1. APICS Southeast Florida
Executive S&OP
A Presentation to:
APICS Southeast Florida by
Tom Wallace

2. Agenda Executive S&OP: Role, Structure and Benefits Implementation
The Future of S&OP

3. The Four Fundamentals Volume Demand Supply Mix How Much? Rates
The Big Picture
Families
Strategy/Policy/Risk
Monthly/out to 36 Mos
Volume
Demand
Supply
Which Ones?
Timing/Sequence
The Details
Products
Tactics/Execution
Weekly/Daily 1-3 Mos
Mix

4. Sales & Operations Planning
Executive S&OP
Volume
Supply (Capacity)
Planning
Demand
Supply
Demand Planning/
Forecasting
Mix
Master Scheduling
Supplier and Plant Scheduling
Distribution Scheduling

5. More Terminology Changes?
Sales & Operations Planning may
become the successor term to ERP/MRPII
Thus the term Executive S&OP was developed to
Eliminate confusion
Avoid what happened with ERP
Put high focus on the Executive role

6. Executive S&OP . . . Is an executive decision-making process
Balances demand and supply
Deals with volume in both units and $$$
Ties operational plans to financial plans: one set of numbers
Is the forum for setting relevant strategy and policy
Is what we called , for years,
Sales & Operations Planning

7. The Role of Top Management
The Leader of the Business Unit (General Manager, President, COO) Needs to be Hands-On with Executive S&OP:
Stewardship
Leadership
Break ties
Set high standards
Motivate
< 2 HOURS PER MONTH
Monthly Time Commitment:
hours

8. Statistical Forecasts &
The Executive S&OP Process
Step #5
Executive
Meeting
Decisions &
Game Plan
Heavy
Lifting
Step #4
Pre-
Meeting
Conflict Resolution,
Recommendations &
Agenda for Exec. Mtg.
Step #3
Supply
Planning
Capacity constraints
2nd-pass spreadsheets
Step #2
Demand
Planning
Management Forecast
1st-pass spreadsheets
Step #1
Data
Gathering
Sales Actuals,
Statistical Forecasts &
Supply Actuals
End of Month

9. Three Examples of Best Practices
Three (of 13) Companies Studied:
High Seasonality
High Cyclicality
Highly Complex New Product Launch

10. Executive S&OP in Make-to-Stock w/ High Seasonality: The Scotts Co.
Important Questions:
When start Pre-Build?
At what rates?
Which SKUs?
When ramp up & how much?
When ramp down?
S&OP helps to
answer these &
other questions
Pre-Build
Pre-Build

11. The Scotts Company
“During the last four years, almost half of the company’s increase in earnings has come from Supply Chain savings: inventory down, manufacturing efficiency up, purchase and transportation costs down. All of these are due to improved planning.”
Ken Reiff
Vice President, Product Planning

12. S&OP in Make-to-Order w/ Extreme Cyclicality: Cast-Fab
Cast-Fab Technologies – Year-to-Year Sales Change
%Chg 15 38 6 12 14 25 1 32 18
Acquired from
Cin’ti Milacron up
down
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
Implemented S&OP
Some competitors
go out of business
46!!! 12

13. Cast-Fab Technologies
“During 2004, we posted sales increases of over 40%, which meant employee call-backs, retraining, new hires, initial training, getting up the learning curve and so forth.
“During the same year, we had productivity gains of up to 3%! We never would have believed this was possible if we hadn’t done it.
“S&OP played a key role in this; it gave us the forward visibility to make the right decisions on a timely basis.”
Ross Bushman
President and COO

14. . . . in the Pharmaceutical Industry
New Product Launch . . .
. . . in the Pharmaceutical Industry
Multiple stages of testing
Multiple approvals by FDA
Multiple years
Multiple 100s of millions of dollars

15. Eli Lilly and Company New Product Launch Performance: Industry
Average Lilly
Years Required
(avg per product) >14 9
<11

16. Eli Lilly & Company
“In the past three years we have launched 9 new products and met all demand despite 2 products that sold significantly above the high-side forecast.
“Without Global Sales & Operations Planning, we would have been driven to reaction mode, which could have resulted in an increase in investment in new assets, a slow down in our launch plans, and/or missed demand opportunities.”
Ron Bohl
Supply Chain Coordinator

17. These 3 Examples: A Common Thread
Executive S&OP is being used extensively in areas of the business that are:
Mission Critical
Very Difficult to Manage

18. Hard Benefits Customer Service UP Inventory DOWN Obsolescence DOWN
Freight Costs DOWN
Order Lead Times DOWN
Supplier Lead Times DOWN
Time to Launch New Products DOWN
Plant Productivity UP
CSL was 50-75%

19. Soft Benefits Enhanced Teamwork Improved Communications
Better Decisions with Less Effort and Time
Better $$$ Plans with Less Effort and Time
Greater Accountability
Greater Control
Window into the Future
Top Management’s Handle on the Business
TMs ROLE – FIRST, BUSINESS PLAN

20. Agenda Sales & Operations Planning: Role, Structure and Benefits
Implementation
The Future of Executive S&OP

21. Organizational Behavior Change Changing the way we do our jobs
The Real Issue . . .
. . . is not in understanding S&OP.
That’s easy. The hard part is . . .
Organizational Behavior Change
Changing the way we do our jobs
“The hard stuff is the soft stuff.”

22. Implementing Executive S&OP Is Different
The leader of the business (president,
COO, CEO, general manager) must provide:
Support
Funding
Commitment
Leadership
So what’s new?
Active, Hands-on Participation by the
Leader and Staff
Each and Every Month

23. Implementing Executive S&OP Is Different
Highly focused on Top Management
Relatively few people
Low cost/high impact

24. Implementation Principles
Implementation begins and ends
with the Leader of the business
“Build it and they will come”
carries a low probability for success
“Gain and hold the high ground”
and success will almost always follow

26. The Implementation Path
Executive
Briefing
Go/No-Go #1
Live Pilot
Go/No-Go #2
Phase III
$$$ Integration
Kickoff
Session
Phase II
Expansion
Business Improvement
Phase I
Live Pilot
Low Risk
Low Cost
Months

27. Low Risk Low Cost Phase III $$$ Integration Phase II Expansion Phase I
Months 7-9
Full Financial Integration
Institutionalize the Process
Phase I
Preparation
Months 4 – 6
Add All Product Families
Full Supply Planning
Limited Financials
Month #2
Demand Planning Processes & Data Feeds
Supply Planning Processes & Data Feeds
Executive Briefing
& Go/No-Go Decision #1
Month #1
Assignment of Responsibilities
Kickoff Education & Planning
Development of Project Schedule
Families & Sub-Families (Pilot Family)
Data Definitions, Sources & Displays
Month #3
Pilot Preparation & Execution
Go/No-Go Decision #2

28. Agenda Sales & Operations Planning: Role, Structure and Benefits
Implementation
The Future of Executive S&OP

29. The Future of S&OP: Growth Factors
Success breeds success
Lean Manufacturing and S&OP
Globalization
New users outside traditional manufacturing
S&OP specific software
Greater financial integration, power and utility
A growing presence in the executive suite

30. Implications for APICS Members (CPIM)
Premises:
Executive S&OP is a powerful tool for top management
It’s here to stay and it’s growing
It’s in APICS’ space
CPIMs know more about Sales & Operations Planning than most others
Therefore, CPIMs are positioned to take part in this growth and to be more valuable to their companies

31. Implications of Executive S&OP for APICS
It’s in APICS’ space.
It “lives” in the Executive Suite
It can help attract new members:
executive perception
non-manufacturing companies
APICS can play a – the? – leadership role in the widespread adoption of Executive S&OP

32. APICS is Getting On Board with S&OP
S&OP Conference – Chicago – June 19, 20
Demand/S&OP Flight at APICS Conference in Kansas City – September 14-16
Frequent Webinars (most recent: 2-25:
Sales & Operations Planning – The Executives’ Role)

33. Thanks for Listening Go to www.tfwallace.com for: Copies of slides
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