S&OP Success: Achieving Transformational Business Results Bob Stahl & Tom Wallace

#APICS2015 Objective of this Presentation  Learn how to achieve transformational benefits  Learn the proven path to that success  Expand your contribution to company’s success

#APICS2015 Agenda Introduction to PresentationTom Characteristics of successful S&OPBob Understanding the role of Top ManagementBob Questions for personal reflection Tom & Bob Resolving both parts of Disagreement Bob Engaging Top ManagementBob Steps of successful implementationBob Questions & Answers Tom & Bob Closing ThoughtsTom

#APICS2015 Tom Wallace Background Written 13 books, translated into Chinese (Mandarin), French, Italian, Korean, Mongolian, Portuguese (Brazil), Russian, Spanish and Thai Authored/co-authored the best selling book on S&OP Taught in Australia, Belgium, Canada, China, Denmark, France, Great Britain, Japan, Mexico, New Zealand and the United States Distinguished Fellow at Ohio State University’s Center for Operational Excellence

 Introduction

#APICS2015 One of Top Management’s Major Tasks “Keep the Herd Moving Roughly West”

#APICS2015 Energy Alignment Accomplishment Before S&OP After successful S&OP

#APICS2015 Keeping the Herd Moving Roughly West... is more Cultural and Behavioral than Technical

#APICS2015 Culture Change Definition of Company Culture: “how we do things around here” Changing how we do the important things around here means: Top Management providing commitment, involvement, and leadership This means engaging Top Management

 What is authentic S&OP?  What are the characteristics that make S&OP operate at its best?

#APICS2015 Bob Stahl Background  40+ years in manufacturing companies  Started as Schedules Coordinator (1970)  With help of Oliver Wight, achieved Class A success (1979)  Became an associate of Oliver Wight – 1981 (passed in 1983)  Have worked with some of the best companies in the world  Today = S&OP Coach, Educator, Author  Has written six books with Tom Wallace – −three have been used for APICS Certification  S&OP Editor and Columnist – −Inaugural for the IIF’s Journal of Forecasting - Foresight  Heads up support services for TFWallace & Company  “Retired” = choices

#APICS2015 Four Fundamentals... Volume Mix How Much? Rates Mkt Facing Families The Big Picture Strategy/Policy/Risk Monthly / Mos Executive Resp. Which Ones? Timing/Sequence The Details Products/SKU’s/Orders Tactics/Execution Weekly/Daily 1-3 Mos Middle Mgt. Resp. Demand Supply Balance Different & separate practices, but integrated! Different & separate practices, but integrated! Pro Active Behavior Re Active Behavior Routinely Sales & Operations Planning (eS&OP)

#APICS2015 Executive S&OP is... APICS Dictionary, 13 th Edition, October 2010 (First Appearance)  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: 1.balance demand and supply at the aggregate level, 2.align operational planning with financial planning, 3.link strategic planning with day-to-day sales and operational activities. 4.Is a forum for disciplined discussion about setting Policy, strategy, risk, budget changes  It is a multi-step process involving demand planning, supply planning, and middle and top management meetings for decision-making and authorization Top Management’s Handle on the Business Executive S&OP – does the proper prior planning to allow the routine things in the MIX Space to be done routinely !!

#APICS The eS&OP Process Step #1 Data Gathering Decisions & Game Plan Step #5 Executive Meeting Step #2 Demand Planning Step #4 Pre-S&OP Meeting Step #3 Supply Planning Heavy Lifting Financial Involvement New Product Involvement Creates a Disciplined Rhythm It is a multi-step process involving demand planning, supply planning, and middle and top management meetings for decision- making and authorization

#APICS2015 eS&OP = Keystone of the Supply Chain  If supply chain practices can be compared to a stone arch, Executive S&OP is the Keystone: −The Keystone alone does not make an arch, but −Without the Keystone, nothing else can stand

#APICS2015 Characteristic that make eS&OP Operate at it’s Best Cross-functional, collegial, collaborative, consensus building mindset, and a disciplined process that aligns human energy – Step #1 - #4 Holistic ownership (leadership) of demand, supply, and fiduciary responsibilities, with authoritative decision making power, creating ONE set of numbers – Step #5

#APICS2015 Top Management and Executive S&OP Need to be Hands-On with the Executive S&OP Process Stewardship & Leadership (Manager/Trustee & Guide/Command) President VP Operations VP Operations VP Sales/Mktg VP Sales/Mktg VP Finance VP Finance VP R&D VP R&D DemandSupply$$$Tech Authorative Decider Done Properly... It takes Top Management between 1 & 2 Hours per Month Done Properly... It takes Top Management between 1 & 2 Hours per Month

#APICS2015 Characteristic that make eS&OP Operate at it’s Best Cross-functional, collegial, collaborative, consensus building mindset, and a disciplined process that aligns human energy – Step #1-#4 Holistic ownership (leadership) of demand, supply, and fiduciary responsibilities, with authoritative decision making power, creating ONE set of numbers – Step #5 View the implementation of eS&OP as a Strategic Imperative

#APICS2015 “The Big Lie of Strategic Planning” ( HBR – Jan/Feb 2014 by Roger Martin) The Problem : “Executives know that strategy is important. But almost all find it scary, because it forces them to confront a future they can only guess at.”... “Strategy making is uncomfortable.” The Solution : “Reconcile yourself to feeling uncomfortable, and follow three rules: 1.Keep it Simple 2.Don’t Look for Perfection 3.Make the Logic Explicit” “A detailed plan may be comforting, but it’s not a strategy.” The implementation of authentic eS&OP is (in and of itself) a Strategic Imperative!

#APICS2015 Characteristic that make eS&OP Operate at it’s Best Cross-functional, collegial, collaborative, consensus building mindset, and a disciplined process that aligns human energy – Step #1-#4 Holistic ownership (leadership) of demand, supply, and fiduciary responsibilities, with authoritative decision making power, creating ONE set of numbers – Step #5 View the implementation of eS&OP as a Strategic Imperative Integrated performance measurements that align with desired performance – Including Compensation Incentives

 Top Management’s Role

#APICS2015 Routinely Raising Disagreement Executive S&OP A process to raise and reconcile disagreement/conflict, agree upon, & communicate THE company game plan Executive S&OP A process to raise and reconcile disagreement/conflict, agree upon, & communicate THE company game plan Sales/Marketing (Units or $ by Family) Operations (Units/hours/ Material) Finance (Revenue) Product Dev. (New Product Issues) President In an authentic eS&OP process, it is not OK to disagree, it is necessary to disagree. Disagree without being disagreeable * Putting the Moose on the table. * Everett Dirksen

#APICS2015 Top Management’s Role (in part)...  Create an environment (culture) that allows the Ugly Moose to be put on the table -- so that...  They can completely and effectively resolve disagreements and conflict, setting proper: −Policy −Strategy −Risk assessment −Performance measurements Before it’s in the MIX Space!

#APICS2015

Leadership’s Role During Change  Lead educational process  Manage cultural changes  Assure proper resources  Immerse themselves in the detail  Approve procedures  Insist on clear targets (goals)  Participate  Measure progress

#APICS2015 Leadership’s Role Ongoing  Insist on meaningful participation  Insist proper homework be done  Remove themselves from the detail  Clearly raise and resolve disagreement and conflict  Make clear decisions  Hold people accountable (process and results)  Encourage and expect realistic improvement  Lead management development  Measure performance

#APICS2015 Corporate Role...  Mandate the fundamental concepts and principles of executive S&OP *  Demonstrate a willingness to “put the moose” on the table  Assure resources to develop necessary and appropriate tools; that may vary SBU by SBU  Measure progress – development and process discipline  Help address cultural and performance measurement issues  Reward success * S&OP Principles: The Foundation for Success Robert A. Stahl and Thomas F. Wallace Foresight Journal Fall 2012

#APICS2015 Questions for Personal Reflection & Discussion  Do you have an environment where disagreement can be openly and thoroughly discussed and debated, regardless of “rank”?  Do all participants have the opportunity to engage in the debate?  Do you have clear lines of accountability when collegial, cross-functional, collaborative, consensus building results can not be achieved?

 Raising and Resolving Disagreement

#APICS2015 Raising Disagreement Executive S&OP A process to raise and reconcile disagreement/conflict, agree upon, & communicate THE company game plan Executive S&OP A process to raise and reconcile disagreement/conflict, agree upon, & communicate THE company game plan Sales/Marketing (Units or $ by Family) Operations (Units/hours/ Material) Finance (Revenue) Product Dev. (New Product Issues)

#APICS2015 Conflict Resolution *...  Disagreement has two parts: −Substantive issue − Emotion behind that issue  Disagreement becomes conflict when the emotional is not completely addressed  Lasting conflict resolution must deal with BOTH elements of disagreement  Doing that effectively can be learned: −With a motive to do so and −A framework on which to work * “Getting to Resolution” Stewart Levine, JD

#APICS2015 Keeping the Herd Moving Roughly West... is more Cultural and Behavioral than Technical

#APICS2015 Culture... Is a “fuzzy” word Here’s a more focused understanding:  Interpersonal relationships reflect the culture of an organization.  The sum of those relationships is the culture!  These relationships reflect a web of implicit and explicit agreements that are the organization (process).

#APICS2015 Research Reports *... Success with Executive S&OP is:  60% = Culture/Behavior Change  30% = Process Definition & Discipline  10% = Technology * Altimiter/AMR Boston, Sept 2010

#APICS2015 A Truth... If you align human energy an organization can do things not before possible.

 How to Engage Top Management

#APICS2015 The Top Management ‘Catch 22’... Getting Top Management involved from the start:  If you DON’T – you won’t address the cultural or behavioral changes  If you DO – they realize that success does not come from doing what they do better, but from doing things differently to be better  That translates to personal and/or organizational discomfort and risk for those in charge * Overcoming the "Catch 22" of Implementation by Robert A. Stahl and Joseph F. Shedlawski Foresight Journal Spring 2012

#APICS2015 How to Engage Top Management?  Identify and enlist an Executive Champion ; someone with executive influence, willing to put skin in the game  Connect the hard benefits of executive S&OP to successful implementation  Mitigate risk – path of low risk/low cost  Quick results to build confidence – 90 Days  Feedback on progress/success  Generate local ownership and enthusiasm

Successful Implementation Steps

#APICS2015  Uninformed (before Go/No-go #1) Boss: “Okay, let’s do an Executive Briefing”  Semi-informed (after Briefing: Go/No-go #1) Staff: “Okay, let’s do a Live Pilot Demonstration”  Fully informed (after Pilot: Go/No-go #2) Staff: “Okay, let’s go to full cutover.” Low Risk Low Risk How to do that... Mitigate RISK

#APICS2015 Implementation Path Months Business Improvement Phase I Pilot Demo Phase II Expansion Live Pilot Demonstration Go/No-Go #2 Phase III Financial Integration Executive Briefing Go/No-Go #1 Kickoff Session Low Cost Low Risk High Impact Quick Results Low Cost Low Risk High Impact Quick Results

Questions & Answers

Closing

#APICS2015 Closing Thoughts 1. DISAGREE WITHOUT BEING DISAGREEABLE 2. ONE SET OF NUMBERS 3. HARD BENEFITS: CUSTOMER SERVICE, PLANT PRODUCTIVITY, INVENTORY, CUSTOMER ORDER LEAD TIMES, TIME TO LAUNCH NEW PRODUCTS, ETC. 4. SOFT BENEFITS: ENHANCED TEAMWORK, IMPROVED COMMUNICATIONS, BETTER DECISIONS AND FINANCIAL PLANS, GREATER ACCOUNTABILITY, WINDOW INTO THE FUTURE, AND ONE MORE ENERGY ALIGNMENT 6. TRANSFORMATIONAL THE BEST BENEFIT? Accomplishment

#APICS2015 Closing Thoughts 1.DISAGREE WITHOUT BEING DISAGREEABLE 2.ONE SET OF NUMBERS 3.HARD BENEFITS : CUSTOMER SERVICE, PLANT PRODUCTIVITY, INVENTORY, CUSTOMER ORDER LEAD TIMES, TIME TO LAUNCH NEW PRODUCT, ETC. 4.SOFT BENEFITS : ENHANCED TEAMWORK, IMPROVED COMMUNICATIONS, BETTER DECISIONS & FINANCIAL PLANS, GREATER ACCOUNTABILITY, WINDOW INTO THE FUTURE, AND ONE MORE... 5.ENERGY ALIGNMENT 6.TRANSFORMATIONAL THE BEST BENEFIT? Accomplishment

Bob Stahl Tom Wallace Thanks For listening & Good Luck