October 9, 2013 El Paso, TX Ramada Hotel

1. El Paso / Juarez Chapter Sales & Operations Planning: Top Management’s Handle on the Business October 9, 2013 El Paso, TX Ramada Hotel Bob Stahl 508-226-0477 RStahlSr@aol.com www.RAStahlCompany.com

2. Agenda • What is authentic Executive S&OP • “It ain’t your father’s Oldsmobile” • What makes it work • Leadership’s (Top Management) Role • What makes it fail (No notes allowed) • How to implement effectively at: • low risk • low cost • high impact • quick results

3. Bob Stahl’s Background . . . • 40+ years in manufacturing companies • Started as Schedules Coordinator • With help of Oliver Wight, certified Class A success (1979) • Became an associate of Oliver Wight – 1981 (passed in 1983) • Have worked with some of the best companies in the world • Today = eS&OP coach, educator, author • Have written six books with Tom Wallace – • three have been used for APICS Certification • S&OP editor and columnist – • for the IIF’s Journal of Forecasting - Foresight • Head up consulting services for TFWallace & Company • “Retired” = choices

4. Volume Supply Demand Balance Mix Sales & Operations Planning Executive S&OP (eS&OP) • How Much? • Rates • The Big Picture • Families • Strategy/Policy/Risk • Monthly / 18 - 36 Mos • Executive Resp. ProActive Behavior • Which Ones? • Timing/Sequence • The Details • Products/SKU’s/Orders • Tactics/Execution • Weekly/Daily 1-3 Mos • Middle Mgt. Resp. Very different, separate, & distinct practices but integrated! ReActive Behavior

5. Exec. S&OP II Aggregate Only Quadrant Forecasting (Worst of Two Worlds) PTF III Building to Customer Demand I Suicide Quadrant Detail Horizon

6. Executive S&OP is . . .APICS Dictionary, 13th Edition, October 2010 • The 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 planningwith day-to-day sales and operational activities. • Is a forum for disciplined discussion about setting Policy, strategy, risk, budget changes • It is a multi-step process involving demand planning, supply planning, and middle and top management meetings for decision-making and authorization Top Management’s Handle on the Business Executive S&OP – does the proper prior planning to allow the routine things to be done routinely!!

7. Using Market-Facing Families & Simplifying Data Assumptions Best Solution: Market-Facing Families Data MIX Assumptions w/ Resource Planning Traditional Solutions: Full Granularity or Fcs’t in Supply Families Markets Segments Channels Customers // Resource Department Equipment Supplier Sales & Marketing (Demand) Operations (Supply)

8. Strategic Planning Business Planning Volume Executive S&OP Demand Supply Sales Plan Operations Plan Capacity Planning Forecasting & Demand Management Mix Master Scheduling Detailed Planning & Execution Systems: MRP, Plant Scheduling, Supplier Scheduling, etc. ERPEnterprise Resource Planning Transactional Software

9. Where Does eS&OP Fit? Strategic Planning Where Executives Live Turning Disconnected Knobs? Business Planning Executive S&OP Disconnect!!! Where Mid-Mgt. Lives Detailed Planning, Scheduling & Execution

10. “Strategic Planning . . .forward in reverse” Annual Business Plan Doing The Right Things Strategy Executive S&OP Linking Strategic Planning to Day-To-Day Operations Robert Hayes HBR-Nov/Dec 1985 Strategic Planning - forward in reverse Executive S&OP Tactics Doing The Things Right Master Schedule Execution

11. Two Parts of Exec. S&OP The mechanics: • Display of Info • Defined Process forDecision-Making • Data Dump (Warehouse) • Information (Org Data) • Knowledge • Understanding

12. Holistic Display

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

14. eS&OP Success . . . • not only allows disagreement, to work it promotes and requires disagreement • Learning how to disagree without being disagreeable is paramount to success • Gaining collaborative consensus from this disagreement makes for best decisions • Without a comfortable process to resolve disagreement/conflict, organizations will avoid it – “put the moose under the table”

15. Top Management’s Role . . .(among other things) • Create an environment (culture) that allows the Ugly Mooseto be put on the table --

16. The Ugly Moose . . . • Big ugly animal • All companies have them (under the table) • Difficult & Contentious • Good companies know how to disagree without being disagreeable • Put the ‘beast’ on the table • Thrive on conflict, not chaos • Moose is a symbol of agreement to do so Getting the Moose on the Table

17. Top Management’s Role . . .(among other things) • Create an environment (culture) that allows the Ugly Mooseto be put on the table -- so that . . . • They can completely and effectively resolve disagreements & conflict, setting proper: • Policy • Strategy • Risk Assessment • Performance Measurements Before it’s in the MIX Space!

18. Conflict Resolution * . . . • Disagreement has two parts: • Substantive issue • Emotion behind that issue • Disagreement becomes conflict when emotion is not completely addressed • Lasting conflict resolution must deal with both elements of disagreement • Doing that effectively can be learned: • With a motive to do so & • A framework on which to work “Getting to Resolution” Stewart Levine

19. Two Parts of Exec. S&OP The mechanics: • Display of Info • Defined Process forDecision-Making • Data Dump (Warehouse) • Information (Org Data) • Knowledge • Understanding

20. The Executive S&OP Process Step #5 Executive Meeting Heavy Lifting Decisions & Game Plan Step #4 Pre-S&OP Meeting Conflict Resolution, Recommendations & Agenda for Exec. Mtg. Step #3 Supply Planning Capacity constraints 2nd-pass spreadsheets Step #2 Demand Planning Management Forecast 1st-pass spreadsheets Sales Actuals, Statistical Forecasts & Production Actuals It is a multi-step process involving demand planning, supply planning, and middle and top management meetings for decision-making and authorization Financial Involvement New Product Involvement Creates a Disciplined Rhythm Step #1 Data Gathering End of Month

21. Need to be Hands-On with the Executive S&OP Process Top Management andExecutive S&OP Done Properly . . . It takes Top Management between 1 & 2 Hours per Month President VP Sales/Mktg VP Operations VP Finance VP R&D Stewardship & Leadership (Manager/Trustee & Guide/Command)

22. Making eS&OP Successful . . . • The hard stuff(tools, techniques, processes) is easy • The soft stuff (relationships, behavior, culture) is hard

23. Market Research . . . Success with eS&OP is: 60% = Behavior/culture change 30% = Process improvement 10% = Technology *Lora Ceceri Altimiter/AMR Boston, Sept 2010

24. Overcoming the Catch 22 of Implementation • If you don’t get top management involved from the start, you won’t address the cultural or behavioral changes that are required. • If you do get top management involved form the start, they realize that success does not come from doing what you do better, but from doing things differently to be better. That translates to personal and/or organizational discomfort and risk for those in charge – resulting in reluctance to implement.

25. Discomfort = RISK • In Change, there is no Comfort (In Comfort, there is no Change) Those who succeed withExecutive S&OPare willing the endure the discomfort that is required! Risk

26. How to do that . . . Mitigate RISK • 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 Demonstration” • Fully informed (after Pilot: Go/No-go #2) Staff: “Okay, let’s go to full cutover.” Low Risk

27. Phase III Financial Integration Phase II Expansion Phase I Pilot Demo Implementation Path Live Pilot Demonstration Go/No-Go #2 Business Improvement Kickoff Session Low Cost Low Risk High Impact Quick Results 1 2 3 4 5 6 7 8 9 Months Executive Briefing Go/No-Go #1

28. 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 (because you can’t address the cultural issues without Top Management) “Hold the high ground”Involve top management at the very outset of the implementation, and throughout. = High probability for success

29. Parallel Paths A Run the Business today B Projects to support ‘A’ Business Excellence X Executive S&OP Z Conflict Resolution Framework Leadership Responsibility: Assuring resources for all Use Pilot for learning, not benefits Gain focus - application of principles

30. Middle Mgt. only It’s a Supply Chain thing Top Mgt. but not President (SBU Ldr) No Education (‘Build It’) Supply based Families Too much granularity No consensus on ‘end game’ No discipline Inadequate Pre-S&OP Conflict Aversion Executive S&OP Meetings: Show & Tell Unfocused Short Term Too Much Detail (MS) Meeting Too Long Finger Pointing Ongoing Data Problems Lack of Progress ImplementationPitfalls

31. The Real Issue . . . Understanding Executive S&OP is simple. The hard part is . . .Behavioral Change changing the way everyone does their jobs. Keys: - Full cross functional buy-in - Counter-experiential/intuitive - Comfort vs Change - Path of low risk Authentic S&OP must be a Strategic Imperative

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

33. A CEO’S Perspective on eS&OP • “We spent a lot of time gathering and validating data, which was time well-spent. But that challenge was nothing compared to the people side of things.” • “The most difficult part was driving . . . constructive conflict in the demand alignment meetings.” An Interview* with Phil Dolci, President and CEO Jarden Branded Consumables *In Foresight: The International Journal of Applied Forecasting, Winter 2012 (www.forecasters.org/foresight)

34. Continued “The measureable benefits are easy... • Service levels are up and inventory is down. • For example, the two largest businesses in my portfolio today each have service levels above 99.5% with inventory that is 20% less than 3 years ago.”

35. Continued • “I could argue, however, that the intangible benefits are just as valuable. We have much better teamwork because of the engagement and constructive conflicts that are natural components of S&OP. This approach has extended to almost every process and function within the business . . .” • “Moreover, I feel much more in touch with the business without micro-managing it.”

36. Aligning Human Energy Accomplishment Accomplishment

37. Thanks for Listening& Good Luck! RStahlSr@aol.com www.RAStahlCompany.com 508-226-0477