EXECUTIVE S&OP by Tom Wallace Myths, Misunderstandings and Misinformation about S&OP A Presentation by Tom Wallace for IBF Phoenix –

EXECUTIVE S&OP by Tom Wallace WWW.TFWALLACE.COM

Myths, Misunderstandings and Myths, Misunderstandings and Misinformation about S&OP Misinformation about S&OP

Myths, Misunderstandings and Myths, Misunderstandings and Misinformation about S&OP Misinformation about S&OP

A Presentation

by

Tom Wallacefor

IBF

Phoenix – February 22, 2010


The Four FundamentalsThe Four FundamentalsThe Four FundamentalsThe Four Fundamentals

Demand Supply

Volume

Mix

Sales & OperationsPlanningX

How Much?RatesThe Big PictureProduct FamiliesStrategy/Policy/RiskMonthly/18 months+Top Management

Which Ones?Timing/SequenceThe DetailsProducts, SKUs, OrdersTactics/ExecutionWkly/Daily, 2 days – 6 mos Middle Management


Sales & Operations PlanningSales & Operations PlanningSales & Operations PlanningSales & Operations Planning

Demand Supply

Volume

Mix

Executive S&OP

Master SchedulingSupplier and Plant Scheduling

Distribution Scheduling

Demand Planning/Forecasting

Supply (Capacity) Planning

Operational S&OP

?????

bodell

I think the key thing to hit is "what is Executive S&OP"? Should we have some bullet points somewhere that give some basic description? And can we link this back to some key points:?1) This is about Executive" Decision Making"2) This is about" Business Performance" (not just demand/supply balancing)3) This is not "detailed execution review"


Myth #1:Myth #1:“S&OP’s a supply chain thing”“S&OP’s a supply chain thing”

Myth #1:Myth #1:“S&OP’s a supply chain thing”“S&OP’s a supply chain thing”

Reality: Executive S&OP is a supply chain thing

and a marketing thing

and a sales thing

and a finance thing

and a manufacturing thing

and a new product development thing

and a general management thing


Soft BenefitsSoft BenefitsSoft BenefitsSoft Benefits

• Enhanced Teamwork• Improved Communications - Institutionalized • Better Decisions with Less Effort and Time• Better $$$ Plans with Less Effort and Time• Tighter Linkage with Strategy• Greater Accountability• Greater Control • Window into the Future


Myth #2: “S&OP’s all about balancing Myth #2: “S&OP’s all about balancing demand and supply”demand and supply”

Myth #2: “S&OP’s all about balancing Myth #2: “S&OP’s all about balancing demand and supply”demand and supply”

Reality: Exec S&OP balances demand & supply

and integrates financial and operational planning

and links strategy to ongoing operations

and impacts marketing strategy

and enhances risk management

and streamlines annual planning

and on and on . . .


Strategic or Tactical?Strategic or Tactical?Strategic or Tactical?Strategic or Tactical?

Strategy

Tactics

ExecutiveS&OP


Myth #3: “S&OP takes too much of Myth #3: “S&OP takes too much of Top Management’s time” Top Management’s time”

Myth #3: “S&OP takes too much of Myth #3: “S&OP takes too much of Top Management’s time” Top Management’s time”

Reality: Monthly Time Requirementfor the Leader of the Business = 1.5

* Executive staff time could be more than this.

hours*


Step #5ExecutiveMeeting

Decisions &Game Plan

Step #4Pre-

MeetingDecisions,

Recommendations &Agenda for Exec Meeting

Step #1Data

Gathering

End of Month

Sales Actuals, Statistical Forecasts

&Supply Actuals

Step #2DemandPlanning Management Forecast

1st-pass spreadsheets

Step #3Supply

Planning Capacity constraints2nd-pass spreadsheets

Heavy

Lifting

The Executive S&OP Process


ExecMeeting

Pre-Meeting

DataGathering

DemandPlanning

Supply Planning

New Product Development In

volvement

Finance Department In

volvement

Role of Finance and Role of Finance and New Product DevelopmentNew Product Development


Myth #4: “We’ll Never Get S&OP to Work; Myth #4: “We’ll Never Get S&OP to Work; We Don’t Have Enough Teamwork” We Don’t Have Enough Teamwork”

Myth #4: “We’ll Never Get S&OP to Work; Myth #4: “We’ll Never Get S&OP to Work; We Don’t Have Enough Teamwork” We Don’t Have Enough Teamwork”

Reality: Teamwork Is A Result, Not A Prerequisite

Q. What If You’ve Implemented S&OP and your teamwork hasn’t improved?

A. You Didn’t Do It Right


Soft BenefitsSoft BenefitsSoft BenefitsSoft Benefits

• Enhanced Teamwork• Improved Communications - Institutionalized • Better Decisions with Less Effort and Time• Better $$$ Plans with Less Effort and Time• Tighter Linkage with Strategy• Greater Accountability• Greater Control • Window into the Future


Myth #6: “S&OP Is Too Rigid; Our Business Myth #6: “S&OP Is Too Rigid; Our Business Changes Too Rapidly For S&OP” Changes Too Rapidly For S&OP”

Myth #6: “S&OP Is Too Rigid; Our Business Myth #6: “S&OP Is Too Rigid; Our Business Changes Too Rapidly For S&OP” Changes Too Rapidly For S&OP”

Reality: Executive S&OP is all about change


Tools & TechniquesTools & TechniquesTools & TechniquesTools & Techniques

IncreaseReliability

EnhanceCoordination

Reduce Waste& Time

Total Quality, Six Sigma, Poka-Yoke, ISO

+ others

Lean Mfg., Just-In-Time, Quick Changeover (SMED),

Flow + others

Sales & Operations Planning, ERP, Kanban, VMI,

+ others

XX

X


Complexity, Change and Complexity, Change and CoordinationCoordination

Complexity, Change and Complexity, Change and CoordinationCoordination

COMPLEXITY AND THE RATE OF CHANGE

NEED FOR EFFECTIVE COORDINATION PROCESSES

Executive S&OP is the Prim

ary Coordination Process


Myth # 7: “We Can’t Use S&OP Myth # 7: “We Can’t Use S&OP Because We’re Totally Outsourced” Because We’re Totally Outsourced”

Myth # 7: “We Can’t Use S&OP Myth # 7: “We Can’t Use S&OP Because We’re Totally Outsourced” Because We’re Totally Outsourced”

Reality: Executive S&OP Doesn’t Care Who Owns The Factory

Heavily Outsourced Companies May NeedExecutive S&OP More Than Others


Myth #8: “Our Company Is Too Big Myth #8: “Our Company Is Too Big for S&OP” for S&OP”

Myth #8: “Our Company Is Too Big Myth #8: “Our Company Is Too Big for S&OP” for S&OP”

Reality: Executive S&OP operates independently of company size

Procter & Gamble ~ $80 BillionMicrosoft ~ $59 “Dow Chemical ~ $57 “ Cast Fab Technologies ~ $40 Million


Myth #9: “Our Forecasts Are Not Myth #9: “Our Forecasts Are Not Accurate Enough For S&OP” Accurate Enough For S&OP”

Myth #9: “Our Forecasts Are Not Myth #9: “Our Forecasts Are Not Accurate Enough For S&OP” Accurate Enough For S&OP”

Reality: Executive S&OP Does Not Require “Accurate” Forecasts


ForecastingForecastingForecastingForecasting

1. Reasoned

2. Reasonable

3. Reviewed

Frequently

4. Represent the

Total Demand

THE FOUR R’s:Current CustomersNew Customers

CompetitionEconomic Outlook

New ProductsPricing Strategy

PromotionsBid Activity

Management DirectivesIntra-Company Demand

History (Data)Other

ProcessProcess

Inputs Process Output


Myth #10: “S&OP Is Simple; All You Myth #10: “S&OP Is Simple; All You Need Is A Few Spreadsheets” Need Is A Few Spreadsheets”

Myth #10: “S&OP Is Simple; All You Myth #10: “S&OP Is Simple; All You Need Is A Few Spreadsheets” Need Is A Few Spreadsheets”

Reality: Implementing Executive S&OP Is All About Change Management


The PrioritiesThe PrioritiesThe PrioritiesThe Priorities

C: Software, Tools

B: Process & Data

A: People, Mindset


Myth #11: “We Can’t Afford To Buy Myth #11: “We Can’t Afford To Buy More Software To Do S&OP ” More Software To Do S&OP ”

Myth #11: “We Can’t Afford To Buy Myth #11: “We Can’t Afford To Buy More Software To Do S&OP ” More Software To Do S&OP ”

Reality: You Do Not Need New Software to Make Executive S&OP Work

Most of the successful users of the process use Excel (or similar)


So, What To Do About Software?So, What To Do About Software?So, What To Do About Software?So, What To Do About Software?

Options:

1. Use spreadsheet software

2. Use S&OP specific software

3. Hybrid: start with spreadsheet

switch to specific later

When in doubt, pick 3.


Myth #12: “We Can’t Do S&OP. Myth #12: “We Can’t Do S&OP. THEYTHEY Will Never Participate” Will Never Participate”


Reality: People Can and Do Change




Who Are THEY?

• Top Management?

• Sales?

• Marketing?

• Finance?

• All of the above?




Why not? Are they bad people?

No, it’s because they don’t understand it.

They don’t understand it, because they haven’t been taught.

“It’s all about change management”Kathy BuddDow Chemical


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EXECUTIVE S&OP by Tom Wallace Myths, Misunderstandings and Misinformation about S&OP A Presentation by Tom Wallace for IBF Phoenix –