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April 15, 2009 95 Gathering Place Wallingford, CT

A PICS New Haven Chapter Top Management Night. Sales & Operations Planning: Top Management’s Handle on the Business. April 15, 2009 95 Gathering Place Wallingford, CT. Bob Stahl www.tfwallace.com. MIT CTL Supply Chain Strategy IOMA/ISM Webinar. Unlocking the Planning Power of

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April 15, 2009 95 Gathering Place Wallingford, CT

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  1. APICS New Haven Chapter Top Management Night Sales & Operations Planning: Top Management’s Handle on the Business April 15, 2009 95 Gathering Place Wallingford, CT Bob Stahl www.tfwallace.com

  2. MIT CTL Supply Chain Strategy IOMA/ISM Webinar Unlocking the Planning Power of Sales & Operations Planning in a Downturn May 7, 2009 Bob Stahl www.tfwallace.com

  3. With apologies to Charles 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!

  4. Volume Supply Demand Four Fundamentals . . . • 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. Mix

  5. Master Scheduling Demand Pull Not your father’s Oldsmobile . . . Executive S&OP Volume DemandPlanning Supply Planning Demand Supply Mix

  6. What is Executive S&OP? Decision-Making Process toBalance Demand & Supply (at the volume level) toEstablish Relevant Strategy, Policy, and assess & accept Risk and toIntegrate Financial & Operating Plans Top Management’s Handle on the Business

  7. Heavy Lifting The Executive S&OP Process Step #5 Executive Meeting 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 Step #1 Data Gathering Sales Actuals, Statistical Forecasts & Supply Actuals End of Month

  8. Detailed Forecasting & Master Scheduling Super MS 24 Months Time Exec. S&OP / Rough Cut Plant Scheduling/Pull PTF MS Mix Sales Volume Marketing A little history . . . Most Detail Aggregate Only Exac Config. . .Precise Mat’l. . .# People. . .Capital Equip . . .Factory Space • Lost in the woods- Detail • Engage Top Management? • Added Little Valueoutside the Planning Time Fence

  9. Executive S&OP better than 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

  10. Examples are from . . . ‘The Books’

  11. Market-facing Families . . . Proper definition of families must promote best forecasting. Product Fire 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!

  12. Marketing: 1-18 Mos Executive S&OP Sales: 1-3 Mos Master Scheduling Demand Pull Two types of forecasting . . . Volume Market Centric Shipments POS Mfg. Company Distribution Center Customers Markets Customer Centric Mix

  13. Dealing with MIX . . . • Volume ratio of a family to a critical resource • Mix ratio for run rate (average, or weighted average) • Etc.

  14. Assumption Sensitivity Simplifying Data Assumptions . . .

  15. An Example . . .

  16. Tri-Lingual . . . • Marketing Units • Operations Units/Hours • Financial Currency

  17. Sales & Marketing and 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 aboutinaccurateforecasts?

  18. Exec. S&OP II Aggregate Only Quadrant Getting out of the Suicide Quadrant . . . PTF III Building to Customer Demand I Suicide Quadrant Detail Horizon

  19. Sales & Marketing’s Job 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!

  20. 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 MeasurementsBefore it’s too late!

  21. An Ugly Moose . . .

  22. Putting the Moose on the table . . . Two Choices: • See an ‘ugly picture’ and deal with it . . . • Hide an ‘ugly picture’ and do nothing about it until it’s too late . . .

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

  24. Top Mgt. and Executive 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)

  25. Serving Constituencies . . . Customers Desired Force = Centripetal Natural Force = Centrifugal Executive S&OP Employees Suppliers, Community, Country, Planet Owners

  26. 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

  27. Engaging Top Management . . . In Change, there is no Comfort (In Comfort, there is no Change) Those who succeed withExecutive S&OPare 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! Risk

  28. Three Levels of Commitment . . . • 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 Risk

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

  30. We are getting Sophisticated . . . The Ultimate Sophistication is Simplicity!

  31. Done Properly . . . Simpler (Not Easier) Better (in 90 Days!!!)

  32. Good Luck & Thanks for Listening 508-226-0477 RStahlSr@aol.com If you’d like a copy of this presentation: Send me an e-mail.

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