A

PICS / iBF

Best of the Best S&OP Conference

Resolving Conflict &

through the Executive S&OP process Gaylord Texan Resort & Convention Center December 11-12, 2008 Roger Lindgren & Bob Stahl Roger Lindgren, CEO V&M Star Bob Stahl, President R.A. Stahl Company www.tfwallace.com

Objective

• • •

Identify some of the types of conflict that can exist in an business organization Explain and discuss how Executive S&OP can provide leadership with the tools and structure to raise and resolve that conflict in a defined and disciplined fashion Provide real life examples Roger Lindgren & Bob Stahl www.tfwallace.com

What is Sales&Operations Planning . . .

Executive S&OP

Volume Demand Planning Demand Supply Supply Planning Mix Master Scheduling Demand Pull Roger Lindgren & Bob Stahl www.tfwallace.com

What is Executive S&OP?

Sales & Operations Planning is a Executive Decision-Making Process to Balance Demand & Supply (at the volume level) is The forum for setting Relevant Strategy & Policy (aligning human energy) and Integrates Financial & Operating Plans (update/validate the Annual Business Plan) Top Management’s Handle on the Business Roger Lindgren & Bob Stahl www.tfwallace.com

An Essential Point . . .

Executive S&OP

is essential for the other pieces of Sales & Operations Planning to work at their best.

Whether they be traditional or Lean techniques Roger Lindgren & Bob Stahl www.tfwallace.com

Types of Conflict . . .

• • • • • • •

Implementation conflict(s) Constituency conflict(s) Business Goal conflict(s) Organizational outlook conflict(s) Strategic conflict(s) Forecasting conflict(s) and many more . . . Roger Lindgren & Bob Stahl www.tfwallace.com

Implementation Conflicts . . .

Parallel Paths

A B C D

Run the Business today Improving Short Term Other Projects Executive S&OP Supply-Chain Excellence

Roger Lindgren & Bob Stahl www.tfwallace.com

Constituency Conflicts . . .

Customers Executive S&OP Employees (Suppliers, Community, Country, Planet) Roger Lindgren & Bob Stahl Owners www.tfwallace.com

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: 1. In the short term, the customer is king 2. Proper prior planning is necessary to serve all constituencies well (Doesn’t happen by accident) 3. Executive S&OP is the tool to set conditions for success with regard to Supply Chain performance Roger Lindgren & Bob Stahl www.tfwallace.com

Business Goal conflicts . . . Being Best in Class

  

High Quality Low Cost (Low Inventory) Customer Service



Quick Response



Reliability



Wide Variety Getting to AND . . . Diminishing OR Roger Lindgren & Bob Stahl www.tfwallace.com

Organizational Conflicts . . .

Sales/Marketing (Units or $ by Family) Finance (Dollars) Executive S&OP upon, & communicate one company game plan Operations (Units/hours/ Material) Roger Lindgren & Bob Stahl Product Dev.

(New Product Issues) www.tfwallace.com

President/General Manager Sales & Marketing Operations Product Design Finance Logistics & Distribution Managing the White Space Roger Lindgren & Bob Stahl www.tfwallace.com

Top Mgt.

and

Executive S&OP

Top Management = The Leader of the Business (General Mgr, Pres., COO)

Done Properly . . . It takes Top Management between

+ VP Operations . . . others Need to be Hands-On with the ES&OP Process:

Stewardship & Leadership

(Manager/Trustee & Guide/Command) Roger Lindgren & Bob Stahl www.tfwallace.com

Strategic Conflicts . . .

Strategy Executive S&OP Tactics Doing The Right Things Doing The Things Right Execution Roger Lindgren & Bob Stahl www.tfwallace.com

For Example . . .

Capacity Planning = Strategy Question ??

Lead Capacity Invest in capacity before materialize (That is, add to

planned

customer orders “demonstrated capacity” proactively with specific actions based on forecast.) Tradeoff: market share for profit Lag Capacity Invest in capacity after customer orders materialize (That is, plan on adding to “demonstrated capacity” only after receipt of customer orders) (default strategy) Tradeoff: Profit for market share Executive S&OP is where the pros and cons of each strategy are discussed and decided upon.

Roger Lindgren & Bob Stahl www.tfwallace.com

Forecasting conflicts

Inputs -- Process -- Output Current Customers New Customers Competition Economic Outlook New Products Pricing Strategy Promotions Bid Activity Process Management Directives Intra-Company Demand History (Data) Other Forecasts that are: 1.

2.

3.

4.

Reasoned Reasonable Reviewed Frequently Represent Total Demand Roger Lindgren & Bob Stahl www.tfwallace.com

Gaining Demand Consensus Energy Market - July Fcst Review Distribution Transformer (I0 Sub-Family)

4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 01/06 04/06 07/06 10/06 01/07 04/07 07/07 10/07 01/08

Period

04/08 07/08 10/08 01/09 04/09 07/09 10/09 Distribution Transformer - History Distribution Transformer - Plan08 Distribution Transformer - Stat Fcst Linear (Distribution Transformer - History)

Roger Lindgren & Bob Stahl www.tfwallace.com

Heavy Lifting Step #5 Executive Meeting

Decisions & Game Plan

Step #4 Pre-S&OP Meeting

Conflict Resolution, Recommendations & Agenda for Exec. Mtg.

Step #3 Production Planning

Capacity constraints 2nd-pass spreadsheets

Step #2 Demand Planning

Management Forecast 1st-pass spreadsheets

Step #1 Run Month End Reports

Sales Actuals, Statistical Forecasts & Production Actuals End of Month

Roger Lindgren & Bob Stahl www.tfwallace.com

Pre-Meeting

(Continued) Consensus requires that everyone: 1. Has had their say, & 2. Feels they had opportunity to influence 3. Everyone can live with the outcome

‘

informed debate

’ ‘

skillful discussion

’ ‘

positive provocation

’

Conflict & Confrontation Consensus & Harmony Getting the Moose on the Table Roger Lindgren & Bob Stahl www.tfwallace.com

Done Properly . . .

Simpler

(Not Easier)

Better

Roger Lindgren & Bob Stahl www.tfwallace.com

Resolving Conflict aligns human energy . . .

Accomplishment Roger Lindgren & Bob Stahl Accomplishment www.tfwallace.com

The Real Issue . . .

Understanding Executive S&OP is simple.

The hard part is . . .

Behavior Change

changing the way everyone does their jobs.

Keys:

- Full cross functional buy-in - Counter experiential/intuitive - Comfort vs Change - Path of low risk

Roger Lindgren & Bob Stahl www.tfwallace.com

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 “Hold the high ground”

Involve top management at the very outset of the implementation, and throughout.

= High probability for success Roger Lindgren & Bob Stahl www.tfwallace.com

Thanks for Listening

Roger Lindgren & Bob Stahl www.tfwallace.com