2007 Northeast Supply Chain Education Conference & Exhibition Executive S&OP

Transcription

1 Education Conference & Exhibition Executive S&OP Top Management s Handle on on the the Business Best Western Royal Plaza Conference Center Marlborough, MA Tuesday, October 2 nd, 2007

2 The Books QuickTime and a TIFF (LZW) decompressor are needed to see this picture.

3 The Mission Meeting World Class Standards In High Quality Low Cost (Low Inventory) Customer Service Quick Response Reliability Wide Variety Getting to AND... Diminishing OR

4 Maintaining Balance Mix vs Volume Most Detail Time Exec. S&OP / Rough Cut 24 Months Aggregate Only Exac Config...Precise Mat l...# People...Capital Equip...Factory Space Master MS Lost Scheduling in the woods- Detail Engage Top PTF Management? Added Little Value outside Plant Scheduling/Pull the Planning Time Fence Sales Mix Detailed Forecasting Super & MS Marketing Volume

5 Detail Forecasting Perspective PTF 3 Building to Customer Demand 1 Suicide Quadrant 2 Aggregate Only Quadrant ES&OP Horizon

6 Forecast Review Product Mgr, reviewing forecast for 1st time in 3 months. Feb Mar Apr May Jun Jul Aug Sep Forecast (000) Actual Sales Difference Cum Difference Product Mgr revises the forecast downward. Feb Mar Apr May Jun Jul Aug Sep Forecast (000) Old Forecast New Forecast Actual Sales Difference Cum Difference

7 Production Plan Current Production Plan. Feb Mar Apr May Jun Jul Aug Sep Plan Production (000) Actual Production Difference Cum Difference Plant Manager gets bad news & adjusts Production Plan. Feb Mar Apr May Jun Jul Aug Sep Plan Production (000) Old Plan New Plan Actual Production Difference Cum Difference

8 Inventory Review CFO observes the high inventories. Feb Mar Apr May Jun Jul Aug Sep Plan Inventory (1 Mo) Actual Inv Difference

9 Inventory Review CFO gets new Forecast & Prod. Plan, & has a fit. Feb Mar Apr May Jun Jul Aug Sep Forecast (000) New Forecast Actual Sales Difference Cum Difference Plan Production New Plan Actual Production Difference Cum Difference Inventory 132 New Plan From $13.8 Million to $22.4 Million

10 Decision Making (Sales Plans, Production Rates, Order Backlogs, & Inventories) Traditional Response to a Problem + Later ~ Reactive & Radical With Exec. S&OP Part of an Ongoing Process + Sooner = Proactive & Fine-Tuned The Challenge: Make S&OP THE Framework for Decision Making

11 The Four Fundamentals Volume How Much? Rates The Big Picture Families Strategy/Policy/Risk Monthly / Mos Executive Resp. Demand Supply Mix Which Ones? Timing/Sequence The Details Products / SKU s Tactics/Execution Weekly/Daily 1-3 Mos Middle Mgt. Resp.

12 Sales & Operations Planning Executive S&OP Volume Demand Planning Demand Supply Supply Planning Mix Master Scheduling Demand Pull

13 An Essential Point... Executive S&OP is essential for the other pieces of Sales & Operations Planning to work at their best.

14 What is Executive S&OP? Sales & Operations Planning is a Decision-Making Process to Balance Demand & Supply (at the volume level) to Establish Relevant Strategy & Policy and to Integrate Financial & Operating Plans Top Management s Handle on the Business

15 There is a Better Way Display of Info Defined Process for Decision-Making Data Dump (Warehouse) Information (Org Data) Knowledge Understanding

16 Mfg. Company Customers Markets Customer/Market Volume Marketing: 1-18 Mos Executive S&OP Market Centric Shipments POS Customer Centric Mix Sales: 1-3 Mos Scheduling Master Demand Pull

17 Make to Stock

18 1000's Units - Sales & Operations Days on Hand The Display 350 Planning Time Fence The Acme Widget Company Actual Bookings New Forecast Actual Operations New Ops. Plan 40 Inventory Target Days on Hand Jul Aug Sept Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Horizon

19 Revenue in 1000's Dollars 2007 Fiscal Year Status $30,000 $25,000 Cumulative YTD Cum Original Plan Latest Call 2008 S&OP Plan $20,000 $15, Fiscal Year Original Plan $ 25,400 Latest Call $ 25, S&OP $ 27,959 $10,000 $5,000 $- Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

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

21 Addressing Conflict Sales/Marketing (Units or $ by Family) Finance (Dollars) Executive S&OP A process to raise & reconcile conflict, President agree upon, & communicate ONE company game plan Operations (Units/hours/ Material) Product Dev. (New Product Issues)

22 Top Mgt. and ES&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 Done Properly... It takes Top Management between 1 & 2 Hours per Month Stewardship & Leadership (Manager/Trustee & Guide/Command)

23 What are the Benefits? Hard Benefits: Higher Customer Service Lower Finished Goods Inventories Smaller Customer Order Backlogs More Stable Production Rates Less Unplanned Overtime Higher Productivity More controlled intro of new products

24 What are the Benefits? Soft Benefits: Better Decisions in Less Time Enhanced Teamwork - Operating Level Mgt. Enhanced Teamwork - Executive Mgt. (Energy Alignment)

25 Energy Alignment Accomplishment Accomplishment

26 What are the Benefits? Soft Benefits: Better Decisions in Less Time Enhanced Teamwork - Operating Level Mgt. Enhanced Teamwork - Executive Mgt. (Energy Alignment) Monthly Update to the Business Plan Greater Accountability Greater Control Top Management s Handle on the Business

27 Done Properly... Simpler Better

28 Discomfort In Change, there is no Comfort In Comfort, there is no Change Those who succeed with Executive S&OP are willing the endure the discomfort that is required!

29 How to Get Started Read a Book Executive Brief Uninformed Commitment Semi-Informed Commitment Informed Live Pilot Commitment Demonstration Counter-Experiential Counter-Intuitive

30 Business Improvement Minimizing Risk Executive Briefing Phase I Preparation Live Pilot Demonstration Phase II Expansion & Replication Phase III $$$ Integration Months

31 Middle Mgt. only It s a Supply Chain thing Top Mgt. but not President (SBU Ldr) No Education ( Build It ) No consensus on end game No discipline Inadequate Pre-S&OP Conflict Aversion Implementation Pitfalls Executive S&OP Meetings: Show & Tell Unfocused Short Term Too Much Detail (MS) Meeting Too Long Finger Pointing Ongoing Data Problems Lack of Progress

32 Success Requires Design Team s Job: Defined set of practices (What, How, & Who) Accurate, timely, & believed data Valid, simplifying assumptions (Dem/Sup/$$) (Getting out of Suicide Quadrant ) Leadership s Job: High discipline clear accountability Constant improvement Changed performance measures Culture/Behavior change (Moose on table)

33 The Real Issue... Understanding Executive S&OP is simple. The hard part is... Behavioral / Cultural Change changing the way everyone does their jobs. Keys: - Full cross functional buy-in - Counter-experiential/intuitive - Comfort vs Change - Path of low risk

34 Thanks & Good Luck! 508/ Copy of presentation? Go to Web site!