Roger Lindgren & Bob Stahl Gaylord Texan Resort & Convention Center December 11-12, 2008 Gaylord Texan Resort & Convention Center December 11-12, 2008 Roger Lindgren, CEO V&M Star Bob Stahl, President R.A. Stahl Company Roger Lindgren, CEO V&M Star Bob Stahl, President R.A. Stahl Company Resolving Conflict & Building Consensus through the Executive S&OP process Resolving Conflict & Building Consensus through the Executive S&OP process APICS / iBF Best of the Best S&OP Conference APICS / iBF Best of the Best S&OP Conference

Roger Lindgren & Bob Stahl ObjectiveObjective Identify some of the types of conflict that can exist in an business organization Explain and discuss how Executive S&OP can provide leadership with the tools and structure to raise and resolve that conflict in a defined and disciplined fashion Provide real life examples

Roger Lindgren & Bob Stahl What is Sales&Operations Planning... DemandSupply Volume Mix Executive S&OP Demand Planning Supply Planning Master Scheduling Demand Pull

Roger Lindgren & Bob Stahl What is Executive S&OP? Sales & Operations Planning is a Executive Decision-Making Process to Balance Demand & Supply (at the volume level) is The forum for setting Relevant Strategy & Policy (aligning human energy) and Integrates Financial & Operating Plans (update/validate the Annual Business Plan) Top Managements Handle on the Business

Roger Lindgren & Bob Stahl An Essential Point... Executive S&OP is essential for the other pieces of Sales & Operations Planning to work at their best. Whether they be traditional or Lean techniques

Roger Lindgren & Bob Stahl Types of Conflict... Implementation conflict(s) Constituency conflict(s) Business Goal conflict(s) Organizational outlook conflict(s) Strategic conflict(s) Forecasting conflict(s) and many more...

Roger Lindgren & Bob Stahl Implementation Conflicts... Run the Business today A A Executive S&OP B B Improving Short Term D D C C Other Projects Supply-Chain Excellence Parallel Paths

Roger Lindgren & Bob Stahl Constituency Conflicts... Customers Employees (Suppliers, Community, Country, Planet) Owners Executive S&OP Executive S&OP Desired Force = CentripetalNatural Force = Centrifugal

Roger Lindgren & Bob Stahl A Couple of Truisms When a company is trading off one constituency against another, its on a slippery slope Being able to serve all constituencies has a lot to do with timing: 1.In the short term, the customer is king 2.Proper prior planning is necessary to serve all constituencies well (Doesnt happen by accident) 3.Executive S&OP is the tool to set conditions for success with regard to Supply Chain performance

Roger Lindgren & Bob Stahl Business Goal conflicts... High Quality Low Cost (Low Inventory) Customer Service Quick Response Reliability Wide Variety Being Best in Class Getting to AND... Diminishing OR

Roger Lindgren & Bob Stahl Organizational Conflicts... Executive S&OP A process to raise, reconcile, agree upon, & communicate one company game plan Executive S&OP A process to raise, reconcile, agree upon, & communicate one company game plan Sales/Marketing (Units or $ by Family) Operations (Units/hours/ Material) Finance (Dollars) Product Dev. (New Product Issues) President

Roger Lindgren & Bob Stahl Process vs Personality Driven Organizations Sales & Marketing Sales & Marketing Operations Product Design Product Design Finance Logistics & Distribution Logistics & Distribution President/General Manager Supply Chain Management Executive S&OP Managing the White Space

Roger Lindgren & Bob Stahl Top Mgt. and Executive S&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: Stewardship & Leadership (Manager/Trustee & Guide/Command) Done Properly... It takes Top Management between 1 & 2 Hours per Month Done Properly... It takes Top Management between 1 & 2 Hours per Month

Roger Lindgren & Bob Stahl Doing The Right Things Doing The Things Right Strategic Conflicts... Robert Hayes HBR-Nov/Dec 1985 Strategic Planning - forward in reverse Executive S&OP Strategy Tactics Execution Executive S&OP Annual Business Plan

Roger Lindgren & Bob Stahl For Example... Capacity Planning =Strategy Question ?? Lead Capacity - Invest in capacity before customer orders materialize (That is, add to planned demonstrated capacity proactively with specific actions based on forecast.) Tradeoff: market share for profit Lag Capacity - Invest in capacity after customer orders materialize (That is, plan on adding to demonstrated capacity only after receipt of customer orders) (default strategy) Tradeoff: Profit for market share Executive S&OP is where the pros and cons of each strategy are discussed and decided upon.

Roger Lindgren & Bob Stahl Forecasting conflicts 1. Reasoned 2. Reasonable 3. Reviewed Frequently 4. Represent Total Demand 1. Reasoned 2. Reasonable 3. Reviewed Frequently 4. Represent Total Demand Forecasts that are: Current Customers New Customers Competition Economic Outlook New Products Pricing Strategy Promotions Bid Activity Management Directives Intra-Company Demand History (Data) Other Process Inputs -- Process -- Output

Roger Lindgren & Bob Stahl Gaining Demand Consensus

Roger Lindgren & Bob Stahl Executive S&OP Process Step #1 Run Month End Reports End of Month Sales Actuals, Statistical Forecasts & Production Actuals Step #5 Executive Meeting Decisions & Game Plan Step #4 Pre-S&OP Meeting Conflict Resolution, Recommendations & Agenda for Exec. Mtg. Step #2 Demand Planning Management Forecast 1st-pass spreadsheets Step #3 Production Planning Capacity constraints 2nd-pass spreadsheets Heavy Lifting

Roger Lindgren & Bob Stahl Pre-Meeting (Continued) Consensus requires that everyone: 1. Has had their say, & 2. Feels they had opportunity to influence 3. Everyone can live with the outcome informed debate skillful discussion positive provocation Conflict & Confrontation Consensus & Harmony Getting the Moose on the Table informed debate skillful discussion positive provocation Conflict & Confrontation Consensus & Harmony Getting the Moose on the Table

Roger Lindgren & Bob Stahl Done Properly... Simpler (Not Easier) Better

Roger Lindgren & Bob Stahl Resolving Conflict aligns human energy... Accomplishment

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

Roger Lindgren & Bob Stahl 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

Roger Lindgren & Bob Stahl Thanks for Listening