Presentation on theme: "Myths, Misunderstandings and Misinformation about S&OP"— Presentation transcript:
1 Myths, Misunderstandings and Misinformation about S&OP A PresentationbyTom Wallace forIBFPhoenix – February 22, 2010
2 X The Four Fundamentals Volume Demand Supply Mix How Much? Rates Sales &OperationsPlanningThe Big PictureVolumeProduct FamiliesStrategy/Policy/RiskMonthly/18 months+Top ManagementDemandSupplyWhich Ones?Timing/SequenceThe DetailsMixProducts, SKUs, OrdersTactics/ExecutionWkly/Daily, 2 days – 6 mosMiddle Management
4 Myth #1: “S&OP’s a supply chain thing” Reality: Executive S&OP is a supply chain thingand a marketing thingand a sales thingand a finance thingand a manufacturing thingand a new product development thingand a general management thing
5 Soft Benefits Enhanced Teamwork Improved Communications - InstitutionalizedBetter Decisions with Less Effort and TimeBetter $$$ Plans with Less Effort and TimeTighter Linkage with StrategyGreater AccountabilityGreater ControlWindow into the Future
6 Myth #2: “S&OP’s all about balancing demand and supply” Reality: Exec S&OP balances demand & supply and integrates financial and operational planning and links strategy to ongoing operations and impacts marketing strategy and enhances risk management and streamlines annual planning and on and on . . .
7 Strategic or Tactical?StrategyExecutiveS&OPTactics
8 Myth #3: “S&OP takes too much of Top Management’s time” Reality: Monthly Time Requirementfor the Leader of the Business = 1.5hours** Executive staff time could be more than this.
9 Agenda for Exec Meeting The Executive S&OP ProcessStep #5ExecutiveMeetingDecisions &Game PlanHeavyLiftingStep #4Pre-MeetingDecisions,Recommendations &Agenda for Exec MeetingStep #3SupplyPlanningCapacity constraints2nd-pass spreadsheetsStep #2DemandPlanningManagement Forecast1st-pass spreadsheetsStep #1DataGatheringSales Actuals,Statistical Forecasts &Supply ActualsEnd of Month
10 New Product Development Role of Finance andNew Product DevelopmentExecMeetingFinance Department InvolvementPre-MeetingSupplyPlanningNew Product Development InvolvementDemandPlanningDataGathering
11 Myth #4: “We’ll Never Get S&OP to Work; We Don’t Have Enough Teamwork” Reality: Teamwork Is A Result,Not A PrerequisiteQ. What If You’ve Implemented S&OPand your teamwork hasn’t improved?A. You Didn’t Do It Right
12 Enhanced Teamwork Soft Benefits Improved Communications - InstitutionalizedBetter Decisions with Less Effort and TimeBetter $$$ Plans with Less Effort and TimeTighter Linkage with StrategyGreater AccountabilityGreater ControlWindow into the Future
13 Myth #6: “S&OP Is Too Rigid; Our Business Changes Too Rapidly For S&OP” Reality: Executive S&OP is all about change
15 Complexity, Change and Coordination COMPLEXITY AND THE RATE OF CHANGENEED FOR EFFECTIVE COORDINATION PROCESSESExecutive S&OP is the Primary Coordination Process
16 Myth # 7: “We Can’t Use S&OP Because We’re Totally Outsourced” Reality: Executive S&OP Doesn’t CareWho Owns The FactoryHeavily Outsourced Companies May NeedExecutive S&OP More Than Others
17 Myth #8: “Our Company Is Too Big for S&OP” Reality: Executive S&OP operatesindependently of company sizeProcter & Gamble ~ $80 BillionMicrosoft ~ $ “Dow Chemical ~ $ “Cast Fab Technologies ~ $40 Million
18 Myth #9: “Our Forecasts Are Not Accurate Enough For S&OP” Reality: Executive S&OP Does NotRequire “Accurate” Forecasts
19 Management Directives ForecastingInputs Process OutputTHE FOUR R’s:Current CustomersNew CustomersCompetitionEconomic OutlookNew ProductsPricing StrategyPromotionsBid ActivityManagement DirectivesIntra-Company DemandHistory (Data)Other1. Reasoned2. Reasonable3. Reviewed Frequently4. Represent the Total DemandProcess
20 Myth #10: “S&OP Is Simple; All You Need Is A Few Spreadsheets” Reality: Implementing Executive S&OPIs All About Change Management
21 The PrioritiesC: Software, ToolsB: Process & DataA: People, Mindset
22 Myth #11: “We Can’t Afford To Buy More Software To Do S&OP ” Reality: You Do Not Need New Software to Make Executive S&OP WorkMost of the successful users of the process use Excel (or similar)
23 So, What To Do About Software? Options:Use spreadsheet softwareUse S&OP specific softwareHybrid: start with spreadsheetswitch to specific laterWhen in doubt, pick 3.
24 Myth #12: “We Can’t Do S&OP. THEY Will Never Participate” Reality: People Can and Do Change
25 Myth #12: “We Can’t Do S&OP. THEY Will Never Participate” Who Are THEY?Top Management?Sales?Marketing?Finance?All of the above?
26 Myth #12: “We Can’t Do S&OP. THEY Will Never Participate” Why not? Are they bad people?No, it’s because they don’t understand it.They don’t understand it, becausethey haven’t been taught.“It’s all about change management”Kathy BuddDow Chemical