2015 shanghai s&op conference november 12, 2015 guofeng hotel shanghai, china november 12, 2015...

2015 Shanghai S&OP

Conference

• November 12, 2015• Guofeng Hotel• Shanghai, China

• November 12, 2015• Guofeng Hotel• Shanghai, China

Bob Stahl508-226-0477

[email protected]

Bob Stahl508-226-0477

[email protected]

Sales & Operations Planning:The New Approaches of Best Practice

mailto:[email protected]

mailto:[email protected]

Bob Stahl www.RAStahlCompany.com Bob Stahl www.RAStahlCompany.com

ObjectiveObjectiveObjectiveObjectiveDesired Outcome:

Gain an informed understanding of some of the “new approaches” that support S&OP as “best practice,” enabling maximum potential benefits to be experienced!

http://www.RAStahlCompany.com/



AgendaAgendaAgendaAgenda• Introduction

• “Refresher” on authentic S&OP

• New Approaches:

– Market Facing Families

– Multiple View Forecasting

– Simplifying Assumptions about Mix

– Real World Benefits of doing S&OP well

• Hard & Soft




A Few Things . . . A Few Things . . . A Few Things . . . A Few Things . . . • English as a second language

– Your English is a lot better than my Chinese

• I may ask Alice & Liza to help with communication

• Questions at any time – they are NOT an interruption – it’s part of learning




Bob Stahl’s BackgroundBob Stahl’s BackgroundBob Stahl’s BackgroundBob Stahl’s Background• 40+ years in manufacturing companies

• Started as Schedules Coordinator (1970)

• With help of Oliver Wight, achieved Class A success (1979)

• Became an associate of Oliver Wight – 1982 (passed in 1983)

• Have worked with some of the best companies in the world

• Today = S&OP Coach, Educator, Author

• Has written six books with Tom Wallace –

– Three have been used for APICS Certification

• S&OP Editor and Columnist –

– Inaugural for the IIF’s Journal of Forecasting - Foresight

• Heads up consulting services for TFWallace & Company

• “Retired” = choices



“Refresher” on the Fundamentals of Authentic eS&OP


The MissionThe Mission

High Quality (High Conformance)

Low Cost (Low Inventory)

Customer ServiceQuick ResponseReliabilityWide Variety

MeetingWorld Class Standards

In

Getting to AND . . . Diminishing ORGetting to AND . . . Diminishing OR




Historical Evolution . . .Historical Evolution . . .Historical Evolution . . .Historical Evolution . . .

Plant Scheduling/PullPlant Scheduling/Pull

MSMS

Exec. S&OP / Rough CutExec. S&OP / Rough Cut

PTF

24MonthsTime

Most Detail Aggregate OnlyExac Config. . .Precise Mat’l. . .# People. . .Capital Equip . . .Factory Space

Detailed Forecasting &Detailed Forecasting &

Master SchedulingMaster Scheduling• Lost in the woods- Detail• Engage Top Management?• Added Little Value outside

the Planning Time Fence

Super MSSuper MS

Sales MarketingMIX VOLUME




RoutinelyReActive Behavior

Volume

Mix

•How Much?•Rates•Mkt Facing Families•The Big Picture•Strategy/Policy/Risk•Monthly / 18 - 36 Mos•Executive Resp.

•Which Ones?•Timing/Sequence•The Details•Products/SKU’s/Orders•Tactics/Execution•Weekly/Daily 1-3 Mos•Middle Mgt. Resp.

Demand Supply

Balance

Different & separate practices,

but integrated!

Different & separate practices,

but integrated!

Sales & Operations PlanningFundamentals

ProActive Behavior

Planning

Scheduling




ERPERPEnterprise Resource PlanningEnterprise Resource Planning

ERPERPEnterprise Resource PlanningEnterprise Resource Planning

Business PlanningBusiness Planning

Strategic PlanningStrategic Planning

Fo

reca

sti

ng

& D

eman

d M

anag

emen

tF

ore

cas

tin

g &

Dem

and

Man

agem

ent

VolumeExecutive S&OP

SalesPlan

OperationsPlan

Cap

acity

Plan

nin

gC

apa

city P

lann

ing

SupplyDemand

MixMaster Scheduling

MixMaster Scheduling

Detailed Planning &Execution Systems:

MRP, Plant Scheduling,Supplier Scheduling, etc.

Detailed Planning &Execution Systems:

MRP, Plant Scheduling,Supplier Scheduling, etc.

Transactional

Software




Sales & Operations PlanningSales & Operations Planning(A word about terminology)(A word about terminology)

Sales & Operations PlanningSales & Operations Planning(A word about terminology)(A word about terminology)

Demand Supply

Volume

Mix

Executive S&OPExecutive S&OP (eS&OP)(eS&OP)

DemandPlanning

SupplyPlanning

Master SchedulingDemand Pull

Inside & Outside




Executive S&OP is . . .Executive S&OP is . . .APICS Dictionary, 13th Edition, October 2010APICS Dictionary, 13th Edition, October 2010

Executive S&OP is . . .Executive S&OP is . . .APICS Dictionary, 13th Edition, October 2010APICS Dictionary, 13th Edition, October 2010

• The executive portion of the overall sales and operations planning set of processes.

• It is a decision-making activity involving the leader of the business (president, general manager, COO, managing director), his or her staff, and a number of middle managers and specialists.

• Its mission is to: – balance demand and supply at the aggregate level, – align operational planning with financial planning, – link strategic planning with day-to-day sales and

operational activities. – Disciplined forum for the setting of policy, strategy,

access and assume risk• It is a multi-step process involving demand planning, supply

planning, and middle and top management meetings for decision-making and authorizationTop Management’s Handle on the Business

eS&OP – does the proper prior planning to allow the routine things to be done

routinely!!




Executive S&OP = KeystoneExecutive S&OP = KeystoneExecutive S&OP = KeystoneExecutive S&OP = Keystone

• If supply chain management can be compared to a stone arch, Executive S&OP is the Keystone:– The Keystone alone does not make an arch, but– Without the Keystone, nothing else can stand




•Data Dump (Warehouse)•Information (Org Data)•Knowledge•Understanding

Two Parts of eS&OPTwo Parts of eS&OPTwo Parts of eS&OPTwo Parts of eS&OP

The mechanics: Display of Info

(Holistic View)

Defined ProcessFor Decision Making




Holistic DisplayHolistic DisplayHolistic DisplayHolistic DisplayThe Acme Widget Company

Christmas Widget Sales & Operations Plan

0

50

100

150

200

250

300

350

400

450

500

550

Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov

2007-2008 Horizon

1000's Units

I nventory PlanActual I nventoryActual OperationsNew ForecastNew Operations Plan




The eS&OP ProcessThe eS&OP ProcessThe eS&OP ProcessThe eS&OP Process

Step #1Data

Gathering

End of Month

Decisions &Game Plan

Step #5ExecutiveMeeting

Conflict Resolution, Recommendations &

Agenda for Exec. Mtg.

Sales Actuals, Statistical

Forecasts &Production Actuals

Step #2DemandPlanning

Step #4Pre-S&OPMeeting

Capacity constraints2nd-pass spreadsheets

Management Forecast1st-pass spreadsheets

Step #3Supply

Planning

HeavyLifting

Financia

l Involvement

Financia

l Involvement

New Product

Involvement

New Product

Involvement

Creates a Disciplined

Rhythm


Rhythm

It is a multi-step process involving demand planning, supply planning, and middle

and top management meetings for decision-making

and authorization




Levels of Levels of Business PlanningBusiness Planning

Levels of Levels of Business PlanningBusiness Planning




Acid Test . . .Acid Test . . .Acid Test . . .Acid Test . . .If the Annual Business

Planning process does not substantively change,

eS&OP is not working.

If eS&OP is not sufficient to set the ABP from, it is not sufficient to run the business every month!




Done Properly . . . Done Properly . . . Done Properly . . . Done Properly . . .

Simpler(Not Easier)

Better




eS&OP Ref MaterialeS&OP Ref MaterialeS&OP Ref MaterialeS&OP Ref Material




AgendaAgendaAgendaAgenda• Introduction

• “Refresher” on authentic S&OP

• New Approaches:

– Market Facing Families

– Multiple View Forecasting

– Simplifying Assumptions about Mix

– Real World Benefits of doing S&OP well

• Hard & Soft



Market-Facing Families


Using Market-Facing Families & Using Market-Facing Families & Simplifying Data AssumptionsSimplifying Data Assumptions


ResourceDepartmentEquipment

Supplier

Operations(Supply)

//Sales &

Marketing(Demand)

MarketsSegments Channels

Customers


Customers

Traditional Solutions:1.Full Granularity or2.Fcs’t in Supply Families


Best Solution:1.Market-Facing Families2.Data MIX Assumptions

w/ Resource & $$Planning


w/ Resource & $$Planning




Forecasting Forecasting (Worst of Two Worlds)(Worst of Two Worlds)Forecasting Forecasting

(Worst of Two Worlds)(Worst of Two Worlds)

PTF

Horizon

De

tail

ISuicide

Quadrant

IIAggregate

OnlyQuadrant

Exec.S&OP

IIIBuilding toCustomerDemand




Demand PlanningDemand Planning(Forecasting)(Forecasting)

Demand PlanningDemand Planning(Forecasting)(Forecasting)

DemandDemand SupplySupply

MIXMIX

VolumeVolume

Families

SKU’s

Resource Req. Plan




Market-facing Families . . .Market-facing Families . . .Market-facing Families . . .Market-facing Families . . .

Proper definition of families must promote best forecasting.

ProductFire RetardantChemicals

Customer-Ford-Penna House-Sony-Acme Lumber- and more

Markets can be tied to extrinsic leading indicators; Products and Customers typically can not!

Market- Automotive- Furniture- Electronics- Construction- and more




Families . . . Families . . . Families . . . Families . . . • S&OP Families -- In eS&OP, Families are aggregate

groups of products that are similar in the way that customers and/or markets view their use. eS&OP Families are used to develop a reasoned, reasonable, credible, and transparent forecast based on market trends, grounded in extrinsic leading indicators.

• Lean Families -- In Lean Manufacturing, the term Families is used to mean the grouping of products that are manufactured by the same resources. This is often called a ‘value stream.’ The idea is to create a ‘synchronous flow’ in manufacturing that allows products to be produced at a uniform and linear market driven rate – known as Takt Time.




Two types of forecasting . . .Two types of forecasting . . .Two types of forecasting . . .Two types of forecasting . . .M

fg. C

om

pan

y

Mark

ets

Dis

trib

uti

on C

en

ter

Shipments

POS

Sales: 1-3 MosMaster Scheduling

Demand Pull

Marketing: 1-18 Mos

Executive S&OP

Mix

Volume

CustomerCentric

MarketCentric

Cu

stom

ers

Sales

Markt’g




Size (5 in all):•Quarts•Pints•JellyTop Opening:•Wide-mouth•Reg-mouth

Fresh Preserving



Product GroupingsProduct GroupingsProduct GroupingsProduct Groupings

(for Product Groups)

Design Objectives:

Highest level possible based on agreed upon

market drivers

Grouped based on how capacities are constrained

Proven Grouping Assumptions that allow demand to be applied to

supply groupings

Product FamiliesProduct FamiliesProduct FamiliesProduct Families

Weather Economy/CC Distribution Pricing/Promo

Volume Baseline

DemandProcess

Volume Forecast Jars

Key Market Drivers at

the Volume Level

Regression Analysis ResultsRegression Analysis ResultsRegression Analysis ResultsRegression Analysis Results

apr-sep cci Line Fit Plot

y = - 42,782.42 x + 12,844,061.73

R2 = 0.48

6,000,000

7,000,000

8,000,000

9,000,000

10,000,000

11,000,000

12,000,000

40.0 50.0 60.0 70.0 80.0 90.0 100.0 110.0 120.0

apr-sep cci

jars jars

Predicted jars

Linear (jars)

weather Line Fit Plot

y = 770,467.11 x + 4,671,898.75

R2 = 0.25

6,000,000

7,000,000

8,000,000

9,000,000

10,000,000

11,000,000

12,000,000

3.00 3.50 4.00 4.50 5.00 5.50 6.00 6.50

weather

jars jars

Predic ted jars

Linear (jars)

R egression Statis ticsM ultip le R 0.864

R S quar e 0.747Adjusted R S quare 0.410

S tandard E rror 854,170 O bservations 8

ANOVA

df SS MS F S ignif icance FRegression 4 5.51241E +12 1,378,101,515,263 1. 317 0.428

Res idual 3 3.14004E +12 1,046,679,523,793 T otal 7 8.65244E +12

Coeffic ients Standard E rror t S tat P -value Lower 95% Upper 95%

Intercept 9,316,146 10,538,145 0.884 0. 442 (24,220,934) 42,853,225

apr-sep cci (28,627) 28,956 -0.989 0. 396 (120,776) 63,523 weather 169,080 689,542 0.245 0. 822 (2,025,350) 2,363,509

wm store ct 727 2,820 0.258 0. 813 (8,247) 9,700

price increase (13,382,212) 14,022,022 -0.954 0. 410 (58,006,544) 31,242,121

Closures to Mouth SizeClosures to Mouth SizeClosures to Mouth SizeClosures to Mouth Size

Product FamiliesProduct FamiliesProduct FamiliesProduct Families

Weather Economy/CC Distribution Pricing/Promo

Volume Baseline

DemandProcess

Volume Forecast Jars

Key Market Drivers at

the Volume Level


Forecasting Forecasting (Worst of Two Worlds)(Worst of Two Worlds)Forecasting Forecasting

(Worst of Two Worlds)(Worst of Two Worlds)

PTF

Horizon

De

tail

ISuicide

Quadrant

IIAggregate

OnlyQuadrant

Exec.S&OP

IIIBuilding toCustomerDemand



Reasonable Grouping AssumptionsReasonable Grouping AssumptionsReasonable Grouping AssumptionsReasonable Grouping Assumptions

Volume Forecast for Closures

Volume Forecast for Jars

Volume Forecast for Jar by Neck Size

(W/M – Reg)

Closure/Size and Type

(W/M – Reg; Lid – Cap)

Multiple View Forecasting


Reconciliation Process(The DAM Meeting)

Reconciliation Process(The DAM Meeting)

ConsensusForecast

ConsensusForecast

(When it does not meet business $$$ needs . . . )Applying “Puts & Takes” – Actions!

(When it does not meet business $$$ needs . . . )Applying “Puts & Takes” – Actions!

CompanyForecastCompanyForecast

Multiple Views . . . Multiple Views . . . Multiple Views . . . Multiple Views . . .



Data

Demand Planning – Market Facing Pleat Forecast Demand Planning – Market Facing Pleat Forecast Demand Planning – Market Facing Pleat Forecast Demand Planning – Market Facing Pleat Forecast

Demand Planning – Healthcare Pleat Market ForecastDemand Planning – Healthcare Pleat Market ForecastDemand Planning – Healthcare Pleat Market ForecastDemand Planning – Healthcare Pleat Market Forecast

Data Gathering

Data to the Demand Agreement Meeting

Unacceptable

Unacceptable

Market View18-24 Months

Three Leading Market Indicators:

Hospital Care ExpendituresFacilities ExpendituresHealthcare Share of GDP

Multivariate Regression Analysis:Actual Leading Indicators to be Investigated

Use Forecast

Estimates

Revise Leading Market

Indicators

Acceptable

Market Share AnalysisData Matrix to be Developed

Use Forecast Estimates

Revise Forecast

Acceptable

Customer View3-6 Months

Top Three Healthcare Contracts are 65% of

the Pleat Sales:PremierMed AssetsHTPG

Investigate the other 35% of similar

Buying patterns

Develop three forecasts for Each

Contract

Develop a forecast of “All Other” healthcare

Combine the Forecast for all

Healthcare pleats

Historical View18-24 Months

Purchase and get up to speed on the

Forecast X software package

Forecast X picks the best forecast among

the methods available for

Healthcare Pleats

Review Pine Sol Performance vs. Dilutable CategoryReview Pine Sol Performance vs. Dilutable CategoryReview Pine Sol Performance vs. Dilutable CategoryReview Pine Sol Performance vs. Dilutable Category

46

• Trend lines show that Dilutable Category and Pine Sol are moving in opposite direction• However, there is a positive correlation between Dilutable Category & Pine Sol (Corr = 0.55)

• Key Workstreams to turnaround competitive disadvantage shown below include: New Growth Strategy with New Advertising, Packaging Graphics, Innovation in and beyond the dilutable category

Note: Pine Sol decline accelerated with pricing action in April 2012 and Fabuloso as key competitive threat

Consensus Consensus DemandDemand Performance PerformanceWaterfa;; ChartWaterfa;; Chart

Consensus Consensus DemandDemand Performance PerformanceWaterfa;; ChartWaterfa;; Chart


Forecasting -- Two PartsForecasting -- Two PartsForecasting -- Two PartsForecasting -- Two Parts

MixM.Sched.

VolumeExec. S&OP

Data Management Anybody

Judgment Sales Marketing




Sales & MarketingSales & Marketing’’s s Job Enablers . . . Job Enablers . . .

Sales & MarketingSales & Marketing’’s s Job Enablers . . . Job Enablers . . .

• No full granularity for the entire planning horizon - 18 to 24 Months (Getting out of the Suicide Quadrant)

• Family definitions that enable them to correlate to extrinsic factors that are “leading indicators” (Using “simplifying data assumptions” to deal with MIX)

• No complex software cost or learning curve

Willingly & Enthusiastically Join the Party!



Simplifying Assumptions about MIX




ResourceDepartmentEquipment

Supplier

Operations(Supply)

//Sales &

Marketing(Demand)


Customers


Customers




w/ Resource Planning


w/ Resource Planning




Family Feud . . .Family Feud . . .When are they the same?When are they the same?Family Feud . . .Family Feud . . .When are they the same?When are they the same?

Small WidgetsSmall Widgets

Medium WidgetsMedium Widgets

Large WidgetsLarge Widgets

Consumer MarketConsumer Market

Housing MarketHousing Market

Industrial MarketIndustrial Market

Su

pp

ly

Dem

an

d

Typically NOT!

World Wide Widget CompanyWorld Wide Widget Company




Non-Aligned to MarketsNon-Aligned to MarketsNon-Aligned to MarketsNon-Aligned to Markets

Small WidgetsSmall Widgets

Medium WidgetsMedium Widgets

Large WidgetsLarge Widgets

Consumer MarketConsumer Market

Housing MarketHousing Market

Industrial MarketIndustrial Market

Su

pp

ly

Dem

an

d

World Wide Widget CompanyWorld Wide Widget Company




Simplifying AssumptionsSimplifying AssumptionsSimplifying AssumptionsSimplifying Assumptions

• Volume ratio from “market facing” family to “supply family”

• Conversion of units to units of capacity (hours?)(average, or weighted average)

• Conversion of units to $$$.




Developing & Developing & Validating AssumptionsValidating AssumptionsDeveloping & Developing & Validating AssumptionsValidating Assumptions

RRP Run Rate ConversionUnits to Hours Control Chart

0.42

0.44

0.46

0.48

0.5

0.52

0.54

0.56

Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb

2006 2007 2008

Hours per Unit

UCL LCL Hours per Unit Linear (Hours per Unit)

AssumptionSensitivity

Avoid the Perception of Precision



62

New demand Split Projection Small size

55%

Control chart 101Control chart 101Control chart 101Control chart 101


Graphical ReportGraphical ReportGraphical ReportGraphical ReportResource Requirements Plan - Dept #8

0

50

100

150

200

250

Oct

Nov

Dec

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

2007 2008 2009

Hours Per Month

Normal Capacity Normal Capacity +25%

Medium Widget Required Capacity Large Widget Required Capacity



Supply GroupingsSupply GroupingsDIYDIY

Supply GroupingsSupply GroupingsDIYDIY

GlassSupply/Capacity

(Anchor)

Closure Plant Capacity(W/M – Reg; Lid – Cap)

Packaging Capacity - DIY(W/M – Reg)

Tinplate Supply/Capacity

Volume Forecast for Jar by Neck Size

(W/M – Reg)

Closure/Size and Type

(W/M – Reg; Lid – Cap)

DIY Demonstrated CapacitiesDIY Demonstrated CapacitiesReg MouthReg Mouth

DIY Demonstrated CapacitiesDIY Demonstrated CapacitiesReg MouthReg Mouth

The ResultsThe ResultsDIY Reg MouthDIY Reg Mouth

The ResultsThe ResultsDIY Reg MouthDIY Reg Mouth


2007 Fiscal Year Status

$-

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

J an Feb Mar Apr May J un J ul Aug Sep Oct Nov Dec

Revenue in 1000's Dollars

Cumulativ e Actual YTD Cumulativ e Original Plan 2007 Latest Call 2008 S&OP Plan

Original Plan 25,400$ Latest Call 25,540$

2008 S&OP 27,959$

2007 Fiscal Year

Fiscal Information . . .Fiscal Information . . .

eS&OP includes FULL FINANCIAL

INTEGRATION (Phase III)



Real World Benefits – Hard & Soft


The Executive S&OP ProcessThe Executive S&OP ProcessThe Executive S&OP ProcessThe Executive S&OP Process

Step #1Data

Gathering

End of Month

Decisions &Game Plan

Step #5ExecutiveMeeting

Conflict Resolution, Recommendations &

Agenda for Exec. Mtg.

Sales Actuals, Statistical

Forecasts &Production Actuals

Step #2DemandPlanning

Step #4Pre-S&OPMeeting

Capacity constraints2nd-pass spreadsheets

Management Forecast1st-pass spreadsheets

Step #3Supply

Planning

HeavyLifting


Rhythm


Rhythm


What are the Benefits ?What are the Benefits ?What are the Benefits ?What are the Benefits ?

Hard Benefits:• Higher Customer Service

Reliable, Responsive, Wide Variety

• Lower Finished Goods Inventories• More Stable Supply Rates• Less Unplanned Overtime• Higher Productivity• More controlled intro of new products


Representative Hard Benefits * . . .Representative Hard Benefits * . . .Representative Hard Benefits * . . .Representative Hard Benefits * . . .

Benefit Range AverageOn-Time Del’y Up 10 to 40% Up 25%

Inventory Levels Down 12 to 70% Down

41%

Mfg. Downtime Less 20 to 50% Less

35%

Plant Efficiency Up 2 to 33% Up 17%

Transport. Cost Down 5 to 30% Down

17%

* “Sales & Operations Planning: Best Practices -- ” Dougherty & Gray -- 2006

Sustainable 5% improvement; not possibleSustainable 50% improvement; very possible



Soft Benefits:• Better Decisions in Less Time• Enhanced Teamwork - Operating Level Mgt.• Enhanced Teamwork - Executive Mgt.

(Energy Alignment)


Energy AlignmentEnergy AlignmentEnergy AlignmentEnergy Alignment

Accomplishment Accomplishment



Soft Benefits:• Better Decisions in Less Time• Enhanced Teamwork - Operating Level Mgt.• Enhanced Teamwork - Executive Mgt.

(Energy Alignment)

• Monthly Update to the Business Plan• Greater Accountability• Greater Control • Masters of Own Destiny

Top Management’s Handle on the Business

Hard benefits are the direct result and

consequence of soft benefits!!


Research Reports * . . . Research Reports * . . . Research Reports * . . . Research Reports * . . .

Success with Executive S&OP is:

•60% = Culture/Behavior Change

•30% = Process Definition & Discipline

•10% = TechnologyAltimiter/AMR

Boston, Sept 2010


An Important Point . . . An Important Point . . . An Important Point . . . An Important Point . . .

Success with eS&OP is more

Cultural than Technical(Tomorrow’s Discussion)


Thanks for ListeningThanks for ListeningThanks for ListeningThanks for Listening

2015 shanghai s&op conference november 12, 2015 guofeng hotel shanghai, china november 12, 2015...

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