Bob Stahl Montvale Plaza Stoneham, Ma. December 4, 2012 Montvale Plaza Stoneham, Ma. December 4, 2012 Bob Stahl Bob Stahl Using eS&OP To Succeed In Uncertain Markets * Holiday Networking Event Hosted by: Boston Chapter of APICS, North Shore Chapter of APICS, South Shore Chapter of APICS; In collaboration with NERT-CSCMP and PMAB * Phil Dolci, President & CEO Crosman Corporation

Bob Stahl Using eS&OP To Succeed In Uncertain Markets “Business leaders today have an ever-increasing amount of data at their fingertips. But when it comes to forecasting, this data and the models they feed only provide an illusion of precision and control. Demand fluctuations are inherently unpredictable so the key to success is not to try to predict the variability but rather to employ a strong process that manages through the variability. The most effective process is Executive S&OP, but it must be embraced across the entire organization for maximum impact. Moreover, some of the best practices in eS&OP are counterintuitive such as operating with less detail. The benefits of a successful implementation are real (increased operating profit, reduced working capital, and increased service levels) and worth the investment.”

Bob Stahl Your Company Uncertainty is Ubiquitous Uncertainty Economy Regulations Taxes Health Care Employment Variability Customers Suppliers Transportation Shoppers Timing

Bob Stahl What to do about Uncertainty MANAGE THRU External Uncertainty Your Company Uncertainty Variability Eliminate Internal Uncertainty

Bob Stahl Typical Responses to Uncertainty are (Natural, but) Flawed Seek more detail, farther out Hunker down… internally focused, self-preservation mode

Bob Stahl The Farther Out One Goes, the Less Valuable Detail Becomes

Bob Stahl Priority #1 – Get On the Same Page (Inside your Company) Maximize your ability to react within the financial constraints you can tolerate. CapabilitiesConstraints Obsolescence Risk Financial Ratios Working Capital Response Time Flexibility -- Labor --Equipment

Bob Stahl Priority #2 – Simplify Plethora of data… see the forest Demand models need only be as “accurate” as your tolerance window requires (Mis)Perception of precision and predictability

Bob Stahl Priority #3 – Engage Goal is to understand the tolerance windows across each piece of the supply chain

Bob Stahl Keys to “Managing Thru” SimplifyMaximize flexibilityEngage entire organizationEngage entire supply chainUnderstand others’ constraintsBe transparent, especially with assumptions

Bob Stahl Using eS&OP To Succeed In Uncertain Markets “Business leaders today have an ever-increasing amount of data at their fingertips. But when it comes to forecasting, this data and the models they feed only provide an illusion of precision and control. Demand fluctuations are inherently unpredictable so the key to success is not to try to predict the variability but rather to employ a strong process that manages through the variability. The most effective process is Executive S&OP, but it must be embraced across the entire organization for maximum impact. Moreover, some of the best practices in eS&OP are counterintuitive such as operating with less detail. The benefits of a successful implementation are real (increased operating profit, reduced working capital, and increased service levels) and worth the investment.”

Bob Stahl The eS&OP Process Step #1 Data Gathering End of Month Decisions & Game Plan Step #5 Executive Meeting Conflict Resolution, Recommendations & Agenda for Exec. Mtg. Sales Actuals, Statistical Forecasts & Production Actuals Step #2 Demand Planning Step #4 Pre-S&OP Meeting Capacity constraints 2nd-pass spreadsheets Management Forecast 1st-pass spreadsheets Step #3 Supply Planning Financial Involvement New Product Involvement Creates a Disciplined Rhythm

Bob Stahl The Real Challenge... Understanding Executive S&OP is simple. The hard part is... Behavioral/Cultural Change changing the way everyone does their jobs. Keys: - Full cross functional buy-in - Counter- experiential/intuitive - Comfort vs Change - Path of low risk

Bob Stahl Key Takeaways Accept that uncertainty / variability is inherently uncontrollable Use eS&OP to manage thru uncertainty by engaging all stakeholders –Inside your enterprise –Upstream and downstream your supply chain