Documente Academic
Documente Profesional
Documente Cultură
TomWallace
for
OMTECChicagoJune16,2010
Tom Wallace www.tfwallace.com
ObjectivesofthisSession ObjectivesofthisSession
Enable each attendee to: Understand where Executive S&OP fits, what it does, why its important Understand and explain the logic and mechanics of Executive S&OP Explain the elements of the monthly process Be exposed to a highly effective implementation process. Other?
Tom Wallace www.tfwallace.com
Tom Wallace
www.tfwallace.com
OutlineXXXXX OutlineXXXXX
Sales & Operations Planning Role, Scope, Benefits Display of S&OP Information The Executive S&OP Process Demand Planning (Forecasting) Supply (Capacity) Planning Pre-meeting Exec Meeting Global Executive S&OP Risk Management Implementation Problem Solving Session The Future of Sales & Operations Planning
www.tfwallace.com
Tom Wallace
Complexity,Changeand Coordination
E AT OF CH G AN E
S S: E OP &
M CO
X LE P
ITY
ND
TH
NE
ED
OR
E FF E
IVE T
O CO
DI N
TI O
PR
S CE
Tom Wallace
Tom Wallace
www.tfwallace.com
Tom Wallace
www.tfwallace.com
TheFourFundamentals
X
Demand
Volume
HowMuch? Rates TheBigPicture ProductFamilies Monthly/18months+ Strategy/Policy/Risk TopManagement WhichOnes? Timing/Sequence TheDetails Products,SKUs,Orders Weekly/Daily.56mos Tactics/Execution MiddleManagement
Supply
Mix
Tom Wallace
www.tfwallace.com
Sales&OperationsPlanning
ExecutiveS&OP
VolumePlanningforDemandandSupply MediumtoLongTermFinancialPlanning SupportforEarningsCalls,RiskMgmt,Strategy
Volume
Supply
Supply(Capacity) Planning
OperationalS&OP
MasterScheduling Plant,SupplierandDistributionScheduling (Kanban,APS,etc.)
Tom Wallace www.tfwallace.com
ExecutiveS&OP... ExecutiveS&OP...
Is an executive decision-making process Balances demand and supply Deals with volume in both units and $$$ Links operational plans to financial plans: one set of numbers facilitates risk management Is the forum for setting relevant strategy and policy
Tom Wallace www.tfwallace.com
ExecutiveS&OP... ExecutiveS&OP...
. . . is essential for the elements within Operational S&OP Master Scheduling Distribution Requirements Planning Plant Scheduling APS, Kanban, etc. Supplier Scheduling to function well and contribute to their full potential.
Tom Wallace www.tfwallace.com
From5,000Feet
Sales/Marketing (Units/$$$byFamily) Finance (Dollars)
Operations (Units/hours/Material)
Tom Wallace
ProductDevelopment (NewProductIssues)
www.tfwallace.com
WhereExecutiveS&OPFits
StrategicPlanning StrategicPlanning
BusinessPlanning BusinessPlanning
BusinessPlanCharacteristics BusinessPlanCharacteristics
Dollars 3 to 5 Years Annual Budget Entire Business Ownership
Tom Wallace
www.tfwallace.com
LevelsofBusinessPlanning LevelsofBusinessPlanning
Y E A R S
RollingmonthlycheckontheBusinessPlan
Tom Wallace www.tfwallace.com
TheRoleofTopManagement TheRoleofTopManagement
The Leader of the Business Unit (General Manager, President, COO) Needs to be Hands-On with Executive S&OP:
1. Stewardship
Tom Wallace
www.tfwallace.com
StrategicPlanning StrategicPlanning
BusinessPlanning BusinessPlanning
TheRoleofTopManagement TheRoleofTopManagement
The Leader of the Business Unit (General Manager, President, COO) Needs to be Hands-On with Executive S&OP:
Tom Wallace
www.tfwallace.com
ExecutiveS&OP ExecutiveS&OP
President
Operations (Units/hours/Material)
Tom Wallace
ProductDevelopment (NewProductIssues)
www.tfwallace.com
TheRoleofTopManagement
The Leader of the Business Unit (General Manager, President, COO) Needs to be Hands-On with Executive S&OP:
1. Stewardship 2. Leadership
HardBenefits
CustomerService Inventory Obsolescence FreightCosts OrderLeadTimes SupplierLeadTimes TimetoLaunchNewProducts PlantProductivity UP DOWN DOWN DOWN DOWN DOWN DOWN UP
Tom Wallace
www.tfwallace.com
Tom Wallace
www.tfwallace.com
Tom Wallace
www.tfwallace.com
SoftBenefits
EnhancedTeamwork ImprovedCommunicationsInstitutionalized BetterDecisionswithLessEffortandTime Better$$$PlanswithLessEffortandTime GreaterAccountability GreaterControl WindowintotheFuture
TopManagementsHandleontheBusiness
Tom Wallace www.tfwallace.com
Tom Wallace
www.tfwallace.com
BadDayatAcmeWidget
ProductManager,reviewingforecastfor1sttimein3mos.
Forecast(000) ActualSales Difference CumDifference Feb Mar Apr 100 100 100 90 10 95 5 15 85 15 30 May Jun Jul Aug Sep 100 120 120 120 120
ProductManagerrevisestheforecastdownward.
Forecast(000) ActualSales Difference CumDifference
Tom Wallace
OldForecast NewForecast
May Jun Jul Aug Sep 100 120 120 120 120 90 90 90 90 90
www.tfwallace.com
ProductionPlan
CurrentProductionPlan.
PlanProduction(000) ActualProduction Difference CumDifference Feb Mar Apr 100 100 100 98 2 2 100 101 0 +1 2 1 May Jun Jul Aug Sep 110 120 120 120 120
PlantManagergetsbadnews&adjustsProductionPlan.
PlanProduction(000) ActualProduction Difference CumDifference
Tom Wallace
OldPlan NewPlan
May Jun Jul Aug Sep 110 120 120 120 120 110 100 100 90 90
www.tfwallace.com
InventoryReview
CFOobservesthehighinventories.
Feb Plan Inventory (1 Mo) 100 Actual Inv. 103 111 Difference +11 Mar 100 116 +16 Apr 100 132 +32 May 120 Jun 120 Jul 120 Aug 120 Sep 120
Average Standard Cost ~ $100 per unit April Ending Inventory ~ $13,200,000
Tom Wallace
www.tfwallace.com
InventoryReview
CFOgetsnewForecastandProductionPlan.
Feb Forecast (000) Actual Sales Difference Cum Difference Plan Production Actual Production Difference Cum Difference 90 10 10 98 2 2 Mar 95 5 15 100 0 2 Apr New Forecast 85 15 30 New Plan 101 +1 1 110 100 100 90 90 May 90 Jun 90 Jul 90 Aug 90 Sep 90
SallySmithsSpreadsheet SallySmithsSpreadsheet
FEB FORECAST ACTUAL SALES DIFFERENCE CUM DIFFERENCE 100 90 -10 -15 100 95 -5 -30 MAR 100 85 -15 APR 100 MAY 120 JUN 120 JUL 120 AUG 120 SEP
100
100 98 -2
110 100 0 -2
120 101 +1 -1
120
120
120
???
Tom Wallace
www.tfwallace.com
SallySmithsSpreadsheet SallySmithsSpreadsheet
FEB FORECAST ACTUAL SALES DIFFERENCE CUM DIFFERENCE 100 90 -10 100 95 -5 -15 MAR 100 85 -15 -30 APR 100 MAY 120 JUN 120 JUL 120 AUG 120 SEP
100
100 98 -2
110 100 0 -2
120 101 +1 -1
120
120
120
142
142
142
142
142
SallySmithsSpreadsheet SallySmithsSpreadsheet
FEB FORECAST ACTUAL SALES DIFFERENCE CUM DIFFERENCE 100 90 -10 100 95 -5 -15 MAR 100 85 -15 -30 APR 100 MAY 120 JUN 120 JUL 120 AUG 120 SEP
100
100 98 -2
110 100 0 -2
120 101 +1 -1
120
120
120
142
142
142
142
142
Tom Wallace
www.tfwallace.com
SallySmithsSpreadsheet SallySmithsSpreadsheet
FEB FORECAST ACTUAL SALES DIFFERENCE CUM DIFFERENCE 100 90 -10 100 95 -5 -15 MAR 100 85 -15 -30 APR 100 MAY 120 JUN 120 JUL 120 AUG 120 SEP
100
100 98 -2
110 100 0 -2
110 110
101 +1 -1
120
120
142
Tom Wallace
www.tfwallace.com
SallySmithsSpreadsheet SallySmithsSpreadsheet
FEB FORECAST ACTUAL SALES DIFFERENCE CUM DIFFERENCE 100 90 -10 100 95 -5 -15 MAR 100 85 -15 -30 APR 100 MAY 120 JUN 120 JUL 120 AUG 120 SEP
100
100 98 -2
110 100 0 -2
110 110
101 +1 -1
120
120
142
Tom Wallace
www.tfwallace.com
Outline Outline
Sales & Operations Planning Role, Scope, Benefits Display of S&OP Information The Executive S&OP Process
Demand Planning (Forecasting) Supply (Capacity) Planning Pre-meeting Exec Meeting
Global Executive S&OP Implementation Problem Solving Session The Future of Sales & Operations Planning
Tom Wallace
www.tfwallace.com
TheExecutiveS&OPProcess
vy e a in g H ft Li
Step#5 Executive Meeting Step#4 Pre Meeting Step#3 Supply Planning Step#2 Demand Planning Step#1 Data Gathering Decisions& GamePlan
Capacityconstraints 2ndpassspreadsheets
ManagementForecast 1stpassspreadsheets
n na i
De e
pa
Pre Meeting
Supply Planning
Demand Planning
Data Gathering
Ne
r P
uc d
e D t
lop e
en m
tIn
lve o
nt e
Tom Wallace
www.tfwallace.com
Tom Wallace
www.tfwallace.com
Tom Wallace
www.tfwallace.com
AlternativeScenarios AlternativeScenarios
Situation: Indiana plant is heavily overloaded, cant meet the newly-increased demand plan Alternatives a. Add a shift at Indiana b. Offload to plant in Utah c. Outsource d. Combination Cost Issues Supervision, hiring, training Freight, cost difference Total cost to acquire Most or all of the above
Tom Wallace
www.tfwallace.com
AlternativeScenarios AlternativeScenarios
Alternatives a. Add a shift at Indiana b. Offload to plant in Utah c. Outsource d. Combination Cost Issues Supervision, hiring, training Freight, cost differential Total cost to acquire Most or all of the above
Other implementation issues: time, duration Other operational issues: quality, lead time, flexibility etc.
Tom Wallace
www.tfwallace.com
WhereWillTheDecisionBeMade?
Step5
Exec Meeting
Step4
Pre Meeting
Step3
Supply Planning
Step2
Demand Planning
Step1
Data Gathering
Tom Wallace
www.tfwallace.com
The5StepExecutiveS&OPProcess The5
Step5
y av g H e ft i n Li
Step3
Exec Meeting
Step4
Step2
Demand Planning
Step1
ManagementForecast 1stpassspreadsheets
Data Gathering
SampleAgendaExecMeeting SampleAgendaExecMeeting
Macro $$$ Review All Families Combined Customer Service Performance Order Fill New Product Issues Family-by-Family Review and Decisions Production/Procurement Rate Changes Collective Impact on Business Plan Recap of Decisions Made Critique of Meeting
www.tfwallace.com
Tom Wallace
ExecMeetingParticipants
Essential:
Possible:
Controller CustomerServiceManager ForecastAnalyst HumanResourceManager MasterScheduler PlantManager ProductDevelopmentManager ProductManager PurchasingManager ????
Probable:
Tom Wallace
www.tfwallace.com
ExecutiveS&OPTimetable ExecutiveS&OPTimetable
Working Day of the Month Step
Exec. Meeting Pre Meeting Supply Planning Demand Planning Data Gathering 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
l l
Tom Wallace
www.tfwallace.com
StrategicorTactical?
Strategy
Executive S&OP
Tactics
TomWallace
www.tfwallace.com
TomWallace
www.tfwallace.com
ExecutiveS&OPandRisk
st The21 CenturySupplyChain: Extended Brittle Longerleadtimes Morevariableleadtimes
TomWallace
www.tfwallace.com
TypesofSupplyChainDisruptions
Supplycrash Demandspike Demandcrash Supplyspike
TomWallace
www.tfwallace.com
ExecutiveS&OPandRisk
st The21 CenturySupplyChain: Extended Brittle Longerleadtimes Morevariableleadtimes
ExecutiveS&OPsRolein Anticipation
Initiallysethedges: safetystock safetytime location consignment finishedproducts components/rawmaterials Reviewandrevisehedgesduringthe ExecutiveS&OPcycle PermanentagendaitemPreMeeting andExecMeeting
TomWallace www.tfwallace.com
ExecutiveS&OPsRolein Recovery
MinorDisruption:probablynorole ModeratetoMajorDisruption: TheMiniS&OPCycle
TomWallace
www.tfwallace.com
TheMiniS&OPCycle TheMiniS&OPCycle
Focus on affected parts of the business Solve the problem at the earliest step possible:
Step5
Exec Meeting
Step4
Pre Meeting
Step3
Supply Planning
Step2
Demand Planning
TomWallace
www.tfwallace.com
TheMiniS&OPCycle TheMiniS&OPCycle
Focus on affected parts of the business Solve the problem at the earliest step possible:
Step5
Exec Meeting
Step4
Pre Meeting
Step3
Supply Planning
Step2
Demand Planning
Use the same people, report formats, and processes as in the regular monthly cycle
www.tfwallace.com
TomWallace
Outline Outline
Sales & Operations Planning Role, Scope, Benefits Display of S&OP Information The Executive S&OP Process
Demand Planning (Forecasting) Supply (Capacity) Planning Pre-meeting Exec Meeting
Global Executive S&OP Implementation Problem Solving Session The Future of Sales & Operations Planning
Tom Wallace
www.tfwallace.com
ExecutiveS&OPProcess
Step #5 Executive Meeting Step #4 PreMeeting Step #3 Supply Planning Step #2 Demand Planning Step #1 Data Gathering EndofMonth Tom Wallace Decisions& GamePlan
Capacityconstraints
ManagementForecast
TheGlobalChallenge: TheGlobalChallenge:
To coordinate an organization doing business in many different countries, on many different continents . . . . . . without inhibiting accountability, and stifling local initiatives and ways of doing business.
Tom Wallace
www.tfwallace.com
GlobalExecutiveS&OP GlobalExecutiveS&OP
HowOneCompanyDoesIt:
Entities: areas (regions) where demand and supply align
www.tfwallace.com
Regions&Entities:Example Regions&Entities:Example
Regions North America South America Europe Middle East/Africa Asia/Pacific Plants Mexico, US Belgium China, Australia Entities
Tom Wallace
www.tfwallace.com
Regions&Entities:Example Regions&Entities:Example
Regions North America South America Europe Middle East/Africa Asia/Pacific Plants Mexico, US Entities Y N Y Belgium N Y China, Australia
www.tfwallace.com
GlobalExecutiveS&OP GlobalExecutiveS&OP
HowOneCompanyDoesIt:
Entities: areas (regions) where demand and supply align Executive S&OP occurs within each Entity up to and including the Exec S&OP meeting
www.tfwallace.com
GlobalExecutiveS&OP GlobalExecutiveS&OP
Step #5 Executive Meeting Step #4 PreS&OP Meeting Step #3 Supply Planning Step #2 Demand Planning Step #1 Data Gathering Tom Wallace & Bob Stahl www.tfwallace.com
i t n
A t y
GlobalExecutiveS&OP GlobalExecutiveS&OP
HowOneCompanyDoesIt:
Entities: areas (regions) where demand and supply align Executive S&OP occurs within each Entity up to and including the Exec S&OP meeting Inter-entity Coordination primarily within Demand Planning and Supply Planning, also at Pre-Meeting
www.tfwallace.com
GlobalExecutiveS&OP GlobalExecutiveS&OP
Step #5 Executive Meeting Step #4 Pre Meeting Step #3 Supply Planning Step #2 Demand Planning Step #1 Data Gathering Tom Wallace & Bob Stahl
EntityA
EntityB
EntityC
www.tfwallace.com
GlobalExecutiveS&OP GlobalExecutiveS&OP
HowOneCompanyDoesIt:
Entities: areas (regions) where demand and supply align Executive S&OP occurs within each Entity up to and including the Exec S&OP meeting Inter-entity Coordination primarily within the Demand Planning and Supply Planning phases Global Consolidation at world HQ, following Exec meetings in the Entities Global Exec Meeting primarily, but not exclusively, financial
Tom Wallace & Bob Stahl www.tfwallace.com
GlobalExecutiveS&OP GlobalExecutiveS&OP
Step #7 GlobalExec Meeting Step #6 Global Consolidation Step #5 Executive Meeting Step #4 PreS&OP Meeting Step #3 Supply Planning Step #2 Demand Planning Step #1 Data Gathering Tom Wallace & Bob Stahl
EntityA
EntityB
EntityC
www.tfwallace.com
GlobalExecutiveS&OP
Question: Ifyousellproductsaroundtheworld buthavesupplyinonlyoneregion, doyouneedGlobalS&OP?
Step #4 PreS&OP Meeting Step #3 Supply Planning Step #2 Demand Planning Step #1 Data Gathering Tom Wallace & Bob Stahl www.tfwallace.com Step #7 GlobalExec Meeting Step #6 Global Consolidation
GlobalExecutiveS&OP
Question: Ifyousellproductsaroundtheworld buthavesupplyinonlyoneregion, doyouneedGlobalS&OP?
Step #4 PreS&OP Meeting Step #3 Supply Planning Step #2 Demand Planning Step #1 Data Gathering Tom Wallace & Bob Stahl www.tfwallace.com
TheGlobalChallenge TheGlobalChallenge
We are a series of organizations doing business locally, with intense global coordination. Percy Barnevik Former CEO ABB
www.tfwallace.com
Outline Outline
Sales & Operations Planning Role, Scope, Benefits Display of S&OP Information The Executive S&OP Process
Demand Planning (Forecasting) Supply (Capacity) Planning Pre-meeting Exec Meeting
Global Executive S&OP Implementation Problem Solving Session The Future of Sales & Operations Planning
Tom Wallace
www.tfwallace.com
ImplementingExecutiveS&OP
BadNews
Change 812Months
GoodNews
FewPeople
(severaldozen)
EarlyResults
(23Months)
LowCost
(<$100K)
Tom Wallace
www.tfwallace.com
TheABCsofImplementation TheABCsofImplementation
C Computer
B Data
A People
Tom Wallace www.tfwallace.com
CItemSoftwareforS&OP CItemSoftwareforS&OP
Traditional: Spreadsheet Software Advantages: Ultra low cost Quick to come up No learning curve Disadvantages: Simulation > Slow Unit and Dollar Alignment > Weak Volume and Mix Alignment > Weak Blood, Sweat, and Excel Dead End
Tom Wallace www.tfwallace.com
SoftwareforS&OPContd SoftwareforS&OPContd
New: S&OP Specific Software Disadvantages: Can Slow Down the Implementation Cost Learning Curve Advantages: Simulation > Rapid, Real Time Unit and Dollar Alignment > Strong, Constant Volume and Mix Alignment > Strong, Constant Fast Preparation Supports Growth and Greater Complexity
Tom Wallace www.tfwallace.com
So,WhatToDoAboutSoftware? So,WhatToDoAboutSoftware?
Options: 1. Use spreadsheet software 2. Use S&OP specific software 3. Hybrid: start with spreadsheet switch to specific later
BItem:DATAISSUES
FamiliesandSubfamilies Resources
Tom Wallace
www.tfwallace.com
Tom Wallace
BItem:DATAISSUES
FamiliesandSubfamilies Resources UnitsofMeasure LoadProfiles/BillsofResources AverageSellingPricesandGrossMargins Actuals:Sales,Bookings,Production,Inventories,Backlog Demand/SupplyStrategies: Where MeettheCustomer (MTS,MTO,FTO) TargetFillRates TargetFinishedGoodsInv:DaysOnHand TargetCustomerOrderBacklog:DaysOnHand TargetModuleInv:DaysOnHand
www.tfwallace.com
Tom Wallace
AItem:People AItem:People
The problem is not understanding Executive S&OP. Its simple The hard part is
ImplementationPrinciples ImplementationPrinciples
People are the A item Implementation begins and ends with the Leader of the business Hold the high ground involve top management at the very outset of the implementation, and throughout and you will probably succeed Build it and they will come design it first, get the mechanics working, and then try to sell it to top management carries a lower probability for success
Tom Wallace www.tfwallace.com
ImplementationPath
Executive Briefing Go/NoGo#1
B U S I N E S S I M P R O V E M E N T
LivePilot Go/NoGo#2
Kickoff Session
PhaseII Expansion
PhaseI LivePilot
123456789 Months
Tom Wallace
www.tfwallace.com
IdentifyingaBrokenProcess IdentifyingaBrokenProcess
Executive S&OP is broken if: Top management is not involved Teamwork has not visibly improved Meeting attendance is poor Focus is on mix and the short term Conflict is not resolved Finger-pointing is not off limits Decisions are not made and so on
Tom Wallace www.tfwallace.com
ReimplementingExecutiveS&OP ReimplementingExecutiveS&OP
Will top management agree to an Executive Briefing? If yes, proceed on the Implementation Path If no, will they agree to an Outsider Audit? If they agree: present audit results to top management include a mini Executive Briefing get agreement to do one product family correctly If no, dont give up Keep it alive, improve it, and keep the executive staff member involved.
Tom Wallace www.tfwallace.com
Tom Wallace
www.tfwallace.com
Tom Wallace
www.tfwallace.com
ThanksforBeingHere! ThanksforBeingHere!
Go to www.tfwallace.com for: S&OP 101 (free) Implementation Information (free) Periodic newsletters (free) White papers (free) S&OP Effectiveness Checklist (free) Books and videos ($$$) To talk: 513-281-0500 Good Luck and Godspeed
Tom Wallace www.tfwallace.com