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Steelwedge Agility Webinar Series Featuring Tom Wallace, S&OP Author and Educator, and Nari Viswanathan, Steelwedge The converging forces of internal complexity and external market volatility are driving business leaders from across the enterprise to look for new, more agile solutions to inform business decisions. In fact, 90% of attendees at Steelwedge's first Agility Series webinar in February said change and uncertainty are impacting their ability to do their jobs. Tom Wallace has found fascinating examples of nimble businesses like Dow, Applied Materials, Procter & Gamble and Staples using S&OP as the engine for collaboration and decision making for applications far beyond its original scope in supply/demand balancing such as: • Enhancing business strategy • Earnings call support • New product introduction, and • Retail delivery Nari Viswanathan, VP of Product Marketing and Management at Steelwedge, a former Supply Chain analyst at Aberdeen Group, will add perspective on S&OP solutions to jump start the journey to end-to-end demand driven process.
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EXECUTIVE S&OP by Tom Wallace WWW.TFWALLACE.COM
Leveraging S&OP
A Webinar
by
Tom Wallace
sponsored by
Steelwedge Software
March, 2012
EXECUTIVE S&OP by Tom Wallace WWW.TFWALLACE.COM
News Flash!
S&OP CertificationWhat: Become certified in S&OP
How: Pass the Certification Exam
Who: - The S&OP Institute - Ohio State University
When: Exams can be taken beginning Sept 1
More info: sopinstitute.com (after 3/20)[email protected]
EXECUTIVE S&OP by Tom Wallace WWW.TFWALLACE.COM
The Four Fundamentals
Demand Supply
Volume
Mix
Sales & OperationsPlanningX
How Much?RatesThe Big PictureProduct FamiliesStrategy/Policy/RiskMonthly/18 months+Top Management
Which Ones?Timing/SequenceThe DetailsProducts, SKUs, OrdersTactics/ExecutionWkly/Daily, 2 days – 6 mos Middle Management
EXECUTIVE S&OP by Tom Wallace 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
?????
EXECUTIVE S&OP by Tom Wallace WWW.TFWALLACE.COM
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
EXECUTIVE S&OP by Tom Wallace WWW.TFWALLACE.COM
EXECUTIVE S&OP by Tom Wallace WWW.TFWALLACE.COM
Last Time We Discussed . . .
• BASF• Cisco Systems• V&M Star• Dow Chemical
EXECUTIVE S&OP by Tom Wallace WWW.TFWALLACE.COM
Executive S&OP in Retail Delivery
Staples, Inc.
Framingham, MA
Products: Office Equipment and Supplies
Corporate Annual Sales: $24.5 billion
EXECUTIVE S&OP by Tom Wallace WWW.TFWALLACE.COM
S&OP at Staples Delivery
Data Gathering
Aggregate Demand Process/Meeting
• Review recent performance to forecast
• Generate forecast for 12 future months
• ID “gaps” in the forecast and plans to mitigate(between Demand Planning and Merchant teams versus what’s been submitted to corporate)
EXECUTIVE S&OP by Tom Wallace WWW.TFWALLACE.COM
S&OP at Staples Delivery
Aggregate Supply Process/Meeting
• Generate supply plans based on new demand plan
(vendor purchase plans and logistics plans)
• Review/resolve supply constraints (forecast translated
from $$$ into case counts, cubic feet, labor hrs)
• Capability updates (process improvement, new business
initiatives, shifts in suppliers/customers, cost/benefit analyses)
EXECUTIVE S&OP by Tom Wallace WWW.TFWALLACE.COM
S&OP at Staples Delivery
STAPLES
• Data Gathering
• Demand Planning
• Supply Planning
• Core Team Meeting
• Exec Team Meeting– President, NA Delivery– Sr. VP Heads of 3 BU’s– Sr. VP Finance– Sr. VP Supply Chain
THE “STANDARD” MODEL• Data Gathering• Demand Planning• Supply Planning• Pre Meeting• Exec Meeting
EXECUTIVE S&OP by Tom Wallace WWW.TFWALLACE.COM
Benefits
Krist Lutz, Director of Sales & Operations Planning for Staples Delivery:
Hard benefits include the traditional ones . . . : - higher in-stock positions with lower inventories - increased revenue due to lost sales avoidance- decreased service expense- better working capital and cash flow
EXECUTIVE S&OP by Tom Wallace WWW.TFWALLACE.COM
Benefits, continued
Kris Lutz again:• Soft benefits are communication and teamwork.• Teams discuss items earlier and much better
than before.• This makes for a more nimble organization,
one where ideas and initiatives can be executed faster and with greater precision
EXECUTIVE S&OP by Tom Wallace WWW.TFWALLACE.COM
The Moral of the Story
There are far more similarities than differences between Staples’ use of Executive S&OP and a how a manufacturing company does it.
Implications: if you have units in your corporation that do not produce physical products, they may still be candidates for S&OP.
EXECUTIVE S&OP by Tom Wallace WWW.TFWALLACE.COM
Executive S&OP in Advanced New Product Launch
Applied Materials
Process Diagnostics and Control Business (PDC)
Rehovot, Israel
Products: Equipment for the manufacture of: Semiconductors
Flat Panel Displays
Photovoltaic Cells
Corporate Annual Sales: $9.5 billion
PDC Employment: ~900
EXECUTIVE S&OP by Tom Wallace WWW.TFWALLACE.COM
Applied Materials: Process Diagnostic and Controls Business (PDC)
• S&OP user for over 10 years• New products dominate the business: over
40% of sales in 2010 (some years over 60%)• New products at PDC require strong
alignment between customer penetration strategy and build and supply chain plans
• Thus, they created a separate S&OP process for new products
EXECUTIVE S&OP by Tom Wallace WWW.TFWALLACE.COM
The Stage-Gate Process (phase-gate)
The stage–gate model is a technique in which new product development (or other initiative) is divided into stages separated by gates.
At each gate, a manager or a steering committee decides on whether or not the project should go forward.
EXECUTIVE S&OP by Tom Wallace WWW.TFWALLACE.COM
The Stage-Gate Process at PDC
• Gate 3: project approval received
• Gate 3.5: product can enter S&OP
• Gate 4: product ready to ship as alpha and then beta test version
• Gate 5: product ready to move from new product status to the
ongoing (“sustaining”) product line
EXECUTIVE S&OP by Tom Wallace WWW.TFWALLACE.COM
SUSTAINING PRODUCTS
S&OP BUILD PLAN
NEWPRODUCTS
S&OP BUILD PLAN
COMBINED PDC S&OP BUILD PLAN
Products between
Gates 3.5 and 5
Products beyondGates 5
Gate 5Transition fromNew Product to
Sustaining Product
SUPPLY REVIEW MTGTEST FOR CAPACITY
EXECUTIVE S&OP by Tom Wallace WWW.TFWALLACE.COM
The Stage-Gate Process at PDC
• Gate 3: project approval received
• Gate 3.5: product can enter S&OP
• Gate 4: product ready to ship as alpha and then beta test version
• Gate 5: product ready to move from new product status to the
ongoing (“sustaining”) product line
EXECUTIVE S&OP by Tom Wallace WWW.TFWALLACE.COM
Benefits
As cited by Shelly Zafrir, Director of Sales & Operations Planning, Silicon Systems Group in Santa Clara (formerly head of S&OP at PDC)
NEW PRODUCT LAUNCH
In new product launch, perhaps the most important metric is lead times to customers.
It was more than one year before S&OP. It is now 3 - 5 months and less on occasion.
EXECUTIVE S&OP by Tom Wallace WWW.TFWALLACE.COM
Benefits, continued
As cited by Shelly Zafrir:
MANUFACTURING CYCLE TIME
Down 15 - 20% on ongoing products, more on new products, while volume increased four-fold since 2009
EXCESS & OBSOLETE INVENTORY
Less than half of 2009 level and expected to drop even more
EXECUTIVE S&OP by Tom Wallace WWW.TFWALLACE.COM
The Moral of the Story
Three points:
1. New Product Launch is filled with uncertainty and change
2. S&OP helps companies deal with uncertainty and change
3. The larger the role that New Products play in your company, then the larger the role that S&OP should have in New Product Launch.
A classic example: Applied Materials PDC
EXECUTIVE S&OP by Tom Wallace WWW.TFWALLACE.COM
Executive S&OP Support for Earnings Calls
The Procter & Gamble Company
Cincinnati, OH
Products: Consumer Packaged Goods
Corporate Annual Sales: $82.6 billion
EXECUTIVE S&OP by Tom Wallace WWW.TFWALLACE.COM
The Operating Environment
• 300 unique brands, sold worldwide• Plants in 40 countries• Operations in 80 countries• S&OP used throughout the company
EXECUTIVE S&OP by Tom Wallace WWW.TFWALLACE.COM
A Single S&OP Process
• Only one standard S&OP process for all businesses and “regions”
• Only one standard set of metrics• Each business evaluated once per year to:
– Insure compliance–Provide road map for improvement
• S&OP done on two axes:business unitregion
EXECUTIVE S&OP by Tom Wallace WWW.TFWALLACE.COM
27
Procter & GambleBusiness Unit and Region Integration
BU1 BU2 BU3 BU4
Reg1
Reg2
Reg3
X
Figure 12-1
x
EXECUTIVE S&OP by Tom Wallace WWW.TFWALLACE.COM
Alignment
Region 1’s forecast of what it expects to sell of Business Unit 1’s Products
=What Business Unit 1 expects Region 1
to sell of its products
This alignment is the foundation for:• Running the business internally with one set of
numbers• Using S&OP as an important foundation for
quarterly earnings calls to Wall Street
EXECUTIVE S&OP by Tom Wallace WWW.TFWALLACE.COM
P&G’s S&OP Assessment Tool
Six sections, ~ 20 items per section• Leadership• Operating Strategy• Initiative Planning• Demand Planning• Supply Planning• S&OP
EXECUTIVE S&OP by Tom Wallace WWW.TFWALLACE.COM
1. Self-assessment by the BU’s and Regionsusing the Assessment Tool
2. Self-assessment validated by qualified assessors from outside that business
3. Assessment interviews and document reviews by the “outsiders”:
1. With business leaders
2. Assessors may attend Exec meeting
4. Assessment summarya. Set final score
b. Strengths and improvement opportunities
c. Action Plan
The Annual Assessment Process
EXECUTIVE S&OP by Tom Wallace WWW.TFWALLACE.COM
The Moral of the Story
Companies should have a formal assessment process to:• maintain the integrity of its S&OP processes• improve those processes
Are your earnings calls (to corporate or the financial community) based on S&OP?
If not, why not?
EXECUTIVE S&OP by Tom Wallace WWW.TFWALLACE.COM
Summary – S&OP at P&G
• One of the very best S&OP processes in the world
• Made possible by the Assessment Process• A quote from Dick Clark, formerly Associate
Director, Global Network Supply Operations:S&OP plays a substantial role at P&G. It is
one of the – some might say the – primary planning processes used to run the business.
In Memory
Richard A ClarkAssociate Director,
Global Network Supply OperationsThe Procter & Gamble Company
1953 – 2011
EXECUTIVE S&OP by Tom Wallace WWW.TFWALLACE.COM
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