1. © Delos Partnership 2009. All rights reserved. Sales and Operations Planning Flexible Dynamic Lean Business Planning

2. © Delos Partnership 2009. All rights reserved. Conflicting objectives Inventory Customer Service Manufacturing Costs Manufacturing Flexibility

3. © Delos Partnership 2009. All rights reserved. Vertical Functional Organisation MD Sales Marketing Technical Operations Finance HR R&DR&D R&DR&D MKTGMKTG MKTGMKTG SALESSALES SALESSALES OPSOPS OPSOPS ACCTSACCTS ACCTSACCTS HRHR HRHR Directors Managers Supervisors/Team Leaders

4. © Delos Partnership 2009. All rights reserved. Disintegrated Business Planning Long term plan Short term Plan Medium Term Plan

5. © Delos Partnership 2009. All rights reserved. The Delos Model For Business Integration Innovation Innovation Vision Strategy Prioritisation Prioritisation Demand Support Supply

6. © Delos Partnership 2009. All rights reserved. Objectives of Integrated Enterprise Leadership Vision and Strategy supported by : One set of numbers at all times Integrated Plans Realistic Plans Visibility and transparency [3-5 years] Teamwork Decisions made in timely fashion More planning, less fire-fighting Consistent performance measures Delivery of the strategy Top Down and bottom up

7. © Delos Partnership 2009. All rights reserved. Integration of Processes and Tools Strategic Review IEL Review Demand Plan Master Schedule Project Plan MRP/CRP/ Activities WTL/ Orders/ Tasks How OftenYearlyMonthlyWeeklyDailyHourly WhoBoard ManagersComputer Units£’sFamiliesFamilies/ Products Parts/ Activities Parts/ Tasks Horizon5 years3 years2 years Focus3-5 years0-3 years0 to Cum Lead Time Part Lead Time Time buckets YearsMonthsWeeksDaysHours Detail

8. © Delos Partnership 2009. All rights reserved. Integration Mission, values, and envisioned future Operational Requirements Business of The Future Winning business Strategy, SWOT, Critical success factors, Measures, responsibilities Integrated Operational Plan for all of the functions in the business Programme Management Operations Management Contract delivery Tactics, Detailed plans, Measures, Development Plans Tactics, Detailed plans, Measures, Development Plans Delivery of requirements for customers and shareholders Delivery of requirements for customers and shareholders Learning And Development Performance Management

9. © Delos Partnership 2009. All rights reserved. Integrated Enterprise Leadership A vision and strategy – communicated to everyone and supported by facts not hopes Clear focus on strategic competency All-embracing performance measures Process not functional “orientation” Integration of all of the business processes Teamwork in pursuit of common objectives Focus on delivery of customer and shareholder value A process for managing change Getting people to follow the changed direction without appearing to launch too many “initiatives”.

10. © Delos Partnership 2009. All rights reserved. Integrated Enterprise Leadership To operate effectively an Integrated Enterprise Leadership process needs: –Timely acquisition of data on sales, inventory etc. –Formal process for preparation of data and information –Time for analysis of information –Discussions to get to conclusions –Time to prepare agendas and recommendations –A regular well communicated and adhered to process

11. © Delos Partnership 2009. All rights reserved. Integrated Enterprise Leadership ACTIONACTION Week 1Week 2Week 3Week 4 Innovation Review Innovation Review Customer Demand Review Customer Demand Review Supply Plan Review Supply Plan Review Priority Review Priority Review Stage 1 Stage 2 Senior Team Review Senior Team Review Stage 5 Stage 7 Stage 3 Support Review Support Review Stage 6 Stage 4

12. © Delos Partnership 2009. All rights reserved. Planned Calendar ……. Dates set in advance (annually) Everyone knows when it is Agenda pre-set Preparation happens If nothing to discuss, then no meeting Almost non-voluntary

13. © Delos Partnership 2009. All rights reserved. Characteristics of IEL process Formal set of meetings Agendas “pre-set” Linked series of meetings Focus on right decisions being made at right level Preparation not “thank goodness for the last minute” Facts not opinions Focus on Long-term and not short-term.

14. © Delos Partnership 2009. All rights reserved. Integrated Business Plan Integration of Innovation Innovation Supply Chain Demand Plan Support Activities

15. © Delos Partnership 2009. All rights reserved. Management of Innovation needs a process Stage/Gate Process Gate 1 Gate 1 Gate 2 Gate 2 Gate 3 Gate 3 Gate 4 Gate 4 Gate 5 Gate 5 Stage 0 Stage 1 Stage 2 Stage 3 Stage 4 Review Initial Investigation Initial Investigation Research And Develop Full business Case Research And Develop Full business Case Develop Product in line With customer Requirements. Develop Product in line With customer Requirements. Test market products and service. Develop market Full production marketing and Sales of product Full production marketing and Sales of product Stage 5 Ideation Is it a good idea? Does it fit our criteria ? Business Case and prioritisation. Meets customer, supply and financial criteria. Meets customers’ and operations needs..

16. © Delos Partnership 2009. All rights reserved. Management of Innovation Integrated Project Management – Programme Management

17. © Delos Partnership 2009. All rights reserved. Integration with Supply Chain Design Purchase Intermediate Manufacture Sub-assemble Finish Distribute Cumulative Lead Time Insert New Products Here Insert New Products Here

18. © Delos Partnership 2009. All rights reserved. New Product Development Performance  Definition  Purpose  Horizon  Source of information  Number of new products developed on time  Improve NPD process  New product development time  Activity schedule in planning system or project plans

19. © Delos Partnership 2009. All rights reserved. NPD Performance Report NPD Performance = 3/6 = 50 %

20. © Delos Partnership 2009. All rights reserved. IEL Process Steps ACTIONACTION Week 1Week 2Week 3Week 4InnovationReviewInnovationReview CustomerDemandReviewCustomerDemandReview SupplyPlanReviewSupplyPlanReview PriorityReviewPriorityReview Stage 1 Stage 2 SeniorTeamReviewSeniorTeamReview Stage 5 Stage 7 Stage 3 SupportReviewSupportReview Stage 6 Stage 4

21. © Delos Partnership 2009. All rights reserved. Common Reasons for Not Forecasting I can never make it 100% accurate My business has too many unforeseen peaks My business is different - you can’t forecast it I don’t know who’s responsible for it anyway It’s not in my objectives I’m measured on getting high sales - so who cares about the forecast The factory never make what I forecast anyway Nobody thanks me for it – so why bother ? Do you want me to Sell or Forecast ?

22. © Delos Partnership 2009. All rights reserved. Forecasting – Defined A forecast is a formal request to the Supply Management function from Sales and Marketing to have the product, materials and capacity available according to the quantity and at the time that they anticipate the demand will occur from the customer to ship the product to their premises

23. © Delos Partnership 2009. All rights reserved. Forecasting Needs a Simple Process FilterDemand Computeforecast CaptureActual C O N S E N S U S F O R E C A S T C O N S E N S U S F O R E C A S T Hold Demand Review Agree commercial plans plans Agree Exceptional demand Assumptions written down and agreed ReviewAccuracy

24. © Delos Partnership 2009. All rights reserved. Forecast Accuracy  Definition  Purpose  Horizon  Source of Information  Percent of items within a tolerance  Assess the degree of flexibility required by the supply side and to improve the process  Cumulative lead time (= purchasing plus manufacturing)  Forecasting module  Sales module

25. © Delos Partnership 2009. All rights reserved. Forecast Accuracy Report – by Error GroupProductForecastActualError% Error Product Group A Product 123100120+2020 Product 456200150-5025 Product 789300330+3010 Total600 017 % Product Group B Product 345200300+10050 Product 567500300-20040 Product 890600700+10017 Product 678200400+200100 Total1500170020040 %

26. © Delos Partnership 2009. All rights reserved. IEL Process Steps ACTIONACTION Week 1Week 2Week 3Week 4InnovationReviewInnovationReview CustomerDemandReviewCustomerDemandReview SupplyPlanReviewSupplyPlanReview PriorityReviewPriorityReview Stage 1 Stage 2 SeniorTeamReviewSeniorTeamReview Stage 5 Stage 7 Stage 3 SupportReviewSupportReview Stage 6 Stage 4

27. © Delos Partnership 2009. All rights reserved. Supply Planning should happen at two levels.. -3-2 Supply Plan125 Actual Supply119118121 Difference-6-7-4 Cum Diff-13-17 123456789 Last Supply Plan125 120 New Supply Plan Difference Cum Diff Q4Q1 360 Family Detail Master \Schedule Capacity Requirements Plan Component Plan Rough Cut Rough Cut MRP/CRP

28. © Delos Partnership 2009. All rights reserved. Rough Cut Capacity Planning Required Capacity Demonstrated Capacity Family Volumes x Rate per hour Family Volumes x Rate per hour Actual Production Per month Actual Production Per month Critical Resources

29. © Delos Partnership 2009. All rights reserved. Sample Output

30. © Delos Partnership 2009. All rights reserved. Customer Service Report – Against Promise Date Customer Service to Promise = 5/6 = 83 %

31. © Delos Partnership 2009. All rights reserved. Financial plan Pull together all the volume plans into one financial picture Volume x price = revenue Volume x cost = variable cost Margin = revenue – variable cost Overheads are fixed Profit is the result Assumptions on assets Cash Flow calculation

32. © Delos Partnership 2009. All rights reserved. Budget

33. © Delos Partnership 2009. All rights reserved. Preparation of the budget Financial projection enables –Visibility of current year outturn – early –Visibility of subsequent year(s) to enable budget to be one set of numbers – early Requires culture change –No six month process –No sandbagging of the numbers –Simple cut-off period –“Roughly right” rather than “precisely wrong”

34. © Delos Partnership 2009. All rights reserved. Budgets – the issues Annual budgets irrelevant in a fast changing world It is a game played by any number of players Budget is used as a “control mechanism” – but it does not work

35. © Delos Partnership 2009. All rights reserved. IEL Process Steps ACTIONACTION Week 1Week 2Week 3Week 4InnovationReviewInnovationReview CustomerDemandReviewCustomerDemandReview SupplyPlanReviewSupplyPlanReview PriorityReviewPriorityReview Stage 1 Stage 2 SeniorTeamReviewSeniorTeamReview Stage 5 Stage 7 Stage 3 SupportReviewSupportReview Stage 6 Stage 4

36. © Delos Partnership 2009. All rights reserved. Two Leadership Stages Prioritisation Family Summary –Major Changes –Main Assumptions –Threats & Opportunities –Decisions Taken –Decisions to Take –Recommendations, Implications, Costs Alignment to Business Plan Innovation Status Senior Team Review Continuously reviewing the balance between strategy and operations Continuously reviewing the operational projection and strategic fit

37. © Delos Partnership 2009. All rights reserved. Summary By Family Discussions should be about assumptions and not numbers !

38. © Delos Partnership 2009. All rights reserved. Objectives for Senior Team Review Make decisions on major issues Delegate issues to the right level Review the long-term picture not short term crises Review process based performance measures Review and develop long-term strategy Make it the meeting for the Executive

39. © Delos Partnership 2009. All rights reserved. Agenda for discussion Current Business situation –Plan versus Budget/Business Plan –Plan versus last plan (volume/value) Strategic Review [1/quarter] Assumptions on which plan is based Issues for Resolution –Innovation development issues –Supply/Demand Allocation issues –Major Capacity changes required –Outsourcing –Capital Expenditure Plans –HR/IT support issues –Reorganisation requirements Performance measures Review of IEL process against assessment criteria

40. © Delos Partnership 2009. All rights reserved. 40 The Core Measures and Financial Effect Relationships to RoCE components

41. © Delos Partnership 2009. All rights reserved. 41 Perfect Customer Orders ROCE Profit Capital Sales Costs Material Labour Overhead Fixed Current Stocks Creditors Debtors Perfect Customer Orders

42. © Delos Partnership 2009. All rights reserved. Removal of the budget Get over the discussion about shareholders demand it Recognise that budgets are for long-term financial and cash flow projection and not performance measurement Set a long term strategy capable of being reviewed every quarter Recognise that life changes, and dynamic business planning and execution is required Use the Balanced Scorecard, and/or the Delos seven measures as the basis for measurement of how well you are doing, and how well the business works. IEL is about planning the work, and working the plan to meet the customers’ requirements in all areas of the business; finance is to add up the results – that’s all. The hardest part is to give up a lifetime of politics and numbers games in exchange for a robust set of assumptions. Evolution happens. Revolution is sometimes necessary.

43. © Delos Partnership 2009. All rights reserved. Prerequisites for successful process 1.Common agreed process 2.Prepared agendas 3.Right attendees 4.Focussed discussion 5.Actions identified and being taken 6.Honesty and realism throughout 7.Elimination of other meetings 8.Commitment to formal process 9.Commitment to follow the plan 10.If you can’t do it say so – Silence is approval.