Tom Wallace & Bob Stahl www.tfwallace.com
Executive S&OPA Presentation to:
APICS Southeast Floridaby
Tom Wallace
3-20-08
Tom Wallace & Bob Stahl www.tfwallace.com
Agenda• Executive S&OP: Role, Structure
and Benefits
• Implementation
• The Future of S&OP
Tom Wallace & Bob Stahl www.tfwallace.com
The 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
Tom Wallace & Bob Stahl www.tfwallace.com
Sales & Operations Planning
Demand Supply
Volume
Mix
Executive S&OP
Master SchedulingSupplier and Plant Scheduling
Distribution Scheduling
Demand Planning/Forecasting Supply (Capacity) Planning
Tom Wallace & Bob Stahl www.tfwallace.com
More Terminology Changes?Sales & Operations Planning maybecome 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
Tom Wallace & Bob Stahl www.tfwallace.com
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
Tom Wallace & Bob Stahl www.tfwallace.com
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
Tom Wallace & Bob Stahl www.tfwallace.com
Step #5ExecutiveMeeting
Decisions &Game Plan
Step #4Pre-
Meeting 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
Lifting
The Executive S&OP Process
Tom Wallace & Bob Stahl www.tfwallace.com
Three Examples ofThree Examples ofBest PracticesBest Practices
Three (of 13) Companies Studied:
• High Seasonality
• High Cyclicality
• Highly Complex New Product Launch
Tom Wallace & Bob Stahl www.tfwallace.com
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.
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
Tom Wallace & Bob Stahl www.tfwallace.com
The 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
Tom Wallace & Bob Stahl www.tfwallace.com
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
Tom Wallace & Bob Stahl www.tfwallace.com
Cast-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
Tom Wallace & Bob Stahl www.tfwallace.com
New Product Launch . . .
. . . in the Pharmaceutical Industry• Multiple stages of testing• Multiple approvals by FDA• Multiple years• Multiple 100s of millions of dollars
Tom Wallace & Bob Stahl www.tfwallace.com
Eli Lilly and Company
New Product Launch Performance:IndustryAverage Lilly
2001-04 1.8
Years Required(avg per product) >14
9
<11
Tom Wallace & Bob Stahl www.tfwallace.com
Eli 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 BohlSupply Chain
Coordinator
Tom Wallace & Bob Stahl www.tfwallace.com
These 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
Tom Wallace & Bob Stahl www.tfwallace.com
Hard 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
Tom Wallace & Bob Stahl www.tfwallace.com
Soft 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
Tom Wallace & Bob Stahl www.tfwallace.com
Agenda• Sales & Operations Planning:
Role, Structure and Benefits
• Implementation
• The Future of Executive S&OP
Tom Wallace & Bob Stahl www.tfwallace.com
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.”
Tom Wallace & Bob Stahl www.tfwallace.com
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
Tom Wallace & Bob Stahl www.tfwallace.com
Implementing Executive S&OP Is Different
• Highly focused on Top Management
• Relatively few people
• Low cost/high impact
Tom Wallace & Bob Stahl www.tfwallace.com
Implementation 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
Tom Wallace & Bob Stahl www.tfwallace.com
The Implementation Path
1 2 3 4 5 6 7 8 9Months
Busi
ness
Im
prov
emen
t
Phase IPhase ILive Pilot
Phase IIPhase IIExpansion
Live PilotGo/No-Go #2
Phase IIIPhase III$$$
Integration
ExecutiveBriefing
Go/No-Go #1
KickoffSession
Low Risk Low Cost
Month #1•Assignment of Responsibilities
•Kickoff Education & Planning
•Development of Project Schedule
•Families & Sub-Families (Pilot Family)
•Data Definitions, Sources & Displays
Month #3•Pilot Preparation & Execution
Go/No-Go Decision #2
Month #2•Demand Planning Processes & Data Feeds
•Supply Planning Processes & Data FeedsExecutive Briefing& Go/No-Go Decision #1
Phase IPhase IPreparation
Phase IIPhase IIExpansion
Phase IIIPhase III$$$
IntegrationLow RiskLow Cost
Months 4 – 6 • Add All Product Families• Full Supply Planning• Limited Financials
Months 7-9• Full Financial Integration•Institutionalize the Process
Tom Wallace & Bob Stahl www.tfwallace.com
Agenda• Sales & Operations Planning:
Role, Structure and Benefits
• Implementation
• The Future of Executive S&OP
Tom Wallace & Bob Stahl www.tfwallace.com
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
Tom Wallace & Bob Stahl www.tfwallace.com
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
Tom Wallace & Bob Stahl www.tfwallace.com
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
Tom Wallace & Bob Stahl www.tfwallace.com
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)
Tom Wallace & Bob Stahl www.tfwallace.com
Thanks for Listening
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