1. Myths, Misunderstandings and Misinformation about S&OP
A Presentation by
Tom Wallace for
IBF
Phoenix – February 22, 2010

2. X The Four Fundamentals Volume Demand Supply Mix How Much? Rates
Sales &
Operations
Planning
The Big Picture
Volume
Product Families
Strategy/Policy/Risk
Monthly/18 months+
Top Management
Demand
Supply
Which Ones?
Timing/Sequence
The Details
Mix
Products, SKUs, Orders
Tactics/Execution
Wkly/Daily, 2 days – 6 mos
Middle Management

3. Sales & Operations Planning
Executive S&OP
?????
Volume
Supply (Capacity)
Planning
Demand
Supply
Demand Planning/
Forecasting
Mix
Master Scheduling
Supplier and Plant Scheduling
Distribution Scheduling
Operational S&OP

4. Myth #1: “S&OP’s a supply chain thing”
Reality: Executive S&OP is a supply chain thing
and a marketing thing
and a sales thing
and a finance thing
and a manufacturing thing
and a new product development thing
and a general management thing

5. Soft Benefits Enhanced Teamwork
Improved Communications - Institutionalized
Better Decisions with Less Effort and Time
Better $$$ Plans with Less Effort and Time
Tighter Linkage with Strategy
Greater Accountability
Greater Control
Window into the Future

6. Myth #2: “S&OP’s all about balancing demand and supply”
Reality: Exec S&OP balances demand & supply and integrates financial and operational planning and links strategy to ongoing operations and impacts marketing strategy and enhances risk management and streamlines annual planning and on and on . . .

7. Strategic or Tactical?
Strategy
Executive
S&OP
Tactics

8. Myth #3: “S&OP takes too much of Top Management’s time”
Reality: Monthly Time Requirement
for the Leader of the Business = 1.5
hours*
* Executive staff time could be more than this.

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

10. New Product Development
Role of Finance and
New Product Development
Exec
Meeting
Finance Department Involvement
Pre-
Meeting
Supply
Planning
New Product Development Involvement
Demand
Planning
Data
Gathering

11. Myth #4: “We’ll Never Get S&OP to Work; We Don’t Have Enough Teamwork”
Reality: Teamwork Is A Result,
Not A Prerequisite
Q. What If You’ve Implemented S&OP
and your teamwork hasn’t improved?
A. You Didn’t Do It Right

12. Enhanced Teamwork Soft Benefits
Improved Communications - Institutionalized
Better Decisions with Less Effort and Time
Better $$$ Plans with Less Effort and Time
Tighter Linkage with Strategy
Greater Accountability
Greater Control
Window into the Future

13. Myth #6: “S&OP Is Too Rigid; Our Business Changes Too Rapidly For S&OP”
Reality: Executive S&OP is all about change

14. Tools & Techniques Increase Reliability Reduce Waste & Time Enhance
Total Quality, Six Sigma, Poka-Yoke, ISO
+ others
Reduce Waste
& Time
Enhance
Coordination X X X
Sales & Operations Planning, ERP, Kanban, VMI,
+ others
Lean Mfg., Just-In-Time,
Quick Changeover (SMED),
Flow + others

15. Complexity, Change and Coordination
COMPLEXITY AND THE RATE OF CHANGE
NEED FOR EFFECTIVE COORDINATION PROCESSES
Executive S&OP is the Primary Coordination Process

16. Myth # 7: “We Can’t Use S&OP Because We’re Totally Outsourced”
Reality: Executive S&OP Doesn’t Care
Who Owns The Factory
Heavily Outsourced Companies May Need
Executive S&OP More Than Others

17. Myth #8: “Our Company Is Too Big for S&OP”
Reality: Executive S&OP operates
independently of company size
Procter & Gamble ~ $80 Billion
Microsoft ~ $ “
Dow Chemical ~ $ “
Cast Fab Technologies ~ $40 Million

18. Myth #9: “Our Forecasts Are Not Accurate Enough For S&OP”
Reality: Executive S&OP Does Not
Require “Accurate” Forecasts

19. Management Directives
Forecasting
Inputs Process Output
THE FOUR R’s:
Current Customers
New Customers
Competition
Economic Outlook
New Products
Pricing Strategy
Promotions
Bid Activity
Management Directives
Intra-Company Demand
History (Data)
Other
1. Reasoned
2. Reasonable
3. Reviewed Frequently
4. Represent the Total Demand
Process

20. Myth #10: “S&OP Is Simple; All You Need Is A Few Spreadsheets”
Reality: Implementing Executive S&OP
Is All About Change Management

21. The Priorities
C: Software, Tools
B: Process & Data
A: People, Mindset

22. Myth #11: “We Can’t Afford To Buy More Software To Do S&OP ”
Reality: You Do Not Need New Software to Make Executive S&OP Work
Most of the successful users of the process use Excel (or similar)

23. So, What To Do About Software?
Options:
Use spreadsheet software
Use S&OP specific software
Hybrid: start with spreadsheet
switch to specific later
When in doubt, pick 3.

24. Myth #12: “We Can’t Do S&OP. THEY Will Never Participate”
Reality: People Can and Do Change

25. Myth #12: “We Can’t Do S&OP. THEY Will Never Participate”
Who Are THEY?
Top Management?
Sales?
Marketing?
Finance?
All of the above?

26. Myth #12: “We Can’t Do S&OP. THEY Will Never Participate”
Why not? Are they bad people?
No, it’s because they don’t understand it.
They don’t understand it, because
they haven’t been taught.
“It’s all about change management”
Kathy Budd
Dow Chemical

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