2 With apologies to Charles Dickens . . . Sources: Congressional Budget Office; Department of Labor, Bureau of Labor Statistics; Department of Commerce, Bureau of Economic Analysis.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 before it gets better. (What’s 9%??)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-- 9 %. The approximate percentage of the American workforce that's unemployed and the percentage that's employed in manufacturing.-- S&OP is one of the most powerful tools available to management today.-- Boston S&OP Summit = confusion.
3 Gravitational Force Needed . . . CustomersNatural Force = CentrifugalDesired Force = CentripetalExecutiveS&OPGravitational ForceTradeoffs = Slippery SlopeS&OP = Keystone of the Mfg ArchBeen Talking for a long time BUT not doing itOwnersEmployees(Suppliers, Community, Country, Planet)
4 Muting Trade-Offs . . .When a company is trading off one constituency against another, it’s on a slippery slopeBeing able to serve all constituencies has a lot to do with timing:In the short term, the customer is kingProper prior planning is necessary to serve all constituencies well (Doesn't’t happen by accident)Executive S&OP is the tool to set conditions for success with regard to Supply Chain performanceRosenbluth Book – The Customer is #2
5 Speech to an APICS Audience . . . So what else is new?March 9, 1982Speech to an APICS Audience-- How many were <20 years old in 1982-- Very nostalgic for RAS & others-- Meaningful even if don’t know who’s speaking
6 . . . So what else is new? March 9, 1982 Houston, Texas Oliver Wight OWW died in July 14, 1983Then it was JapanToday it's ChinaWent on to speak of State-of-the-Art vintage 1982S&OP not even thought of at that timeParable of Boiled Frog----- Meeting Notes (3/2/11 16:43) -----Parable of the Boiled Frog!!Oliver Wight
7 S&OP Morphing Terminology (causing confusion) At first -- S&OP meant an executive led process for balancing demand & supply at the volume levelThen -- S&OP meant any process that dealt with balancing demand & supply at both the volume & mix levels, blurring the distinctionToday -- 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-- Some don’t differentiate between volume & mix-- Boston S&OP Summit
8 Very different, separate, & distinct practices The Four FundamentalsVolumeMixProActive BehaviorHow Much?RatesThe Big PictureFamiliesStrategy/Policy/RiskMonthly / MosExecutive Resp.DemandSupplyBalanceWhich Ones?Timing/SequenceThe DetailsProducts/SKU’s/OrdersTactics/ExecutionWeekly/Daily 1-3 MosMiddle Mgt. Resp.----- Meeting Notes (3/2/11 16:43) -----Should not blurr the distinction!ReActive BehaviorVery different, separate, & distinct practicesbut integrated!
10 Myth #1: “S&OP’s a supply chain thing” Reality: Executive S&OP is a Supply Chain thing.and a Sales & Marketing thingand a Finance thingand a Manufacturing thingand a Procurement thingand an Outsourcing thingand a New Product thingand a General Management thingSept 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.Half TruthChuck Connelly yesterday when introducing “Mattress Mack” he asked – how many sales & marketing???
11 Process Driven versus Personality Driven President/General ManagerExecutive S&OPSales &MarketingOperationsProductDesignFinanceLogistics&WarehouseBlurring the BoundariesManaging the White Space
12 Soft Benefits “The Predicator” Align Human Energy and the Power is BoundlessEnhanced TeamworkImproved Communications - Defined & DisciplinedBetter Decisions with Less Effort and TimeBetter $$$ Plans with Less Effort and TimeTighter Linkage with StrategyGreater AccountabilityGreater ControlUpdate to the Annual Business PlanWindow into the FutureMaster of own destinyTop Management’s Handle on the BusinessCommunications = defined and disciplinedVince Lombardi (Tom Landry / Bum Phillips) - work on the process; not the results!
13 Myth #2: “S&OP’s all about balancing demand and supply” Reality:S&OP does help to balance demand and supplyand integrates financial and operational planningand links strategic planning to ongoing operationsand shortens the annual planning processand enhances risk managementand can impact strategic plansHalf Truth
15 Myth #3: “S&OP takes too much of Top Management’s time” Reality:Monthly Time Requirementfor the Leader of the Business ~ 1.5hours** Executive staff time could be more than this.
16 The Executive S&OP Process Step #5ExecutiveMeetingConflict Resolution,Recommendations &Agenda for Exec. Mtg.HeavyLiftingDecisions &Game PlanStep #4Pre-S&OPMeetingCapacity constraints2nd-pass spreadsheetsFinancial InvolvementManagement Forecast1st-pass spreadsheetsStep #3SupplyPlanningNew Product InvolvementSales Actuals,Statistical Forecasts &Production ActualsStep #2DemandPlanningCreates a Disciplined RhythmStep #1Month EndDataEnd of Month
17 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.“
18 Planning Perspective Full Granular Detail III Building to Customer PTFIIIBuilding toCustomerDemandISuicideQuadrantIIAggregate OnlyQuadrantExecutiveS&OPFull GranularFull HorizonDetailHorizon
19 Mix Problems Scream for Attention Volume Problems Barely Whisper Problems PerspectiveMix Problems Scream for AttentionVolume Problems Barely WhisperCreates the illusion that all problems are MIX problems -- therefore need a forecast for full granular detail for full horizon.
20 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!
21 Soft Benefits Enhanced Teamwork Improved Communications - InstitutionalizedBetter Decisions with Less Effort and TimeBetter $$$ Plans with Less Effort and TimeTighter Linkage with StrategyGreater AccountabilityGreater ControlWindow into the Future
22 Myth #4: ContinuedQ. What if you’ve implemented Executive S&OP but teamwork hasn’t improved?A. You flat didn’t do it rightGaining 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.
23 Reality: Executive S&OP is all about change. It’s a coordination tool 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
24 Tools & Techniques X X X Increase Reliability Reduce Waste & Time Six Sigma, Total Quality, Poka-Yoke, ISO+ othersReduce Waste& TimeEnhanceCoordinationXXXSales & Operations Planning, ERP, Kanban, VMI,+ othersLean Mfg., Just-In-Time,Quick Changeover (SMED),Flow + others24
25 Complexity, Change and Coordination Complexity and the Rate of ChangeNeed for Effective Coordination ProcessesExecutive S&OP is the Primary Coordination Process
26 Coordination is all about: Alignment of Human Energy 5% versus 50% Sustainable ImprovementAccomplishmentAccomplishment
27 Myth # 6: “We Can’t Use S&OP Because We’re Totally Outsourced” Reality:Executive S&OP Doesn’t Care Who Owns The Factory.. . . nor do Customers care who owns the resources of production! “Outsourcing” is a vital contributor!Heavily Outsourced Companies May Need Executive S&OP More Than Others. (i.e., Just Bats)-- Just Bats = Scott Hendrick-- War Story about – “I don’t by your problems; I buy your product”
28 Myth #7: “Our Company Is Too Big (Too Small) for S&OP” Reality:Executive S&OP operates . . .independently of company sizeProcter & Gamble ~ $ 80 BillionMicrosoft ~ $ 60 BillionDow Chemical ~ $ 55 BillionHomac ~ $ BillionJust Bats ~ $ Billion
29 Myth #8: “Our Forecasts Are Not Accurate Enough For S&OP” Reality:Executive S&OP Does NotRequire “Accurate” ForecastsSales Forecasting – A New ApproachAccuracy & Forecast not in same sentenceBut by working on the process, it often helps to improve the forecasts29
31 Forecasting . . . A Three-Legged Stool CustomerViewHistoricalMarketReconciliation Process(The “DAM” Meeting)ConsensusForecastStewart Levine – Getting to ResolutionCompare to Annual Business PlanApplying “Puts & Takes” (Actions)CompanyForecast
32 Myth #9: “S&OP Is Simple; All You Need Is A Few Spreadsheets” Reality:The logic of Executive S&OP is SIMPLEImplementing Executive S&OP Is All About Change Management. . . And that is not simple!OWW = The Ultimate Sophistication is Simplicity
33 Research finding . . . Lora Ceceri, Altimeter -- Boston, September 2010 The effective use of S&OP is:60% Change management30% Process improvement10% TechnologyAMR merged with GartnerGetting to Resolution – Stewarts Levine
34 Myth #10: “We Can’t Do S&OP. THEY Will Never Participate” Reality:Never Say NeverPeople Can and Do Change –But It doesn’t happen by accident!Self Fulfilling Prophecy
35 Myth #10: Continued Who Are THEY? Top Management? Sales/Marketing Manufacturing?Finance?New Product Development?Outsourcing?All of the above?You are all EaglesKindred SpiritChampionGodfather
36 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!It’s not doing what you do better -- it’s doing something different to be better.Like American Express -- Don’t leave home without it.
37 Executive S&OP is . . . APICS Dictionary, 13th Edition, October 2010 The executive portion of the overall sales and operations planning set of processes.It is a decision-making activity involving the leader of the business (president, general manager, COO, managing director), his or her staff, and a number of middle managers and specialists.Its mission is tobalance demand and supply at the aggregate level,align operational planning with financial planning,link strategic planning with day-to-day sales and operational activities.It is a multi-step process involving demand planning, supply planning, and middle and top management meetings for decision-making and authorization.
38 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 MisinformationBoston S&OP Summit = confusion.
39 “Ultimate Sophistication Done Properly . . .Implementation approach fits these times:Low CostNo capital investment; no software; just timeLow RiskParallel Pilot ApproachQuick Results90-Days for Complete Pilot DemoHigh ImpactAligns Human EnergySimpler(Not Easier)Better(in 90 Days!!!)“Ultimate SophisticationIs Simplicity”Oliver WightSimple does not = EASY!!OWW – Ultimate Sophistication is SimplicityUncertain & Unpredictable Times
40 The Books . . .- Are you already doing Sales & Operations Planning ??
41 In the Making . . .Planned Publication:3rd Quarter 2011
42 Making ChangeThe only time that the “logical future” has a chance is if we deny its possibility.“In human affairs, the willed future always prevails over the logical future.”“Change happens one step at a time, by thinking globally, but acting locally.”The logical future will only happen if we ignore its possibility!Rene Dubos -1982A Celebration of LifeAn essay
43 Bob Stahl Thanks for Listening 508-226-0477 RStahlSr@aol.com Thanks for ListeningHope you had a great day yesterday, and a better day today.