Gaylord Texan Resort & Convention Center December 11-12, 2008

1. APICS / iBF Best of the Best S&OP Conference Resolving Conflict & Building Consensus through the Executive S&OP process Gaylord Texan Resort & Convention Center December 11-12, 2008 Roger Lindgren, CEO V&M Star Bob Stahl, President R.A. Stahl Company

2. Objective • Identify some of the types of conflict that can exist in an business organization • Explain and discuss how Executive S&OP can provide leadership with the tools and structure to raise and resolve that conflict in a defined and disciplined fashion • Provide real life examples

3. Master Scheduling Demand Pull What is Sales&Operations Planning . . . Executive S&OP Volume DemandPlanning Supply Planning Demand Supply Mix

4. What is Executive S&OP? Sales & Operations Planning is aExecutive Decision-Making Process toBalance Demand & Supply (at the volume level) isThe forum for setting Relevant Strategy & Policy (aligning human energy) and Integrates Financial & Operating Plans (update/validate the Annual Business Plan) Top Management’s Handle on the Business

5. An Essential Point . . . Executive S&OP is essential for the other pieces of Sales & Operations Planning to work at theirbest. Whether they be traditional or Lean techniques

6. Types of Conflict . . . • Implementation conflict(s) • Constituency conflict(s) • Business Goal conflict(s) • Organizational outlook conflict(s) • Strategic conflict(s) • Forecasting conflict(s) • and many more . . .

7. Supply-Chain Excellence Implementation Conflicts . . . Parallel Paths A Run the Business today B Improving Short Term C Other Projects D Executive S&OP

8. Constituency Conflicts . . . Customers Desired Force = Centripetal Natural Force = Centrifugal Executive S&OP Owners Employees (Suppliers, Community, Country, Planet)

9. 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: • In the short term, the customer is king • Proper prior planning is necessary to serve all constituencies well (Doesn’t happen by accident) • Executive S&OP is the tool to set conditions for success with regard to Supply Chain performance

10. Business Goal conflicts . . . Being Best in Class • High Quality • Low Cost (Low Inventory) • Customer Service • Quick Response • Reliability • Wide Variety Getting to AND . . . Diminishing OR

11. Organizational Conflicts . . . Sales/Marketing (Units or $ by Family) Finance (Dollars) Executive S&OP A process to raise, reconcile, agree upon, & communicate one company game plan President Product Dev. (New Product Issues) Operations (Units/hours/ Material)

12. President/General Manager Sales & Marketing Operations Product Design Finance Logistics & Distribution Process vs PersonalityDriven Organizations Executive S&OP Supply Chain Management Managing the White Space

13. Top Mgt. andExecutive S&OP Top Management = The Leader of the Business (General Mgr, Pres., COO) + VP Sales &/or Marketing VP Operations VP Finance VP Development . . . others Need to be Hands-On with the ES&OP Process: Done Properly . . . It takes Top Management between 1 & 2 Hours per Month Stewardship & Leadership (Manager/Trustee & Guide/Command)

14. Annual Business Plan Executive S&OP Strategic Conflicts . . . Doing The Right Things Strategy Executive S&OP Robert Hayes HBR-Nov/Dec 1985 Strategic Planning - forward in reverse Doing The Things Right Tactics Execution

15. For Example . . . Capacity Planning =Strategy Question ?? Lead Capacity - Invest in capacity before customer orders materialize (That is, add to planned “demonstrated capacity” proactively with specific actions based on forecast.) Tradeoff: market share for profit Lag Capacity - Invest in capacity after customer orders materialize (That is, plan on adding to “demonstrated capacity” only after receipt of customer orders) (default strategy) Tradeoff: Profit for market share Executive S&OP is where the pros and cons of each strategy are discussed and decided upon.

16. Current Customers New Customers Competition Economic Outlook New Products Pricing Strategy Promotions Bid Activity Management Directives Intra-Company Demand History (Data) Other Forecasting conflicts Inputs -- Process -- Output Forecasts that are: 1.Reasoned 2.Reasonable 3.Reviewed Frequently 4.Represent Total Demand Process

17. Gaining Demand Consensus

18. Step #5 Executive Meeting Heavy Lifting Decisions & Game Plan Step #4 Pre-S&OP Meeting Conflict Resolution, Recommendations & Agenda for Exec. Mtg. Step #3 Production Planning Capacity constraints 2nd-pass spreadsheets Step #2 Demand Planning Management Forecast 1st-pass spreadsheets Step #1 Run Month End Reports Sales Actuals, Statistical Forecasts & Production Actuals End of Month Executive S&OP Process

19. Pre-Meeting(Continued) Consensus requires that everyone:1. Has had their say, &2. Feels they had opportunity to influence3. Everyone can live with the outcome ‘informed debate’ ‘skillful discussion’ ‘positive provocation’ Conflict & Confrontation Consensus & Harmony Getting the Moose on the Table

20. Done Properly . . . Simpler (Not Easier) Better

21. Resolving Conflict aligns human energy . . . Accomplishment Accomplishment

22. The Real Issue . . . Understanding Executive S&OP is simple. The hard part is . . .Behavior Change changing the way everyone does their jobs. Keys: - Full cross functional buy-in - Counter-experiential/intuitive - Comfort vs Change - Path of low risk

23. Implementation Alternatives “Build it and they will come”Design it first, get the mechanics working, and then attempt to sell it to top management. =Low probability for success “Hold the high ground”Involve top management at the very outset of the implementation, and throughout. =High probability for success

24. Thanks for Listening