1. Hilton Garden Inn Waltham, Mass. March 23, 2011
TOPGRADING SOLUTIONS
MRI NETWORK
S&OP - Myths, Misunderstandings & Misinformation
----- Meeting Notes (3/23/11 16:28) -----
Jason Breault
Hilton Garden Inn
Waltham, Mass.
March 23, 2011
Bob Stahl

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 . . .
Customers
Natural Force = Centrifugal
Desired Force = Centripetal
Executive
S&OP
Gravitational Force
Tradeoffs = Slippery Slope
S&OP = Keystone of the Mfg Arch
Been Talking for a long time BUT not doing it
Owners
Employees
(Suppliers, Community, Country, Planet)

4. Muting Trade-Offs . . .
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:
In the short term, the customer is king
Proper 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 performance
Rosenbluth Book – The Customer is #2

5. Speech to an APICS Audience
. . . So what else is new?
March 9, 1982
Speech 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, 1983
Then it was Japan
Today it's China
Went on to speak of State-of-the-Art vintage 1982
S&OP not even thought of at that time
Parable 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 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
-- Some don’t differentiate between volume & mix
-- Boston S&OP Summit

8. Very different, separate, & distinct practices
The Four Fundamentals
Volume
Mix
ProActive Behavior
How Much?
Rates
The Big Picture
Families
Strategy/Policy/Risk
Monthly / Mos
Executive Resp.
Demand
Supply
Balance
Which Ones?
Timing/Sequence
The Details
Products/SKU’s/Orders
Tactics/Execution
Weekly/Daily 1-3 Mos
Middle Mgt. Resp.
----- Meeting Notes (3/2/11 16:43) -----
Should not blurr the distinction!
ReActive Behavior
Very different, separate, & distinct practices
but integrated!

9. Sales & Operations Planning
Executive S&OP
Volume
Demand Planning
Demand
Supply
Supply
Planning
Mix
Master Scheduling
Demand Pull

10. 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 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 Truth
Chuck Connelly yesterday when introducing “Mattress Mack” he asked – how many sales & marketing???

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

12. Soft Benefits “The Predicator”
Align Human Energy and the Power is Boundless
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
Communications = defined and disciplined
Vince 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 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
Half Truth

14. “Strategic Planning . . . forward in reverse”
Annual Business Plan
Doing
The
Right
Things
Strategy
Executive
S&OP
Strategic Planning - forward in reverse
HBR-Nov/Dec 1985
Robert Hayes
Executive S&OP
Tactics
Doing
The
Things
Right
Wicham Skinner = Manufacturing Strategy
George Gage - EG&G Staff Strategy
Master Schedule ~ “Operational S&OP”
Master Schedule
Execution

15. 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.

16. The Executive S&OP Process
Step #5
Executive
Meeting
Conflict Resolution,
Recommendations &
Agenda for Exec. Mtg.
Heavy
Lifting
Decisions &
Game Plan
Step #4
Pre-S&OP
Meeting
Capacity constraints
2nd-pass spreadsheets
Financial Involvement
Management Forecast
1st-pass spreadsheets
Step #3
Supply
Planning
New Product Involvement
Sales Actuals,
Statistical Forecasts &
Production Actuals
Step #2
Demand
Planning
Creates a Disciplined Rhythm
Step #1
Month End
Data
End 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
PTF
III
Building to
Customer
Demand I
Suicide
Quadrant II
Aggregate Only
Quadrant
Executive
S&OP
Full Granular
Full Horizon
Detail
Horizon

19. Mix Problems Scream for Attention Volume Problems Barely Whisper
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.

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 - 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

22. 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.

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
+ others
Reduce Waste
& Time
Enhance
Coordination X X X
Sales & Operations Planning, ERP, Kanban, VMI,
+ others
Lean Mfg., Just-In-Time,
Quick Changeover (SMED),
Flow + others 24

25. Complexity, Change and Coordination
Complexity and the Rate of Change
Need for Effective Coordination Processes
Executive S&OP is the Primary Coordination Process

26. Coordination is all about: Alignment of Human Energy
5% versus 50% Sustainable Improvement
Accomplishment
Accomplishment

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 size
Procter & Gamble ~ $ 80 Billion
Microsoft ~ $ 60 Billion
Dow Chemical ~ $ 55 Billion
Homac ~ $ Billion
Just Bats ~ $ Billion

29. Myth #8: “Our Forecasts Are Not Accurate Enough For S&OP”
Reality:
Executive S&OP Does Not
Require “Accurate” Forecasts
Sales Forecasting – A New Approach
Accuracy & Forecast not in same sentence
But by working on the process, it often helps to improve the forecasts 29

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

31. Forecasting . . . A Three-Legged Stool
Customer
View
Historical
Market
Reconciliation Process
(The “DAM” Meeting)
Consensus
Forecast
Stewart Levine – Getting to Resolution
Compare to Annual Business Plan
Applying “Puts & Takes” (Actions)
Company
Forecast

32. Myth #9: “S&OP Is Simple; All You Need Is A Few Spreadsheets”
Reality:
The logic of Executive S&OP is SIMPLE
Implementing 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 management
30% Process improvement
10% Technology
AMR merged with Gartner
Getting to Resolution – Stewarts Levine

34. 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!
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 Eagles
Kindred Spirit
Champion
Godfather

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 to
balance 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 Misinformation
Boston S&OP Summit = confusion.

39. “Ultimate Sophistication
Done Properly . . .
Implementation approach fits these times:
Low Cost
No capital investment; no software; just time
Low Risk
Parallel Pilot Approach
Quick Results
90-Days for Complete Pilot Demo
High Impact
Aligns Human Energy
Simpler
(Not Easier)
Better
(in 90 Days!!!)
“Ultimate Sophistication
Is Simplicity”
Oliver Wight
Simple does not = EASY!!
OWW – Ultimate Sophistication is Simplicity
Uncertain & Unpredictable Times

40. The Books . . .
- Are you already doing Sales & Operations Planning ??

41. In the Making . . .
Planned Publication:
3rd Quarter 2011

42. Making Change
The 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 -1982
A Celebration of Life
An essay

43. Bob Stahl Thanks for Listening 508-226-0477 RStahlSr@aol.com
Thanks for Listening
Hope you had a great day yesterday, and a better day today.