Executive S

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Executive SOP

• A Presentation to
• APICS Southeast Florida
• by
• Tom Wallace
• 3-20-08

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Agenda

• Executive SOP Role, Structure and Benefits
• Implementation
• The Future of SOP

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The Four Fundamentals

• How Much?
• Rates
• The Big Picture
• Families
• Strategy/Policy/Risk
• Monthly/out to 36 Mos

• Which Ones?
• Timing/Sequence
• The Details
• Products
• Tactics/Execution
• Weekly/Daily 1-3 Mos

Mix
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Sales Operations Planning
Executive SOP
Volume
Supply (Capacity) Planning
Demand
Supply
Demand Planning/ Forecasting
Mix
Master Scheduling Supplier and Plant Scheduling
Distribution Scheduling
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More Terminology Changes?

• Sales Operations Planning may
• become the successor term to ERP/MRPII
• Thus the term Executive SOP was developed to
• Eliminate confusion
• Avoid what happened with ERP
• Put high focus on the Executive role

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Executive SOP . . .

• Is an executive decision-making process
• Balances demand and supply
• Deals with volume in both units and
• Ties operational plans to financial plans one
  set of numbers
  
• Is the forum for setting relevant strategy and
  policy
  
• Is what we called , for years,
• Sales Operations Planning

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The Role of Top Management

• The Leader of the Business Unit (General Manager,
  President, COO) Needs to be Hands-On with
  Executive SOP
  
• Stewardship
• Leadership
• Break ties
• Set high standards
• Motivate

Monthly Time Commitment 1.5
hours
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The Executive SOP Process
Step 1 Data Gathering
Sales Actuals, Statistical Forecasts Supply
Actuals
End of Month
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Three Examples ofBest Practices

• Three (of 13) Companies Studied
• High Seasonality
• High Cyclicality
• Highly Complex New Product Launch

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Executive SOP in Make-to-Stock
w/ High Seasonality The Scotts Co.

• Important Questions
• When start Pre-Build?
• At what rates?
• Which SKUs?
• When ramp up how much?
• When ramp down?

SOP helps to answer these other questions
Pre-Build
Pre-Build
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The Scotts Company

• During the last four years, almost half of the
  companys increase in earnings has come from
  Supply Chain savings inventory down,
  manufacturing efficiency up, purchase and
  transportation costs down. All of these are due
  to improved planning.
• Ken Reiff
• Vice President, Product Planning

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SOP in Make-to-Orderw/ Extreme Cyclicality
Cast-Fab

• Cast-Fab Technologies Year-to-Year Sales Change

Chg 15 38 6 12 14 25 14 1 32 25 18


Acquired from Cinti Milacron
up up down down up down down down down do
wn
up up up
1993 1994 1995 1996 1997 1998 1999 2000 20
01
2002 2003 2004 2005
Implemented SOP
Some competitors go out of business
46!!!
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Cast-Fab Technologies

• During 2004, we posted sales increases of over
  40, which meant employee call-backs, retraining,
  new hires, initial training, getting up the
  learning curve and so forth.
• During the same year, we had productivity gains
  of up to 3! We never would have believed this
  was possible if we hadnt done it.
  
• SOP played a key role in this it gave us the
  forward visibility to make the right decisions on
  a timely basis.
  
• Ross Bushman
• President and COO

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New Product Launch . . .

• . . . in the Pharmaceutical Industry
• Multiple stages of testing
• Multiple approvals by FDA
• Multiple years
• Multiple 100s of millions of dollars

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Eli Lilly and Company

• New Product Launch Performance
• Industry
• Average Lilly
• 2001-04 1.8
• Years Required
• (avg per product) 14

9

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Eli Lilly Company

• In the past three years we have launched 9 new
  products and met all demand despite 2 products
  that sold significantly above the high-side
  forecast.
• Without Global Sales Operations Planning, we
  would have been driven to reaction mode, which
  could have resulted in an increase in investment
  in new assets, a slow down in our launch plans,
  and/or missed demand opportunities.
• Ron Bohl
• Supply Chain Coordinator

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These 3 ExamplesA Common Thread

• Executive SOP is being used extensively in
  areas of the business that are
  
• Mission Critical
• Very Difficult to Manage

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Hard Benefits

• Customer Service UP
• Inventory DOWN
• Obsolescence DOWN
• Freight Costs DOWN
• Order Lead Times DOWN
• Supplier Lead Times DOWN
• Time to Launch New Products DOWN
• Plant Productivity UP

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Soft Benefits

• Enhanced Teamwork
• Improved Communications
• Better Decisions with Less Effort and Time
• Better Plans with Less Effort and Time
• Greater Accountability
• Greater Control
• Window into the Future
• Top Managements Handle on the Business

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Agenda

• Sales Operations Planning Role, Structure and
  Benefits
  
• Implementation
• The Future of Executive SOP

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The Real Issue . . .

• . . . is not in understanding SOP.
• Thats easy. The hard part is . . .
• Organizational Behavior Change
• Changing the way we do our jobs

The hard stuff is the soft stuff.
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Implementing Executive SOP Is Different

• The leader of the business (president,
• COO, CEO, general manager) must provide
• Support
• Funding
• Commitment
• Leadership

So whats new?
Active, Hands-on Participation by the
Leader and Staff
Each and Every Month
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Implementing Executive SOP Is Different

• Highly focused on Top Management
• Relatively few people
• Low cost/high impact

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Implementation Principles

• Implementation begins and ends
• with the Leader of the business
• Build it and they will come
• carries a low probability for success
• Gain and hold the high ground
• and success will almost always follow

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The Implementation Path
Executive Briefing Go/No-Go 1
Live Pilot Go/No-Go 2
Phase III Integration
Kickoff Session
Phase II Expansion
Business Improvement
Phase I Live Pilot
Low Risk Low Cost
1 2 3 4 5 6 7
8 9
Months
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Phase III Integration
Low Risk Low Cost
Phase II Expansion

• Months 7-9
• Full Financial Integration
• Institutionalize the Process

Phase I Preparation

• Months 4 6
• Add All Product Families
• Full Supply Planning
• Limited Financials

• Month 2
• Demand Planning Processes Data Feeds
• Supply Planning Processes Data Feeds

Executive Briefing Go/No-Go Decision 1

• Month 1
• Assignment of Responsibilities
• Kickoff Education Planning
• Development of Project Schedule
• Families Sub-Families (Pilot Family)
• Data Definitions, Sources Displays

• Month 3
• Pilot Preparation Execution
• Go/No-Go Decision 2

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Agenda

• Sales Operations Planning Role, Structure and
  Benefits
  
• Implementation
• The Future of Executive SOP

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The Future of SOP Growth Factors

• Success breeds success
• Lean Manufacturing and SOP
• Globalization
• New users outside traditional manufacturing
• SOP specific software
• Greater financial integration, power and utility
• A growing presence in the executive suite

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Implications for APICS Members (CPIM)

• Premises
• Executive SOP is a powerful tool for top
  management
  
• Its here to stay and its growing
• Its in APICS space
• CPIMs know more about Sales Operations Planning
  than most others
  
• Therefore, CPIMs are positioned to take part in
  this growth and to be more valuable to their
  companies

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Implications of Executive SOP for APICS

• Its in APICS space.
• It lives in the Executive Suite
• It can help attract new members
• executive perception
• non-manufacturing companies
• APICS can play a the? leadership role in the
  widespread adoption of Executive SOP

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APICS is Getting On Boardwith SOP

• SOP Conference Chicago June 19, 20
• Demand/SOP Flight at APICS Conference in Kansas
  City September 14-16
  
• Frequent Webinars (most recent 2-25
• Sales Operations Planning The
  Executives Role)

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Thanks for Listening

• Go to www.tfwallace.com for
• Copies of slides
• Periodic newsletter
• White papers
• Books and videos