Executive SOP A Presentation to APICS Southeast Florida

Executive S&OP A Presentation to: APICS Southeast Florida by Tom Wallace 3 -20 -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 Volume Supply Demand Mix Tom Wallace & Bob Stahl • How Much? • Rates • The Big Picture • Families • Strategy/Policy/Risk • Monthly/out to 36 Mos • Which Ones? • Timing/Sequence • The Details • Products • Tactics/Execution • Weekly/Daily 1 -3 Mos www. tfwallace. com

Sales & Operations Planning Executive S&OP Volume Demand Planning/ Forecasting Demand Supply (Capacity) 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 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: Tom Wallace & Bob Stahl 1. 5 hours www. tfwallace. com

The Executive S&OP Process Step #5 vy a g He ftin Li Executive Meeting Decisions & Game Plan Step #4 Pre. Meeting Step #3 Supply Planning Conflict Resolution, Recommendations & Agenda for Exec. Mtg. Capacity constraints 2 nd-pass spreadsheets Step #2 Demand Planning Management Forecast 1 st-pass spreadsheets Step #1 Data Gathering End of Month Tom Wallace & Bob Stahl Sales Actuals, Statistical Forecasts & Supply Actuals 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: • When start Pre-Build? • At what rates? • Which SKUs? • When ramp up & how much? • When ramp down? Pre-Build Tom Wallace & Bob Stahl S&OP helps to answer these & other questions Pre-Build 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 Technologies – Year-to-Year Sales Change 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Tom Wallace & Bob Stahl %Chg up 15 up 38 down 6 down 12 up 14 down 25 down 14 down 1 down 32 down 25 up 18 46!!! up up 12 Acquired from Cin’ti Milacron Implemented S&OP Some competitors go out of business 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

New Product Launch. . . in the Pharmaceutical Industry • • Multiple stages of testing Multiple approvals by FDA Multiple years Multiple 100 s 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 Years Required (avg per product) >14 Tom Wallace & Bob Stahl 9 <11 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 in 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 • “Build it and they will come” carries a low probability for success • “Gain and hold the high ground” and success will almost always follow Tom Wallace & Bob Stahl www. tfwallace. com

The Implementation Path Business Improvement Executive Briefing Go/No-Go #1 Live Pilot Go/No-Go #2 Phase II Expansion Kickoff Session Phase I Live Pilot 1 2 Tom Wallace & Bob Stahl Phase III $$$ Integration 3 Low Risk Low Cost 4 5 Months 6 7 8 9 www. tfwallace. com

Low Risk Low Cost Phase II Expansion Phase I Preparation Phase III $$$ Integration Months 7 -9 • Full Financial Integration • Institutionalize the Process 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 • Development of Project Schedule • Families & Sub-Families (Pilot Family) • Data Definitions, Sources & Displays Month #3 • Pilot Preparation & Execution Go/No-Go Decision #2

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 Conference – Chicago – June 19, 20 • Demand/S&OP Flight at APICS Conference in Kansas City – September 14 -16 • Frequent Webinars (most recent: 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