1. Roger Lindgren & Bob Stahl www.tfwallace.com Gaylord Texan Resort & Convention Center December 11-12, 2008 Gaylord Texan Resort & Convention Center December 11-12, 2008 Roger Lindgren, CEO V&M Star Bob Stahl, President R.A. Stahl Company Roger Lindgren, CEO V&M Star Bob Stahl, President R.A. Stahl Company Resolving Conflict & Building Consensus through the Executive S&OP process Resolving Conflict & Building Consensus through the Executive S&OP process APICS / iBF Best of the Best S&OP Conference APICS / iBF Best of the Best S&OP Conference

2. Roger Lindgren & Bob Stahl www.tfwallace.com ObjectiveObjective Identify some of the types of conflict that can exist in an business organization Explain and discuss how Executive S&OP can provide leadership with the tools and structure to raise and resolve that conflict in a defined and disciplined fashion Provide real life examples

3. Roger Lindgren & Bob Stahl www.tfwallace.com What is Sales&Operations Planning... DemandSupply Volume Mix Executive S&OP Demand Planning Supply Planning Master Scheduling Demand Pull

4. Roger Lindgren & Bob Stahl www.tfwallace.com What is Executive S&OP? Sales & Operations Planning is a Executive Decision-Making Process to Balance Demand & Supply (at the volume level) is The forum for setting Relevant Strategy & Policy (aligning human energy) and Integrates Financial & Operating Plans (update/validate the Annual Business Plan) Top Managements Handle on the Business

5. Roger Lindgren & Bob Stahl www.tfwallace.com An Essential Point... Executive S&OP is essential for the other pieces of Sales & Operations Planning to work at their best. Whether they be traditional or Lean techniques

6. Roger Lindgren & Bob Stahl www.tfwallace.com Types of Conflict... Implementation conflict(s) Constituency conflict(s) Business Goal conflict(s) Organizational outlook conflict(s) Strategic conflict(s) Forecasting conflict(s) and many more...

7. Roger Lindgren & Bob Stahl www.tfwallace.com Implementation Conflicts... Run the Business today A A Executive S&OP B B Improving Short Term D D C C Other Projects Supply-Chain Excellence Parallel Paths

8. Roger Lindgren & Bob Stahl www.tfwallace.com Constituency Conflicts... Customers Employees (Suppliers, Community, Country, Planet) Owners Executive S&OP Executive S&OP Desired Force = CentripetalNatural Force = Centrifugal

9. Roger Lindgren & Bob Stahl www.tfwallace.com A Couple of Truisms When a company is trading off one constituency against another, its on a slippery slope Being able to serve all constituencies has a lot to do with timing: 1.In the short term, the customer is king 2.Proper prior planning is necessary to serve all constituencies well (Doesnt happen by accident) 3.Executive S&OP is the tool to set conditions for success with regard to Supply Chain performance

10. Roger Lindgren & Bob Stahl www.tfwallace.com Business Goal conflicts... High Quality Low Cost (Low Inventory) Customer Service Quick Response Reliability Wide Variety Being Best in Class Getting to AND... Diminishing OR

11. Roger Lindgren & Bob Stahl www.tfwallace.com Organizational Conflicts... Executive S&OP A process to raise, reconcile, agree upon, & communicate one company game plan Executive S&OP A process to raise, reconcile, agree upon, & communicate one company game plan Sales/Marketing (Units or $ by Family) Operations (Units/hours/ Material) Finance (Dollars) Product Dev. (New Product Issues) President

12. Roger Lindgren & Bob Stahl www.tfwallace.com Process vs Personality Driven Organizations Sales & Marketing Sales & Marketing Operations Product Design Product Design Finance Logistics & Distribution Logistics & Distribution President/General Manager Supply Chain Management Executive S&OP Managing the White Space

13. Roger Lindgren & Bob Stahl www.tfwallace.com Top Mgt. and Executive S&OP Top Management = The Leader of the Business (General Mgr, Pres., COO) + VP Sales &/or Marketing VP Operations VP Finance VP Development... others Need to be Hands-On with the ES&OP Process: Stewardship & Leadership (Manager/Trustee & Guide/Command) Done Properly... It takes Top Management between 1 & 2 Hours per Month Done Properly... It takes Top Management between 1 & 2 Hours per Month

14. Roger Lindgren & Bob Stahl www.tfwallace.com Doing The Right Things Doing The Things Right Strategic Conflicts... Robert Hayes HBR-Nov/Dec 1985 Strategic Planning - forward in reverse Executive S&OP Strategy Tactics Execution Executive S&OP Annual Business Plan

15. Roger Lindgren & Bob Stahl www.tfwallace.com For Example... Capacity Planning =Strategy Question ?? Lead Capacity - Invest in capacity before customer orders materialize (That is, add to planned demonstrated capacity proactively with specific actions based on forecast.) Tradeoff: market share for profit Lag Capacity - Invest in capacity after customer orders materialize (That is, plan on adding to demonstrated capacity only after receipt of customer orders) (default strategy) Tradeoff: Profit for market share Executive S&OP is where the pros and cons of each strategy are discussed and decided upon.

16. Roger Lindgren & Bob Stahl www.tfwallace.com Forecasting conflicts 1. Reasoned 2. Reasonable 3. Reviewed Frequently 4. Represent Total Demand 1. Reasoned 2. Reasonable 3. Reviewed Frequently 4. Represent Total Demand Forecasts that are: Current Customers New Customers Competition Economic Outlook New Products Pricing Strategy Promotions Bid Activity Management Directives Intra-Company Demand History (Data) Other Process Inputs -- Process -- Output

17. Roger Lindgren & Bob Stahl www.tfwallace.com Gaining Demand Consensus

18. Roger Lindgren & Bob Stahl www.tfwallace.com Executive S&OP Process Step #1 Run Month End Reports End of Month Sales Actuals, Statistical Forecasts & Production Actuals Step #5 Executive Meeting Decisions & Game Plan Step #4 Pre-S&OP Meeting Conflict Resolution, Recommendations & Agenda for Exec. Mtg. Step #2 Demand Planning Management Forecast 1st-pass spreadsheets Step #3 Production Planning Capacity constraints 2nd-pass spreadsheets Heavy Lifting

19. Roger Lindgren & Bob Stahl www.tfwallace.com Pre-Meeting (Continued) Consensus requires that everyone: 1. Has had their say, & 2. Feels they had opportunity to influence 3. Everyone can live with the outcome informed debate skillful discussion positive provocation Conflict & Confrontation Consensus & Harmony Getting the Moose on the Table informed debate skillful discussion positive provocation Conflict & Confrontation Consensus & Harmony Getting the Moose on the Table

20. Roger Lindgren & Bob Stahl www.tfwallace.com Done Properly... Simpler (Not Easier) Better

21. Roger Lindgren & Bob Stahl www.tfwallace.com Resolving Conflict aligns human energy... Accomplishment

22. Roger Lindgren & Bob Stahl www.tfwallace.com The Real Issue... Understanding Executive S&OP is simple. The hard part is... Behavior Change changing the way everyone does their jobs. Keys: - Full cross functional buy-in - Counter- experiential/intuitive - Comfort vs Change - Path of low risk

23. Roger Lindgren & Bob Stahl www.tfwallace.com Implementation Alternatives Build it and they will come Design it first, get the mechanics working, and then attempt to sell it to top management. = Low probability for success Hold the high ground Involve top management at the very outset of the implementation, and throughout. = High probability for success

24. Roger Lindgren & Bob Stahl www.tfwallace.com Thanks for Listening