Bob Stahl April 15, 2009 95 Gathering Place Wallingford, CT April 15, 2009 95 Gathering Place...

Bob Stahl www.tfwallace.com

April 15, 200995 Gathering PlaceWallingford, CT

April 15, 200995 Gathering PlaceWallingford, CT

Bob Stahlwww.tfwallace.comBob Stahl

www.tfwallace.com

Sales & Operations Sales & Operations Planning:Planning:

Top Management’s Handle on the BusinessTop Management’s Handle on the Business

Sales & Operations Sales & Operations Planning:Planning:

Top Management’s Handle on the BusinessTop Management’s Handle on the Business

AAPICSPICSNew Haven ChapterNew Haven Chapter

Top Management NightTop Management Night

AAPICSPICSNew Haven ChapterNew Haven Chapter

Top Management NightTop Management Night


May 7, 2009May 7, 2009Bob Stahl

www.tfwallace.comBob Stahl

www.tfwallace.com

Unlocking the Planning Power ofUnlocking the Planning Power of

Sales & Operations Sales & Operations PlanningPlanning

in a Downturnin a Downturn

Unlocking the Planning Power ofUnlocking the Planning Power of

Sales & Operations Sales & Operations PlanningPlanning

in a Downturnin a Downturn

MIT CTLMIT CTLSupply Chain Strategy IOMA/ISM WebinarSupply Chain Strategy IOMA/ISM Webinar

MIT CTLMIT CTLSupply Chain Strategy IOMA/ISM WebinarSupply Chain Strategy IOMA/ISM Webinar


With apologies to With apologies to Charles Charles

Dickens . . .Dickens . . .

With apologies to With apologies to Charles Charles

Dickens . . .Dickens . . .•Worst of Times . . .

These are perhaps the worst economic conditions in a generation or two!

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


Four Fundamentals . . .Four Fundamentals . . .Four Fundamentals . . .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/SKU’s/Orders•Tactics/Execution•Weekly/Daily 1-3 Mos•Middle Mgt. Resp.


Not your father’s Oldsmobile . Not your father’s Oldsmobile . . . . . Not your father’s Oldsmobile . Not your father’s Oldsmobile . . . . .

Demand Supply

Volume

Mix

Executive S&OPExecutive S&OPExecutive S&OPExecutive 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?

Decision-Making Processto

Balance Demand & Supply(at the volume level)

to

Establish Relevant Strategy, Establish Relevant Strategy, Policy, and assess & accept RiskPolicy, and assess & accept Risk

and to

Integrate Financial & Operating PlansTop Management’s Handle on the Business


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 ProcessThe Executive S&OP Process


A little history . . A little history . . . . A little history . . A little history . . . .

Plant Scheduling/PullPlant Scheduling/Pull

MSMS

Exec. S&OP / Rough CutExec. S&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

MarketingSales

Super MSSuper MS


Executive S&OP Executive S&OP better than better than

ever . . .ever . . .

Executive S&OP Executive S&OP better than better than

ever . . .ever . . .What has made it better (agenda):• Market-facing (vs Mfg. Process) Families • Simplifying Data Assumptions about MIX:

– Getting out of the Suicide Quadrant

• Both of which make the Sales & Marketing job of Demand Planning (forecasting) Simpler & Better

• Enables Top Management to do their part:– Strategy, Policy, Risk, Performance

• An Implementation Path of Low Cost, Low Risk, High Impact


Examples are from . . . ‘The

Books’

Examples are from . . . ‘The

Books’

QuickTime™ and aTIFF (LZW) decompressor

are needed to see this picture.

QuickTime™ and aTIFF (LZW) decompressor

are needed to see this picture.


Market-facing Families . . .Market-facing Families . . .Market-facing Families . . .Market-facing Families . . .

Proper definition of families must promote best forecasting.

ProductFire RetardantChemicals

Market- Automotive- Furniture- Electronics- Construction- XXX

Customer-Ford-Penna House-Sony-Acme Lumber- XXX

Markets can be tied to extrinsic leading indicators; Products and Customers typically can not!


Two types of forecasting . Two types of forecasting . . .. .Two types of forecasting . Two types of forecasting . . .. .

Mfg. Company

Markets

Distribution Center

Shipments

POS

Sales: 1-3 MosMaster Scheduling

Demand Pull

Marketing: 1-18 Mos

Executive S&OP

Mix

Volume

CustomerCentric

MarketCentric

Customers


Dealing with MIX . . Dealing with MIX . . ..Dealing with MIX . . Dealing with MIX . . ..• Volume ratio of a family to

a critical resource

• Mix ratio for run rate (average, or weighted average)

• Etc.


Simplifying Data Simplifying Data Assumptions . . .Assumptions . . .Simplifying Data Simplifying Data Assumptions . . .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


An Example . . .An Example . . .An Example . . .An Example . . .Resource 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


Tri-Lingual . . . Tri-Lingual . . . Tri-Lingual . . . Tri-Lingual . . .

•Marketing Units

•Operations Units/Hours

• Financial Currency


2007 Fiscal Year Status

$-

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

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

Revenue in 1000's Dollars

Cumulative YTDCum Original PlanLatest Call2008 S&OP Plan

Original Plan 25,400$ Latest Call 25,540$ 2008 S&OP 27,959$

2007 Fiscal Year


Sales & Marketing and Sales & Marketing and Forecasting . Forecasting .

. .. .

Sales & Marketing and Sales & Marketing and Forecasting . Forecasting .

. .. .

– Complain & Whine– Beat on Sales/Marketing people– Drive them away from the table– Use complex algorithms & formulae– Buy new forecasting software– Give up

Rather than– Change approach, methods, & processes

What do we do about inaccurate forecasts?


Getting out of the Getting out of the Suicide Suicide

Quadrant . . .Quadrant . . .

Getting out of the Getting out of the Suicide Suicide

Quadrant . . .Quadrant . . .PTF

Horizon

Deta

il

ISuicideQuadrant

IIAggregate

OnlyQuadrant

Exec.S&OP

IIIBuilding toCustomerDemand


Sales & Marketing’s Sales & Marketing’s Job Job

Enablers . . . Enablers . . .

Sales & Marketing’s Sales & Marketing’s Job Job

Enablers . . . Enablers . . . • No full granularity for the entire

planning horizon - 18 to 24 Months (Getting out of the Suicide Quadrant)

• Family definitions that enable them to correlate to extrinsic factors that are “leading indicators” (Using “simplifying data assumptions” to deal with MIX)

• No complex software cost or learning curve

Willingly & Enthusiastically Join the Party!


Top Management’s Role . . . Top Management’s Role . . . Top Management’s Role . . . Top Management’s Role . . .

• Create an environment (culture) that allows the Ugly Moose to be put on the table -- so that . . .

• They can respond to it with effective:– Policy– Strategy– Risk

– Performance Measurements

Before it’s too late!


An Ugly Moose . . .An Ugly Moose . . .An Ugly Moose . . .An Ugly Moose . . .Energy Market

Distribution Transformer

-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

01/06 04/06 07/06 10/06 01/07 04/07 07/07 10/07 01/08 04/08 07/08 10/08 01/09 04/09 07/09 10/09

Pounds

Distribution Transformer - History Distribution Transformer - Stat FcstDistribution Transformer - Plan08 Linear (Distribution Transformer - History)


Putting the Putting the Moose on the Moose on the

table . . . table . . .

Putting the Putting the Moose on the Moose on the

table . . . table . . . Two Choices:1. See an ‘ugly picture’ and

deal with it . . .

2. Hide an ‘ugly picture’ and do nothing about it until it’s too late . . .


Addressing Conflict . Addressing Conflict . . .. . Addressing Conflict . Addressing Conflict . . .. .

Executive S&OPA process to raise & reconcile conflict,

agree upon, & communicate ONEcompany game plan

Executive S&OPA process to raise & reconcile conflict,

agree upon, & communicate ONEcompany game plan

Sales/Marketing(Units or $ by Family)

Operations(Units/hours/

Material)

Finance(Dollars)

Product Dev.(New Product Issues)

President


Top Mgt. Top Mgt. andand Executive S&OP Executive S&OPTop Mgt. Top Mgt. andand Executive S&OP Executive S&OP

Top Management = The Leader of the Business(General Mgr, Pres., COO)

+VP Sales &/or MarketingVP OperationsVP FinanceVP Development. . . others

Need to be Hands-On with the ES&OP Process:

Stewardship & Leadership(Manager/Trustee & Guide/Command)

Done Properly . . .

It takes Top Management between

1 & 2 Hours per Month

Done Properly . . .

It takes Top Management between

1 & 2 Hours per Month


Serving Constituencies . Serving Constituencies . . .. .Serving Constituencies . Serving Constituencies . . .. .

Customers

EmployeesSuppliers, Community, Country, Planet

Owners

ExecutiveS&OP

ExecutiveS&OP

Desired Force = CentripetalNatural Force = Centrifugal


A Couple of Truisms . . A Couple of Truisms . . ..A Couple of Truisms . . A Couple of Truisms . . ..• When a company is trading off one

constituency against another, it’s on a slippery slope

• Being able to serve all constituencies has a lot to do with timing:1. In the short term, the customer is king2. Proper prior planning is necessary to serve

all constituencies well (Doesn’t happen by accident)

3. Executive S&OP is the tool to set conditions for success with regard to Supply Chain performance


Engaging Top Engaging Top Management . . .Management . . .Engaging Top Engaging Top Management . . .Management . . .

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

Those who succeed withExecutive S&OP

are willing to deal with the discomfort that is required!

Counter-Intuitive & Counter-Experiential

Not doing what you do better. Doing something different to be better!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)

Staff: “Okay, let’s do a Live Pilot Demo”

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

Staff: “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 Implementation Path . . . Path . . . Implementation Implementation Path . . . Path . . .

1 2 3 4 5 6 7 8 9

Months

Business

Improvement

Phase IPhase ILive Pilot

Phase IIPhase IIExpansion

Live PilotDemonstrationGo/No-Go #2

Phase IIIPhase IIIFinancial Integratio

n

ExecutiveBriefing

Go/No-Go #1

KickoffSession

Low RiskLow Cost

High Impact

Low RiskLow Cost

High Impact


We are gettingWe are getting

Sophisticated . . .Sophisticated . . .

We are gettingWe are getting

Sophisticated . . .Sophisticated . . .The

Ultimate Sophistication

is

Simplicity!


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

Simpler(Not Easier)

Better(in 90 Days!!!)


Good Luck & Good Luck & Thanks for Thanks for Listening Listening

Good Luck & Good Luck & Thanks for Thanks for Listening Listening

508-226-0477

[email protected] you’d like a copy of this presentation:

Send me an e-mail.

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