Overcoming the “Catch 22” of Sales and Operations Planning Implementation Joe Shedlawski, CPIM R.A.Stahl Company

Introduction Why Engage Top Management The Elements of Successful S&OP What's the Challenge (Catch '22’) How to Engage Top Management Discussion Agenda

Introduction

A catch-22 is a paradoxical situation from which an individual cannot escape because of contradictory rulesparadoxical What is a Catch 22?

Why Engage Top Management?

Top Management’s Role: “Keep the Herd Moving, Roughly West”

Energy Alignment Accomplishment

Executive S&OP A process to raise and reconcile disagreement/conflict, agree upon, & communicate THE company game plan Executive S&OP A process to raise and reconcile disagreement/conflict, agree upon, & communicate THE company game plan Sales/Marketing (Units or $ by Family) Operations (Units/hours/ Material) Finance (Gross Revenue) Product Development (New Product Issues)

Implementation Alternatives

Hard Benefits Customer service UP InventoryDOWN Obsolescence DOWN Freight costDOWN Order lead times DOWN Supplier lead times DOWN Time to launch new products DOWN Plant productivity UP

Soft Benefits Enhanced teamwork Improved communications – institutionalized Better decisions with less effort and time Better $$$ plans with less effort and time Greater accountability and control Enhanced execution of strategic plans Window into the future Energy alignment: Keep the herd moving roughly west

The Elements of Successful Executive S&OP

Which Ones? Timing/Sequence The Details Products/SKU’s/Orders Tactics/Execution Weekly/Daily 1-3 Months Middle Mgt. Responsibility How Much? Rates Market Facing Families The Big Picture Strategy/Policy/Risk Monthly / Mos Executive Responsibility Volume Mix Demand Supply Pro Active Behavior Re Active Behavior Top Management’s Place

What’s the Challenge?

Keeping that herd moving roughly west is more of a cultural challenge than a technical one!

Interpersonal relationships reflect the culture of an organisation The sum of those relationships defines the organisation’s culture These relationships reflect a web of implicit and explicit agreements throughout the organisation Culture

Success with Executive S&OP consists of: 10% technology 30% process definition and discipline 60% culture change Research (AMR study, 2010 )

Cultural Changes: Pre-S&OP Lack of involvement by Top Management Acceptance of poor data Silo mentalities that inhibit interdepartmental collaboration Reactive decision making Post-S&OP Inter-functional collaboration, with open trust between departments Data-driven decisions High level of cross- functional discipline Proactive approaches to demand and supply plans * How S&OP Changes Corporate Culture: Results from Interviews with Seven Companies Stahl/Mello; Foresight Journal: Winter 2010

In Executive S&OP, it’s necessary to voice disagreements! Management must: Create a culture that allows the Ugly Moose to be put on the table -- so that they can completely and effectively resolve disagreements and conflict, setting proper: –Policy –Strategy –Risk assessment –Performance measurements Before it’s in the MIX Space! Top Management’s Role

Disagreement has two parts: –Substantive issue –Emotion behind that issue Disagreement becomes conflict when the emotion is not completely addressed Lasting conflict resolution must deal with both elements of disagreement Doing that effectively can be learned: –With a motive to do so and –A framework on which to work Conflict Resolution * * “Getting to Resolution” Stewart Levine

If Top Management does get involved from the very beginning: –There is risk of personal or organisational discomfort that comes from changing the culture –BUT that is necessary to bring about lasting results If Top Management does not get so involved and committed: –There is less personal risk of disruption –BUT there will likely not be any substantial business improvement Top Management’s Catch 22 * Overcoming the "Catch 22" of Implementation by Robert A. Stahl and Joseph F. Shedlawski Foresight Journal Spring 2012

How to Engage Top Management

“A detailed plan may be comforting, but it’s not a strategy.” “The Big Lie of Strategic Planning” Harvard Business Review – Jan/Feb 2014 by Roger Martin The Problem: Executives know that strategy is important. But almost all find it scary, because it forces them to confront a future they can only guess at. Strategy making is uncomfortable. The Solution: Reconcile yourself to feeling uncomfortable, and follow three rules: 1.Keep it simple 2.Don’t look for perfection 3.Make the logic explicit

Identify and enlist an Executive Champion; someone with executive influence, willing to “put skin in the game” Connect the hard benefits of executive S&OP to successful implementation Follow a path of low risk/low cost Obtain quick results to build confidence Provide feedback on progress/success Generate local ownership and enthusiasm Engage Top Management

Low Risk Implementation Path Months Business Improvement Phase I Pilot Demo Phase II Expansion Live Pilot Demonstration Go/No-Go #2 Phase III Financial Integration Executive Briefing Go/No-Go #1 Kickoff Session Low Cost Low Risk High Impact Quick Results Low Cost Low Risk High Impact Quick Results

During Change: Immerse in the Detail Lead educational process Manage cultural changes Assure proper resources Approve procedures Insist on clear targets (goals) Participate Measure progress Leadership’s Role

Ongoing: Remove from Detail Insist on meaningful participation Insist proper homework be done Raise and resolve disagreement and conflict Make clear decisions Hold people accountable to process and to results Encourage and expect realistic improvement Lead management development Measure performance Leadership’s Role (Continued)

Mandate the fundamental concepts and principles of executive S&OP Demonstrate a willingness to air disagreement Assure resources to develop necessary and appropriate tools Track progress – process discipline, cultural, key performance measures Reward success Corporate Role* * S&OP Principles: The Foundation for Success Robert A. Stahl and Thomas F. Wallace Foresight Journal Fall 2012

Discussion

Thanks for Listening!