tom wallace & bob stahl executive s&op a presentation to: apics southeast florida by tom...

Tom Wallace & Bob Stahl www.tfwallace.com

Executive S&OPExecutive S&OP

A Presentation to:

APICS Southeast Floridaby

Tom Wallace

3-20-08


AgendaAgenda

• Executive S&OP: Role, Structure and Benefits

• Implementation

• The Future of S&OP


The Four FundamentalsThe Four Fundamentals

Demand Supply

Volume

Mix

•How Much?•Rates•The Big Picture•Families•Strategy/Policy/Risk•Monthly/out to 36 Mos

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


Sales & Operations PlanningSales & Operations Planning

Demand Supply

Volume

Mix

Executive S&OP

Master SchedulingSupplier and Plant Scheduling

Distribution Scheduling

Demand Planning/Forecasting

Supply (Capacity) Planning

bodell

I think the key thing to hit is "what is Executive S&OP"? Should we have some bullet points somewhere that give some basic description? And can we link this back to some key points:?1) This is about Executive" Decision Making"2) This is about" Business Performance" (not just demand/supply balancing)3) This is not "detailed execution review"


More Terminology Changes?More Terminology Changes?

Sales & Operations Planning may

become the successor term to ERP/MRPII

Thus the term Executive S&OP was developed to

• Eliminate confusion

• Avoid what happened with ERP

• Put high focus on the Executive role


Executive S&OP . . .Executive S&OP . . .• Is an executive decision-making process

• Balances demand and supply

• Deals with volume in both units and $$$

• Ties operational plans to financial plans: one set of numbers

• Is the forum for setting relevant strategy and policy

• Is what we called , for years,

Sales & Operations Planning


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

1. Stewardship2. Leadership

• Break ties• Set high standards• Motivate

Monthly Time Commitment: 1.5

The Role of Top ManagementThe Role of Top Management

hours


Step #5ExecutiveMeeting

Decisions &Game Plan

Step #4Pre-

MeetingConflict 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

Lifting

The Executive S&OP Process


Three Examples ofThree Examples ofBest PracticesBest Practices

Three Examples ofThree Examples ofBest PracticesBest Practices

Three (of 13) Companies Studied:

• High Seasonality

• High Cyclicality

• Highly Complex New Product Launch


Seasonality Curve fora Typical Scotts Product

(data at Point of Sale)

Figure X-1

Executive S&OP in Make-to-Stock w/ High Seasonality: The Scotts Co.Executive S&OP in Make-to-Stock

w/ High Seasonality: The Scotts Co.

Important Questions:• When start Pre-Build?• At what rates?• Which SKUs?• When ramp up & how much?• When ramp down?

Pre-BuildPre-Build

S&OP helps to answer these & other questions


The Scotts CompanyThe Scotts Company

“During the last four years, almost half of the company’s increase in earnings has come from Supply Chain savings: inventory down, manufacturing efficiency up, purchase and transportation costs down. All of these are due to improved planning.”

Ken ReiffVice President, Product

Planning


S&OP in Make-to-Orderw/ Extreme Cyclicality: Cast-Fab

S&OP in Make-to-Orderw/ Extreme Cyclicality: Cast-Fab

Cast-Fab Technologies – Year-to-Year Sales Change

1993199419951996199719981999200020012002200320042005

%Chg

15386

121425141

322518

upup

downdown

updowndowndowndowndown

upup up

Implemented S&OP

Some competitors go out of business

Acquired fromCin’ti Milacron

46!!!12


Cast-Fab TechnologiesCast-Fab Technologies

“During 2004, we posted sales increases of over 40%, which meant employee call-backs, retraining, new hires, initial training, getting up the learning curve and so forth.

“During the same year, we had productivity gains of up to 3%! We never would have believed this was possible if we hadn’t done it.

“S&OP played a key role in this; it gave us the forward visibility to make the right decisions on a timely basis.”

Ross BushmanPresident and COO


New Product Launch . . .New Product Launch . . .

. . . in the Pharmaceutical Industry

• Multiple stages of testing

• Multiple approvals by FDA

• Multiple years

• Multiple 100s of millions of dollars


Eli Lilly and CompanyEli Lilly and Company

New Product Launch Performance:

IndustryAverage Lilly

2001-04 1.8

Years Required

(avg per product) >14

9

<11


Eli Lilly & CompanyEli Lilly & Company

“In the past three years we have launched 9 new products and met all demand despite 2 products that sold significantly above the high-side forecast.

“Without Global Sales & Operations Planning, we would have been driven to reaction mode, which could have resulted in an increase in investment in new assets, a slow down in our launch plans, and/or missed demand opportunities.”

Ron Bohl

Supply Chain Coordinator


These 3 Examples:A Common ThreadThese 3 Examples:A Common Thread

Executive S&OP is being used extensively in areas of the business that are:

• Mission Critical

• Very Difficult to Manage


Hard BenefitsHard BenefitsHard BenefitsHard Benefits• Customer Service UP• Inventory DOWN• Obsolescence DOWN• Freight Costs DOWN• Order Lead Times DOWN• Supplier Lead Times DOWN• Time to Launch New Products DOWN• Plant Productivity UP


Soft BenefitsSoft BenefitsSoft BenefitsSoft Benefits• Enhanced Teamwork • Improved Communications• Better Decisions with Less Effort and Time• Better $$$ Plans with Less Effort and Time• Greater Accountability• Greater Control • Window into the Future

Top Management’s Handle on the Business


AgendaAgenda

• Sales & Operations Planning: Role, Structure and Benefits

• Implementation

• The Future of Executive S&OP


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

. . . is not in understanding S&OP.

That’s easy. The hard part is . . .

Organizational Behavior Change Changing the way we do our jobs

“The hard stuff is the soft stuff.”


Implementing Executive S&OP Is Different


Active, Hands-on Participation by theLeader and Staff

The leader of the business (president,

COO, CEO, general manager) must provide:• Support• Funding• Commitment• Leadership

So what’s new?

Each and Every Month




• Highly focused on Top Management

• Relatively few people

• Low cost/high impact


Implementation PrinciplesImplementation Principles

• Implementation begins and ends with the Leader of the business

• “Build it and they will come” carries a low probability for success

• “Gain and hold the high ground”

and success will almost always follow


The Implementation Path The Implementation Path

1 2 3 4 5 6 7 8 9Months

Bu

sin

ess

Imp

rovem

en

t

Phase IPhase ILive Pilot

Phase IIPhase IIExpansion

Live PilotGo/No-Go #2

Phase IIIPhase III$$$

Integration

ExecutiveBriefing

Go/No-Go #1

KickoffSession

Low Risk Low Cost

Month #1•Assignment of Responsibilities

•Kickoff Education & Planning

•Development of Project Schedule

•Families & Sub-Families (Pilot Family)

•Data Definitions, Sources & Displays

Month #1•Assignment of Responsibilities

•Kickoff Education & Planning

•Development of Project Schedule

•Families & Sub-Families (Pilot Family)

•Data Definitions, Sources & Displays

Month #3•Pilot Preparation & Execution

Go/No-Go Decision #2

Month #3•Pilot 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

Phase IPhase IPreparation

Phase IIPhase IIExpansion

Phase IIIPhase III$$$

IntegrationLow RiskLow Cost

Months 4 – 6 • Add All Product Families• Full Supply Planning• Limited Financials

Months 4 – 6 • Add All Product Families• Full Supply Planning• Limited Financials

Months 7-9• Full Financial Integration•Institutionalize the Process

Months 7-9• Full Financial Integration•Institutionalize the Process


AgendaAgenda

• Sales & Operations Planning: Role, Structure and Benefits

• Implementation

• The Future of Executive S&OP


The Future of S&OP: Growth Factors

The Future of S&OP: Growth Factors

• Success breeds success• Lean Manufacturing and S&OP• Globalization• New users outside traditional manufacturing• S&OP specific software• Greater financial integration, power and utility• A growing presence in the executive suite


Implications for APICS Members (CPIM)

Implications for APICS Members (CPIM)

Premises: • Executive S&OP is a powerful tool for top

management • It’s here to stay and it’s growing• It’s in APICS’ space• CPIMs know more about Sales & Operations

Planning than most others

Therefore, CPIMs are positioned to take part in this growth and to be more valuable to their companies


Implications of Executive S&OP for APICS

Implications of Executive S&OP for APICS

• It’s in APICS’ space.

• It “lives” in the Executive Suite

• It can help attract new members:– executive perception– non-manufacturing companies

• APICS can play a – the? – leadership role in the widespread adoption of Executive S&OP


APICS is Getting On Boardwith S&OP

APICS is Getting On Boardwith S&OP

• S&OP Conference – Chicago – June 19, 20

• Demand/S&OP Flight at APICS Conference in Kansas City – September 14-16

• Frequent Webinars (most recent: 2-25: Sales & Operations Planning –

The Executives’ Role)


Thanks for ListeningThanks for Listening

Go to www.tfwallace.com for:

• Copies of slides

• Periodic newsletter

• White papers

• Books and videos

tom wallace & bob stahl executive s&op a presentation to: apics southeast florida by tom...

Documents

tom wallace bob stahl

executive sop process

executive role slide

future of sop slide

product planning slide

agenda executive sop

term executive sop

coo slide