Post on 07-May-2018
EXECUTIVE S&OP by Tom Wallace WWW.TFWALLACE.COM
Leveraging S&OP
A Webinar
by
Tom Wallace
sponsored by
Steelwedge Software
March, 2012
EXECUTIVE S&OP by Tom Wallace WWW.TFWALLACE.COM
News Flash!
S&OP Certification
What: Become certified in S&OP
How: Pass the Certification Exam
Who: - The S&OP Institute
- Ohio State University
When: Exams can be taken beginning Sept 1
More info: sopinstitute.com (after 3/20)
tom@tfwallace.com
EXECUTIVE S&OP by Tom Wallace WWW.TFWALLACE.COM
The Four Fundamentals
Demand Supply
Volume
Mix
Sales &
Operations
PlanningXHow Much?Rates
The Big PictureProduct FamiliesStrategy/Policy/Risk
Monthly/18 months+
Top Management
Which Ones?
Timing/Sequence
The DetailsProducts, SKUs, OrdersTactics/Execution
Wkly/Daily, 2 days – 6 mos
Middle Management
EXECUTIVE S&OP by Tom Wallace WWW.TFWALLACE.COM
Sales & Operations Planning
Demand Supply
Volume
Mix
Executive S&OP
Master Scheduling
Supplier and Plant Scheduling
Distribution Scheduling
Demand Planning/Forecasting
Supply (Capacity) Planning
?????
EXECUTIVE S&OP by Tom Wallace WWW.TFWALLACE.COM
Step #5
ExecutiveMeeting
Decisions &Game Plan
Step #4
Pre-Meeting
Conflict Resolution, Recommendations &Agenda for Exec. Mtg.
Step #1
DataGathering
End of Month
Sales Actuals, Statistical Forecasts
&Supply Actuals
Step #2
DemandPlanning Management Forecast
1st-pass spreadsheets
Step #3
Supply Planning Capacity constraints
2nd-pass spreadsheets
The Executive S&OP Process
EXECUTIVE S&OP by Tom Wallace WWW.TFWALLACE.COM
Last Time We Discussed . . .
• BASF
• Cisco Systems
• V&M Star
• Dow Chemical
EXECUTIVE S&OP by Tom Wallace WWW.TFWALLACE.COM
Executive S&OP in Retail Delivery
Staples, Inc.
Framingham, MA
Products: Office Equipment and Supplies
Corporate Annual Sales: $24.5 billion
EXECUTIVE S&OP by Tom Wallace WWW.TFWALLACE.COM
S&OP at Staples Delivery
Data Gathering
Aggregate Demand Process/Meeting
• Review recent performance to forecast
• Generate forecast for 12 future months
• ID “gaps” in the forecast and plans to mitigate
(between Demand Planning and Merchant teams
versus what’s been submitted to corporate)
EXECUTIVE S&OP by Tom Wallace WWW.TFWALLACE.COM
S&OP at Staples Delivery
Aggregate Supply Process/Meeting
• Generate supply plans based on new demand plan
(vendor purchase plans and logistics plans)
• Review/resolve supply constraints (forecast translated
from $$$ into case counts, cubic feet, labor hrs)
• Capability updates (process improvement, new business
initiatives, shifts in suppliers/customers, cost/benefit analyses)
EXECUTIVE S&OP by Tom Wallace WWW.TFWALLACE.COM
S&OP at Staples Delivery
STAPLES
• Data Gathering
• Demand Planning
• Supply Planning
• Core Team Meeting
• Exec Team Meeting– President, NA Delivery
– Sr. VP Heads of 3 BU’s
– Sr. VP Finance
– Sr. VP Supply Chain
THE “STANDARD” MODEL
• Data Gathering
• Demand Planning
• Supply Planning
• Pre Meeting
• Exec Meeting
EXECUTIVE S&OP by Tom Wallace WWW.TFWALLACE.COM
Benefits
Krist Lutz, Director of Sales & Operations
Planning for Staples Delivery:
Hard benefits include the traditional ones . . . :
- higher in-stock positions with lower inventories
- increased revenue due to lost sales avoidance
- decreased service expense
- better working capital and cash flow
EXECUTIVE S&OP by Tom Wallace WWW.TFWALLACE.COM
Benefits, continued
Kris Lutz again:
• Soft benefits are communication and teamwork.
• Teams discuss items earlier and much better
than before.
• This makes for a more nimble organization,
one where ideas and initiatives can be executed
faster and with greater precision
EXECUTIVE S&OP by Tom Wallace WWW.TFWALLACE.COM
The Moral of the Story
There are far more similarities than differences
between Staples’ use of Executive S&OP and a
how a manufacturing company does it.
Implications: if you have units in your corporation
that do not produce physical products, they may
still be candidates for S&OP.
EXECUTIVE S&OP by Tom Wallace WWW.TFWALLACE.COM
Executive S&OP in Advanced
New Product Launch
Applied Materials Process Diagnostics and Control Business (PDC) Rehovot, Israel
Products: Equipment for the manufacture of:
Semiconductors
Flat Panel Displays
Photovoltaic Cells
Corporate Annual Sales: $9.5 billion
PDC Employment: ~900
EXECUTIVE S&OP by Tom Wallace WWW.TFWALLACE.COM
Applied Materials: Process Diagnostic and
Controls Business (PDC)
• S&OP user for over 10 years
• New products dominate the business: over
40% of sales in 2010 (some years over 60%)
• New products at PDC require strong
alignment between customer penetration
strategy and build and supply chain plans
• Thus, they created a separate S&OP process
for new products
EXECUTIVE S&OP by Tom Wallace WWW.TFWALLACE.COM
The Stage-Gate Process (phase-gate)
The stage–gate model is a technique in which
new product development (or other initiative) is
divided into stages separated by gates.
At each gate, a manager or a steering committee
decides on whether or not the project should go
forward.
EXECUTIVE S&OP by Tom Wallace WWW.TFWALLACE.COM
The Stage-Gate Process at PDC
• Gate 3: project approval received
• Gate 3.5: product can enter S&OP
• Gate 4: product ready to ship as alpha and
then beta test version
• Gate 5: product ready to move from new
product status to the ongoing
(“sustaining”) product line
EXECUTIVE S&OP by Tom Wallace WWW.TFWALLACE.COM
SUSTAINING
PRODUCTS
S&OP BUILD PLAN
NEW
PRODUCTS
S&OP BUILD PLAN
COMBINED PDC
S&OP BUILD PLAN
Products
between
Gates 3.5 and 5
Products
beyond
Gates 5
Gate 5
Transition from
New Product to
Sustaining Product
SUPPLY REVIEW MTGTEST FOR CAPACITY
EXECUTIVE S&OP by Tom Wallace WWW.TFWALLACE.COM
The Stage-Gate Process at PDC
• Gate 3: project approval received
• Gate 3.5: product can enter S&OP
• Gate 4: product ready to ship as alpha and
then beta test version
• Gate 5: product ready to move from new
product status to the ongoing
(“sustaining”) product line
EXECUTIVE S&OP by Tom Wallace WWW.TFWALLACE.COM
Benefits
As cited by Shelly Zafrir, Director of Sales &
Operations Planning, Silicon Systems Group in
Santa Clara (formerly head of S&OP at PDC)
NEW PRODUCT LAUNCH
In new product launch, perhaps the most
important metric is lead times to customers.
It was more than one year before S&OP. It is now
3 - 5 months and less on occasion.
EXECUTIVE S&OP by Tom Wallace WWW.TFWALLACE.COM
Benefits, continued
As cited by Shelly Zafrir:
MANUFACTURING CYCLE TIME
Down 15 - 20% on ongoing products, more on
new products, while volume increased four-fold
since 2009
EXCESS & OBSOLETE INVENTORY
Less than half of 2009 level and expected to drop
even more
EXECUTIVE S&OP by Tom Wallace WWW.TFWALLACE.COM
The Moral of the Story
Three points:
1. New Product Launch is filled with uncertainty
and change
2. S&OP helps companies deal with uncertainty
and change
3. The larger the role that New Products play in
your company, then the larger the role that
S&OP should have in New Product Launch.
A classic example: Applied Materials PDC
EXECUTIVE S&OP by Tom Wallace WWW.TFWALLACE.COM
Executive S&OP Support for Earnings Calls
The Procter & Gamble Company
Cincinnati, OH
Products: Consumer Packaged Goods
Corporate Annual Sales: $82.6 billion
EXECUTIVE S&OP by Tom Wallace WWW.TFWALLACE.COM
The Operating Environment
• 300 unique brands, sold worldwide
• Plants in 40 countries
• Operations in 80 countries
• S&OP used throughout the company
EXECUTIVE S&OP by Tom Wallace WWW.TFWALLACE.COM
A Single S&OP Process
• Only one standard S&OP process for
all businesses and “regions”
• Only one standard set of metrics
• Each business evaluated once per year to:
– Insure compliance
– Provide road map for improvement
• S&OP done on two axes: business unit
region
EXECUTIVE S&OP by Tom Wallace WWW.TFWALLACE.COM
27
Procter & Gamble
Business Unit and Region Integration
BU1 BU2 BU3 BU4
Reg1
Reg2
Reg3
X
Figure 12-1
x
EXECUTIVE S&OP by Tom Wallace WWW.TFWALLACE.COM
Alignment
Region 1’s forecast of what it expects to sell of
Business Unit 1’s Products
=What Business Unit 1 expects Region 1
to sell of its products
This alignment is the foundation for:
• Running the business internally with one set of
numbers
• Using S&OP as an important foundation for
quarterly earnings calls to Wall Street
EXECUTIVE S&OP by Tom Wallace WWW.TFWALLACE.COM
P&G’s S&OP Assessment Tool
Six sections, ~ 20 items per section
• Leadership
• Operating Strategy
• Initiative Planning
• Demand Planning
• Supply Planning
• S&OP
EXECUTIVE S&OP by Tom Wallace WWW.TFWALLACE.COM
1. Self-assessment by the BU’s and Regions
using the Assessment Tool
2. Self-assessment validated by qualified assessors from
outside that business
3. Assessment interviews and document reviews by the
“outsiders”:
1. With business leaders
2. Assessors may attend Exec meeting
4. Assessment summary
a. Set final score
b. Strengths and improvement opportunities
c. Action Plan
The Annual Assessment Process
EXECUTIVE S&OP by Tom Wallace WWW.TFWALLACE.COM
The Moral of the Story
Companies should have a formal assessment
process to:
• maintain the integrity of its S&OP processes
• improve those processes
Are your earnings calls (to corporate or the
financial community) based on S&OP?
If not, why not?
EXECUTIVE S&OP by Tom Wallace WWW.TFWALLACE.COM
Summary – S&OP at P&G
• One of the very best S&OP processes in the
world
• Made possible by the Assessment Process
• A quote from Dick Clark, formerly Associate
Director, Global Network Supply Operations:
S&OP plays a substantial role at P&G. It is
one of the – some might say the – primary
planning processes used to run the business.
In Memory
Richard A ClarkAssociate Director,
Global Network Supply Operations
The Procter & Gamble Company
1953 – 2011
EXECUTIVE S&OP by Tom Wallace WWW.TFWALLACE.COM
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