Myths, Misunderstandings and Misinformation about S&OP Bob Stahl

508-226-0477 www.RAStahlCompany.com

www.tfwallace.com

With apologies to Charles Dickens . . .

Worst of Times . . .

These are perhaps the worst economic conditions in a generation or two . . . and it may get worse.

Best of Times . . .

For those who choose to use them, we have terrific tools in our hands today to deal with the massive uncertainty!

Myths, Misunderstandings and Misinformation

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S&OP Morphing Terminology

(causing confusion)

• • •

At first -- S&OP meant an executive led process for balancing demand & supply at the volume level Then -- S&OP meant any process that dealt with balancing demand & supply at both the volume & mix levels, blurring the distinction Today -- S&OP is no longer exclusively a term that describes any specific process, but rather a set of words that mean anything you want it to mean

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The Four Fundamentals

Demand Very different, separate, & distinct practices but integrated!

Volume Balance Mix •How Much?

•Rates •The Big Picture •Families •Strategy/Policy/Risk •Monthly / 18 - 36 Mos •Executive Resp.

Supply •Which Ones?

•Timing/Sequence •The Details •Products/SKU’s/Orders •Tactics/Execution •Weekly/Daily 1-3 Mos •Middle Mgt. Resp.

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Sales & Operations Planning Executive S&OP

Volume Demand Planning Demand Supply Supply Planning Mix Master Scheduling Demand Pull

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Myth #1: “S&OP’s a supply chain thing” Reality : Executive S&OP

is

a Supply Chain thing. and a Sales & Marketing thing and a Finance thing and a Manufacturing thing and a Procurement thing and an Outsourcing thing and a New Product thing and a General Management thing

Sept 2007 -- HBR --

“Are You the Weakest Link in Your Company’s Supply Chain?” It is a company-wide, collaborative decision making process, reaching up to the top levels in the business.

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Process Driven versus Personality Driven President/General Manager Executive S&OP Sales & Marketing Operations Product Design Finance Logistics & Warehouse Managing the White Space

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• • • • • • • • • •

Soft Benefits

Enhanced Teamwork Improved Communications - Defined & Disciplined Better Decisions with Less Effort and Time Better $$$ Plans with Less Effort and Time Tighter Linkage with Strategy Greater Accountability Greater Control Update to the Annual Business Plan Window into the Future Master of own destiny Top Management’s Handle on the Business

8

Myth #2: “S&OP’s all about balancing demand and supply” Reality : S&OP does help to balance demand and supply and integrates financial and operational planning and links strategic planning to ongoing operations and shortens the annual planning process and enhances risk management and can impact strategic plans

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“Strategic Planning . . .

forward in reverse”

Strategy Doing The Right Things Tactics Master Schedule Execution Doing The Things Right

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Myth #3: “S&OP takes too much of Top Management’s time” Reality

:

Monthly Time Requirement for the Leader of the Business ~ 1.5

hours * * Executive staff time could be more than this.

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The Executive S&OP Process

Heavy Lifting 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 Month End Data

End of Month Sales Actuals, Statistical Forecasts & Production Actuals

Creates a Disciplined Rhythm

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Myth #3A: “S&OP is too much detail for Top Management to be involved” Reality

:

That’s a misunderstanding of what Executive S&OP should be. If you’re trying to set policy & strategy while living in the “

suicide quadrant

,” you’ll not succeed.”

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Planning Perspective

III Building to Customer Demand PTF I Suicide Quadrant II Aggregate Only Quadrant Full Granular Detail Executive S&OP Horizon

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Problems Perspective Mix Problems Scream for Attention Volume Problems Barely Whisper

Creates the illusion that

all

problems are MIX problems -- therefore need a forecast for

full granular detail

for full horizon.

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Myth #4: “We’ll Never Get S&OP to Work; We Don’t Have Enough Teamwork” Reality: Teamwork is not a Prerequisite It’s a Result

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Soft Benefits

•

Enhanced Teamwork

• Improved Communications - Institutionalized • Better Decisions with Less Effort and Time • Better $$$ Plans with Less Effort and Time • Tighter Linkage with Strategy • Greater Accountability • Greater Control • Window into the Future 17

Myth #4: Continued

Q. What if you’ve implemented Executive S&OP but teamwork hasn’t improved?

A. You flat didn’t do it right

Gaining teamwork must be one of the objectives of implementing Executive S&OP from the get-go . Harbinger = Teamwork starts in and within the Design Team.

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Myth #5: “S&OP Is Too Rigid; Our Business Changes Too Rapidly For S&OP” Reality: Executive S&OP is all about change.

It’s a coordination tool

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Tools & Techniques

Six Sigma, Total Quality, Poka-Yoke, ISO + others

X X

Lean Mfg., Just-In-Time, Quick Changeover (SMED),

X

Flow + others Sales & Operations Planning, ERP, Kanban, VMI, + others

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Complexity, Change and Coordination

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Coordination is all about:

Alignment of

Human Energy

Accomplishment Accomplishment

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Myth # 6: “We Can’t Use S&OP Because We’re Totally Outsourced” Reality: Executive S&OP Doesn’t Care Who Owns The Factory.

Heavily Outsourced Companies May Need Executive S&OP More Than Others.

. . . nor do (i.e., Just Bats)

Customers

care who owns the resources of production! “Outsourcing” is a vital contributor!

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Myth #7: “Our Company Is Too Big (Too Small) for S&OP” Reality: Executive S&OP operates independently of company size Procter & Gamble Microsoft Dow Chemical Homac Just Bats ~ $80 Billion ~ $60 “ ~ $55 “ ~ $40 Million ~ $30 Million

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Myth #8: “Our Forecasts Are Not Accurate Enough For S&OP” Reality: Executive S&OP Does Not Require “Accurate” Forecasts But by working on the

process,

helps to improve the forecasts it often

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Forecasting

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

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Forecasting . . .

A Three-Legged Stool Market View Customer View Reconciliation Process

(The “DAM” Meeting)

Consensus Forecast Historical Compare to Annual Business Plan Applying “Puts & Takes” Company Forecast View

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Myth #9: “S&OP Is Simple; All You Need Is A Few Spreadsheets” Reality: Implementing Executive S&OP Is All About Change Management

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Research finding . . .

Lora Ceceri, Altimeter -- Boston, September 2010

The effective use of S&OP is:

•

60% Change management

•

30% Process improvement

•

10% Technology

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Myth #10: “We Can’t Do S&OP. THEY Will Never Participate” Reality: Never Say Never

People Can and Do Change But . . . It doesn’t happen by accident!

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Myth #10: Continued Who Are

THEY?

• • • • •

Top Management?

Sales/Marketing Manufacturing?

Finance?

New Product Development?

• •

Outsourcing? All of the above?

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Myth #10: Continued

• • • •

Why not? Are they bad people?

They don’t understand it.

They don’t understand it, because they haven’t been taught.

It’s

“counter-experiential.” That’s why education and “buy-in” from the get-go is important!

It’s all about changing mind-sets!

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Gravitational Force Needed . . .

Customers Executive S&OP Employees (Suppliers, Community, Country, Planet) Owners

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Executive S&OP is . . .

APICS Dictionary, 13th Edition, October 2010

•

The executive portion set of processes. of the overall sales and operations planning

• • • – –

Pick up your

his or her staff, and a number of middle managers and specialists.

 iio

balance demand and supply at the aggregate level, align operational planning with financial planning ,

–

link strategic planning

o  icio

It is a multi-step process

ry  

making and authorization.



with day-to-day sales and operational involving demand planning, supply

APICS ook Sor

ci 34

i 

With apologies to Charles Dickens . . .

•

Worst of Times . . .

These are perhaps the worst economic conditions in a generation or two . . . and it may get worse.

•

Best of Times . . .

For those who choose to use them, we have terrific tools in our hands today to deal with the uncertainty!

Myths, Misunderstandings and Misinformation

35

Done Properly . . .

Simpler

•Low Cost •Low Risk •High Impact •Quick Results (Not Easier)

Better

(in 90 Days!!!)

36

Book Signing . . .

Book Store @ 5:30 today

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Thanks for Listening Bob Stahl

508-226-0477 [email protected]

www.RAStahlCompany.com

www.tfwallace.com

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