1. Bob Stahl www.tfwallace.com April 15, 2009 95 Gathering Place Wallingford, CT April 15, 2009 95 Gathering Place Wallingford, CT Bob Stahl www.tfwallace.com Bob Stahl www.tfwallace.com Sales & Operations Planning: Top Management’s Handle on the Business Sales & Operations Planning: Top Management’s Handle on the Business APICS New Haven Chapter Top Management Night APICS New Haven Chapter Top Management Night

2. Bob Stahl www.tfwallace.com May 7, 2009 Bob Stahl www.tfwallace.com Bob Stahl www.tfwallace.com Unlocking the Planning Power of Sales & Operations Planning in a Downturn Unlocking the Planning Power of Sales & Operations Planning in a Downturn MIT CTL Supply Chain Strategy IOMA/ISM Webinar MIT CTL Supply Chain Strategy IOMA/ISM Webinar

3. Bob Stahl www.tfwallace.com With apologies to Charles Dickens... Worst of Times... These are perhaps the worst economic conditions in a generation or two! Best of Times... For those who choose to use them, we have terrific tools in our hands today to deal with the uncertainty!

4. Bob Stahl www.tfwallace.com Four Fundamentals... Demand Supply Volume Mix How Much? Rates The Big Picture Families Strategy/Policy/Risk Monthly / 18 - 36 Mos Executive Resp. Which Ones? Timing/Sequence The Details Products/SKU’s/Orders Tactics/Execution Weekly/Daily 1-3 Mos Middle Mgt. Resp.

5. Bob Stahl www.tfwallace.com Not your father’s Oldsmobile... DemandSupply Volume Mix Executive S&OP Demand Planning Supply Planning Master Scheduling Demand Pull

6. Bob Stahl www.tfwallace.com What is Executive S&OP? Decision-Making Process to Balance Demand & Supply (at the volume level) Establish Relevant Strategy, Policy, and assess & accept Risk to Establish Relevant Strategy, Policy, and assess & accept Risk and to Integrate Financial & Operating Plans Top Management’s Handle on the Business

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

8. Bob Stahl www.tfwallace.com A little history... Plant Scheduling/Pull MS Exec. S&OP / Rough Cut PTF 24 Months Time Most DetailAggregate Only Exac Config...Precise Mat’l...# People...Capital Equip...Factory Space Volume Mix Detailed Forecasting & Master Scheduling Lost in the woods- Detail Engage Top Management? Added Little Value outside the Planning Time Fence Marketing Sales Super MS

9. Bob Stahl www.tfwallace.com Executive S&OP better than ever... What has made it better (agenda): Market-facing (vs Mfg. Process) Families Simplifying Data Assumptions about MIX: –Getting out of the Suicide Quadrant Both of which make the Sales & Marketing job of Demand Planning (forecasting) Simpler & Better Enables Top Management to do their part: –Strategy, Policy, Risk, Performance An Implementation Path of Low Cost, Low Risk, High Impact

10. Bob Stahl www.tfwallace.com Examples are from... ‘The Books’

11. Bob Stahl www.tfwallace.com Market-facing Families... Proper definition of families must promote best forecasting. Product Fire Retardant Chemicals Market - Automotive - Furniture - Electronics - Construction - XXX Customer -Ford -Penna House -Sony -Acme Lumber - XXX Markets can be tied to extrinsic leading indicators; Products and Customers typically can not!

12. Bob Stahl www.tfwallace.com Two types of forecasting... Mfg. CompanyMarketsDistribution Center Shipment s POS Sales: 1-3 Mos Master Scheduling Demand Pull Marketing: 1-18 Mos Executive S&OP Mix Volume Customer Centric Market Centric Customers

13. Bob Stahl www.tfwallace.com Dealing with MIX... Volume ratio of a family to a critical resource Mix ratio for run rate (average, or weighted average) Etc.

14. Bob Stahl www.tfwallace.com Simplifying Data Assumptions... Assumption Sensitivity

15. Bob Stahl www.tfwallace.com An Example...

16. Bob Stahl www.tfwallace.com Tri-Lingual... Marketing Units Operations Units/Hours Financial Currency

17. Bob Stahl www.tfwallace.com

18. Sales & Marketing and Forecasting... –Complain & Whine –Beat on Sales/Marketing people –Drive them away from the table –Use complex algorithms & formulae –Buy new forecasting software –Give up Rather than –Change approach, methods, & processes What do we do about inaccurate forecasts?

19. Bob Stahl www.tfwallace.com Getting out of the Suicide Quadrant... PTF Horizon Detail I Suicide Quadrant II Aggregate Only Quadrant Exec. S&OP III Building to Customer Demand

20. Bob Stahl www.tfwallace.com Sales & Marketing’s Job Enablers... No full granularity for the entire planning horizon - 18 to 24 Months (Getting out of the Suicide Quadrant) Family definitions that enable them to correlate to extrinsic factors that are “leading indicators” (Using “simplifying data assumptions” to deal with MIX) No complex software cost or learning curve Willingly & Enthusiastically Join the Party!

21. Bob Stahl www.tfwallace.com Top Management’s Role... Create an environment (culture) that allows the Ugly Moose to be put on the table -- so that... They can respond to it with effective: –Policy –Strategy –Risk –Performance Measurements Before it’s too late!

22. Bob Stahl www.tfwallace.com An Ugly Moose...

23. Bob Stahl www.tfwallace.com Putting the Moose on the table... Two Choices: 1.See an ‘ugly picture’ and deal with it... 2.Hide an ‘ugly picture’ and do nothing about it until it’s too late...

24. Bob Stahl www.tfwallace.com Addressing Conflict... Executive S&OP A process to raise & reconcile conflict, agree upon, & communicate ONE company game plan Executive S&OP A process to raise & reconcile conflict, 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

25. 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

26. Bob Stahl www.tfwallace.com Serving Constituencies... Customers Employees Suppliers, Community, Country, Planet Owners Executive S&OP Executive S&OP Desired Force = CentripetalNatural Force = Centrifugal

27. Bob Stahl www.tfwallace.com A Couple of Truisms... When a company is trading off one constituency against another, it’s 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 (Doesn’t happen by accident) 3.Executive S&OP is the tool to set conditions for success with regard to Supply Chain performance

28. Bob Stahl www.tfwallace.com Engaging Top Management... In Change, there is no Comfort (In Comfort, there is no Change) Those who succeed with Executive S&OP are willing to deal with the discomfort that is required! Counter-Intuitive & Counter-Experiential Not doing what you do better. Doing something different to be better! Risk

29. Bob Stahl www.tfwallace.com 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 Demo” Fully informed (after Pilot: Go/No-go #2) Staff: “Okay, let’s go to full cutover.” Low Risk Low Risk Three Levels of Commitment...

30. Bob Stahl www.tfwallace.com Implementation Path... 1 2 3 4 5 6 7 8 9 Months Business Improvement Phase I Live Pilot Phase II Expansion Live Pilot Demonstration Go/No-Go #2 Phase III Financial Integration Executive Briefing Go/No-Go #1 Kickoff Session Low Risk Low Cost High Impact Low Risk Low Cost High Impact

31. Bob Stahl www.tfwallace.com We are getting Sophisticated... The Ultimate Sophistication is Simplicity!

32. Bob Stahl www.tfwallace.com Done Properly... Simpler (Not Easier) Better (in 90 Days!!!)

33. Bob Stahl www.tfwallace.com Good Luck & Thanks for Listening 508-226-0477 RStahlSr@aol.com If you’d like a copy of this presentation: Send me an e-mail.