Executive S&OP

A Presentation to:

APICS Southeast District

by
Tom Wallace
1-10-08

Tom Wallace & Bob Stahl www.tfwallace.com

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

Tom Wallace & Bob Stahl www.tfwallace.com

 The Four Fundamentals
•How Much?
Volume •Rates
•The Big Picture
•Families
•Strategy/Policy/Risk
•Monthly/out to 36 Mos

Demand Supply
•Which Ones?
•Timing/Sequence
•The Details
•Products
Mix •Tactics/Execution
•Weekly/Daily 1-3 Mos

Tom Wallace & Bob Stahl www.tfwallace.com

 Sales & Operations Planning

Executive S&OP
Volume

Demand Planning/ Demand Supply

Supply (Capacity)
Forecasting Planning

Mix

Master Scheduling
Supplier and Plant Scheduling
Distribution Scheduling
Tom Wallace & Bob Stahl www.tfwallace.com
 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

Tom Wallace & Bob Stahl www.tfwallace.com

 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

Tom Wallace & Bob Stahl www.tfwallace.com

The Role of Top Management
The Leader of the Business Unit (General Manager,
President, COO) Needs to be Hands-On with
Executive S&OP:
1. Stewardship
2. Leadership
• Break ties
• Set high standards
• Motivate

Monthly Time Commitment: 1.5 hours

Tom Wallace & Bob Stahl www.tfwallace.com
The Executive S&OP Process
Step #5
av Executive Decisions &
He y Meeting Game Plan

t in
f Step #4
Li g Pre- Conflict Resolution,
Meeting 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
Tom Wallace & Bob Stahl www.tfwallace.com
 Three Examples of
Best Practices

Three (of 13) Companies Studied:

• High Seasonality
• High Cyclicality
• Highly Complex New Product Launch

Tom Wallace & Bob Stahl www.tfwallace.com

 Executive S&OP in Make-to-Stock
w/ High Seasonality: The Scotts Co.

Important Questions: Figure X -1

• When start Pre-Build?
• At what rates?
• Which SKUs?
• When ramp up & how much?
• When ramp down?
S&OP helps answer these
& others
Pre-Build
Pre-Build

Tom Wallace & Bob Stahl www.tfwallace.com

 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

Tom Wallace & Bob Stahl www.tfwallace.com

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

Tom Wallace & Bob Stahl www.tfwallace.com

 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

Tom Wallace & Bob Stahl www.tfwallace.com

 Eli Lilly and Company

New Product Launch in the

Pharmaceutical Industry
• Multiple stages of testing
• Multiple approvals by FDA
• Multiple years
• Multiple 100s of millions of dollars

Tom Wallace & Bob Stahl www.tfwallace.com

 Eli Lilly and Company

New Product Launch Performance:

Industry
Average Lilly
2001-04 1.8
9
Years Required
(avg per product) >14

<11

Tom Wallace & Bob Stahl www.tfwallace.com

 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

Tom Wallace & Bob Stahl www.tfwallace.com

 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

Tom Wallace & Bob Stahl www.tfwallace.com

 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

Tom Wallace & Bob Stahl www.tfwallace.com

 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

Tom Wallace & Bob Stahl www.tfwallace.com

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

Tom Wallace & Bob Stahl www.tfwallace.com

 The Real Issue . . .
Is not 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.”

Tom Wallace & Bob Stahl www.tfwallace.com
 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
Tom Wallace & Bob Stahl www.tfwallace.com
 Implementing Executive S&OP
Is Different

• Highly focused on Top Management

• Relatively few people

• Low cost/high impact

Tom Wallace & Bob Stahl www.tfwallace.com

 Implementation Principles
• Implementation begins and ends
with the Leader of the business

• “Hold the high ground”

and success will almost always follow

• “Build it and they will come”

carries a low probability for success

Tom Wallace & Bob Stahl www.tfwallace.com

 The Implementation Path
Low Risk and Low Cost
Executive
Briefing Live Pilot
Go/No-Go #1 Go/No-Go #2
Phase III
$$$
Integration
Improvement

Kickoff Phase II
Session Expansion
Business

Phase I
Preparation

1 2 3 4 5 6 7 8 9
Months

Tom Wallace & Bob Stahl www.tfwallace.com

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

Tom Wallace & Bob Stahl www.tfwallace.com

 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

Tom Wallace & Bob Stahl www.tfwallace.com

 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
Tom Wallace & Bob Stahl www.tfwallace.com
 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

Tom Wallace & Bob Stahl www.tfwallace.com

 APICS is Getting On Board
with S&OP
• S&OP Symposium – Chicago – June 19, 20

• Demand/S&OP Flight at APICS Conference

in Kansas City – September 14-16

• Frequent Webinars (next: 2-25:

Sales & Operations Planning –
The Executives’ Role

Tom Wallace & Bob Stahl www.tfwallace.com

 Thanks for Listening

Go to www.tfwallace.com for:
• Copies of slides
• Periodic newsletter
• White papers
• Books and videos

Tom Wallace & Bob Stahl www.tfwallace.com

 Phase III
Low Risk $$$
Integration
Low Cost Phase II Months 7-9
Expansion • 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
Executive Briefing
& Go/No-Go Decision #1 •Supply Planning Processes & Data Feeds

Month #1
•Assignment of Responsibilities

•Kickoff Education & Planning

Month #3
•Development of Project Schedule •Pilot Preparation & Execution

•Families & Sub-Families (Pilot Family) Go/No-Go Decision #2

•Data Definitions, Sources & Displays

 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
Tom Wallace & Bob Stahl www.tfwallace.com