections•Demonstrate leadership understanding •Which avoids the ‘they syndrome’•Display an ‘commitment’•

Objective: •Write detailed plan- 90 day results•Address resource issues•Prepare Exec. Presentation to get

‘specific commitment’• Create teamwork, blur boundaries

Objective: •Gain an understanding of detail•How it applies to company •To avoid the Sharp-Stick Syndrome•Raise and address conflicts•



1 2 3 4 5 6 7 8 9

Months

Business

Improvement


ExecutiveBriefing

Go/No-Go #1

KickoffSession


Pilot Workload . Pilot Workload . . . . . Pilot Workload . Pilot Workload . . . . .

Month #1•Assignment of Responsibility

•Kickoff Education & Planning

•Development of Project Schedule

•Families & Sub-Families (Pilot Family)

•Data Definitions, Sources & Displays

Month #1•Assignment of Responsibility

•Kickoff Education & Planning

•Development of Project Schedule

•Families & Sub-Families (Pilot Family)

•Data Definitions, Sources & Displays

Month #3•Pilot Demo Preparation

& Execution

Go/No-Go Decision #2

Month #3•Pilot Demo Preparation

& Execution

Go/No-Go Decision #2

Month #2•Demand Planning Processes & Data Feeds

•Supply Planning Processes & Data Feeds

Month #2•Demand Planning Processes & Data Feeds

•Supply Planning Processes & Data FeedsExecutive Briefing& Go/No-Go Decision #1

Executive Briefing& Go/No-Go Decision #1




1 2 3 4 5 6 7 8 9

Months

Business

Improvement


Phase IIPhase IIExpansion

Live PilotDemonstrationGo/No-Go #2

Phase IIIPhase IIIFinancial Integratio

n

ExecutiveBriefing

Go/No-Go #1

KickoffSession

Low RiskLow CostLow RiskLow Cost


Success RequiresSuccess RequiresSuccess RequiresSuccess RequiresDesign Team’s Job:

1. Defined set of practices (What, How, & Who)

2. Accurate, timely, & believed data

3. Valid, simplifying assumptions (Demand/Supply/Financial)

(Getting out of ‘Suicide Quadrant’)

Leadership’s Job:

• High discipline clear accountability (process & results)

• Constant improvement

• Changed performance measures

• Culture/Behavior change (Moose on table)


Decision MakingDecision Making(Sales Plans, Supply Rates, Order Backlogs, & Inventories)(Sales Plans, Supply Rates, Order Backlogs, & Inventories)Decision MakingDecision Making(Sales Plans, Supply Rates, Order Backlogs, & Inventories)(Sales Plans, Supply Rates, Order Backlogs, & Inventories)

TraditionalResponse to

a Problem

+

Later

~

Reactive & ‘Radical’

With ES&OPPart of an

Ongoing Process

+

Sooner

=

Proactive & ‘Fine-Tuned’

The Implementation Task: Make Executive S&OP

the Framework for Decision Making


Done Done Properly . . . Properly . . . Done Done Properly . . . Properly . . .

Simpler(Not Easier)

Better


Making ChangeMaking ChangeMaking ChangeMaking Change

“Change happens one step at a time, by thinking globally (big), but acting locally (small)”

“In human affairs, the willed future always prevails over the logical

future.”

Rene Dubos‘A Celebration

of Life’An essay


‘The Books’‘The Books’

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are needed to see this picture.

QuickTime™ and aTIFF (LZW) decompressor

are needed to see this picture.


Thanks & Good Luck !Thanks & Good Luck !Thanks & Good Luck !Thanks & Good Luck !

508/[email protected]

Go to Web site: 1. Copy of presentation2. Copy of Dubos Essay3. Copy of bi-monthly newsletter

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Executive S&OP