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Webinar July 21, 2011

The 7 Habits of Highly Effective S&OP


Dr. Mark Moon Associate Professor of Marketing Head, Department of Marketing & Logistics Director, Forecasting and Demand Management Forum University of Tennessee, Knoxville

Webinar July 21, 2011

Todays Agenda
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Tribute to Dr. Steven R. Covey (who developed the 7 Habits) (So I dont get sued) Our vision of the ideal state of S&OP The 7 Habits of Highly Effective S&OP
1. 2. 3. 4. 5. 6. 7.

Be Proactive Begin with the End in Mind Put First Things First Think Win/Win Seek First To Understand, Then to Be Understood Synergize Sharpen the Saw
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The 7 Habits of Highly Effective People

Webinar July 21, 2011

First published in 1989 Regarded as one of the most impactful self-help books ever written.

15 million copies sold, translated in 38 languages

7 Habits framework has been adapted to different contexts:


Happy kids Effective families Effective leaders

Can it be a useful framework for S&OP Implementation?

Webinar July 21, 2011

Before We Get Into the 7 Habits

It might be a good idea to articulate our vision of S&OP (Sales and Operations Planning) Which we like to think of as Demand/Supply Integration
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Webinar July 21, 2011

Demand/Supply Integration (otherwise known as S&OP)

What is it?

Why do companies do it?


The process by which a company makes strategic decisions based upon market demand, supply capabilities, financial objectives, and the strategic direction of the firm So that marketing will create demand for products that can be produced So that operations will supply products for which there is demand

Bottom line so all sides of a company will be singing out of the same hymnal

Webinar July 21, 2011

Demand/Supply Integration (DSI): The Ideal State


Senior Leadership Alignment To Strategy Finance Financial Goal Financial Plan SUPPLY Demand/Supply Production, Capacity Forecast Integration (Including inventory) Logistics, etc., and (S&OP) Upstream Suppliers
Operational Plan (supply and inventory)

Strategic Direction DEMAND Sales and Marketing, Downstream Channel Partners

Demand Forecast Demand Plan

Webinar July 21, 2011

So Now Lets Look At The 7 Habits

Webinar July 21, 2011

Habit # 1 Be Proactive

Your life doesn't just "happen." Whether you know it or not, it is carefully designed by you. The choices, after all, are yours. Just remember that every moment, every situation, provides a new choice. And in doing so, it gives you a perfect opportunity to do things differently to produce more positive results.
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Webinar July 21, 2011

Be Proactive

Demand/Supply Integration doesnt just happen. Many organizations have ingrained cultures that promote siloed thinking. Moving an organization toward a DSI orientation requires proactive planning and execution. Studies have shown that DSI success is determined by: Tools = 10% Culture = 50%

Process = 40%

Culture change requires proactive change management to overcome cultural barriers.

Webinar July 21, 2011

The Levers of Change Management


Culture & Values
Everybody committed to success through openness and honesty

Information Business Processes and Systems One, standardised set


Clean data and common IT platforms of processes, understood across the business

Organization
The right structure with people who have the right responsibilities and accountabilities

Metrics & Competencies


Doing the right things and measuring results in the right way

Process = 40%

Tools = 10%
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Culture = 50%

Webinar July 21, 2011

Habit # 2 Begin with the End in Mind

Habit 2 is based on imagination--the ability to envision in your mind what you cannot at present see with your eyes. It is based on the principle that all things are created twice. There is a mental (first) creation, and a physical (second) creation. The physical creation follows the mental, just as a building follows a blueprint. If you don't make a conscious effort to visualize who you are and what you want in life, then you empower other people and circumstances to shape you and your life by default.
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Webinar July 21, 2011

Begin With The End in Mind

Successful S&OP (or DSI) implementations require a vision of what the process is trying to achieve This vision must be clearly articulated and endorsed by senior leadership

This is a strategy for planning the business, not just for planning the supply chain.
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Webinar July 21, 2011

An Example of One Companys Vision


5 5 Executive Executive SIOP DSI Meeting Meeting SIOP Meeting
(Wk4) (Wk4)

A continuous cycle of events

4 4 DS SIOP SIOP I Reconciliation Reconciliation


(Wk3) (Wk3)

1 1 Portfolio Portfolio

Integrated reconciliation & financial appraisal

& & Product Product Review Review


(Wk1) (Wk1)

3 3 Supply Supply Review Review


(Wk3) (Wk3)

2 2 Demand Demand & & Inventory Inventory


Review Review
(Wk2) (Wk2)

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Webinar July 21, 2011

Habit # 3 Put First Things First

Habit 3 is about life management as well--your purpose, values, roles, and priorities. What are "first things?" First things are those things you, personally, find of most worth. If you put first things first, you are organizing and managing time and events according to the personal priorities you established in Habit 2.
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Webinar July 21, 2011

Put First Things First


Urgent Not Urgent

Important

Quadrant 1

Quadrant 2

Not Important

Quadrant 3

Quadrant 4

Webinar July 21, 2011

The Challenge

Eliminate Quadrants 3 and 4


Minimize time spent in Quadrant 1 by investing in Quadrant 2

The key: Dont prioritize whats on your schedule Rather, schedule your priorities
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As an Example -- Demand Planning Process Flow at one company


Day -6 Day -5 Day -2
Market/ Product risks opportunities and assumptions Sales / Marketing input by exception, with risks opportunities and assumptions

Webinar July 21, 2011

Day 0

Sales History

Statistical Forecast

Input Data Consolidation Demand Planner

Initial forecast

Validation of plan, assumptions and changes

Gap analysis & Demand Review Prep

Demand Review

Review / Change forecast Model

Customer Forecasts

Comparison with AOP & STRAP

Forecast performance

Approved Demand Plan & Action Plan Business Leader Accountability

Important Tasks Are Identified, Priorities are Scheduled, and Everyones Responsibility and Timeline is Clear 17

Webinar July 21, 2011

Habit #4 Think Win/Win

Win-win sees life as a cooperative arena, not a competitive one. Win-win is a frame of mind and heart that constantly seeks mutual benefit in all human interactions. Win-win means agreements or solutions are mutually beneficial and satisfying. A person or organization that approaches conflicts with a win-win attitude possesses three vital character traits:

Integrity: sticking with your true feelings, values, and commitments Maturity: expressing your ideas and feelings with courage and consideration for the ideas and feelings of others Abundance Mentality: believing there is plenty for everyone
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Webinar July 21, 2011

Think Win-Win

Many times, Demand Planning processes break down because there is a lack of trust between developers and users of forecasts Are any of these situations true in your companies?

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Webinar July 21, 2011

Think Win-Win

Does manufacturing complain that sales overstates demand forecasts, doesnt sell the product and then supply chain gets blamed for too much inventory?
Does the sales team complain that manufacturing cant deliver on its production commitments and its hurting sales? Does manufacturing complain that the sales team doesnt let them know when new product introductions should be scheduled, and then they complain about missed customer commitments?
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Webinar July 21, 2011

If those sound familiar to you

Then you might have the Demand and Supply sides of the organization following different agendas. Your incentive systems might be discouraging a Win-Win atmosphere! Remember that People Do That For Which They Are Rewarded! Remember that Culture drives 50% of success! Eliminating siloed thinking is a cultural challenge
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Webinar July 21, 2011

Habit #5 Seek First To Understand, Then To Be Understood

If you're like most people, you probably seek first to be understood; you want to get your point across. And in doing so, you may ignore the other person completely, pretend that you're listening, selectively hear only certain parts of the conversation or attentively focus on only the words being said, but miss the meaning entirely.
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Webinar July 21, 2011

Seek First To Understand, Then To Be Understood

The essence of DSI, or S&OP, is to provide a forum where the primary business functions can articulate their opportunities and constraints, and then make forward-looking plans that benefit the organization as a whole. This requires understanding, and openness, of the realities that each function faces.
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Webinar July 21, 2011

An Example from One Company of How this Reconciliation Can Take Place

DSI Reconciliation Meeting


Chaired by CFO Attendees:


Agenda:

Lines of Business Leaders Integrated Supply Chain Leaders Others appropriate to issues under discussion Latest financial view Review unresolved issues arising from Demand review & Supply review meetings Issues arising through this cycle & proposed resolution Agree issues to be raised at Exec-DSI meeting Financial Plan Issues to be taken to the Exec-DSI meeting

Output:

Risks & Opportunities documented Solution Scenarios, including new commercial/supply initiatives Recommendations 24

Webinar July 21, 2011

The Important Take-Away Here

The DSI Process provides a forum for different functions to come together and make decisions that benefit the organization as a whole. This process will not work if turf protection is the order of the day! This process will work if participants seek first to understand, then to be understood.
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Webinar July 21, 2011

Habit #6 Synergize

So put it simply, synergy means "two heads are better than one." Synergize is the habit of creative cooperation. It is teamwork, open-mindedness, and the adventure of finding new solutions to old problems. But it doesn't just happen on its own. It's a process, and through that process, people bring all their personal experience and expertise to the table. Together, they can produce far better results that they could individually. Valuing differences is what really drives synergy.
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Webinar July 21, 2011

Synergize

For an effective DSI process, all the supporting processes have to be working
Resource Management

Sales Management

Supplier Management
Procurement Logistics

Portfolio Management
Demand Management Market Management

Supply Chain Management Project Management

Each function brings critical insights to the process, and when each function values the insights of the others, the whole is greater than the sum of the parts.
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Webinar July 21, 2011

Habit #7 Sharpen The Saw

Sharpen the Saw means preserving and enhancing the greatest asset you have--you. It means having a balanced program for self-renewal.

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Webinar July 21, 2011

Sharpen the Saw

In this context, renewal means continuous enhancement of attitude, knowledge and skills through education and training on various elements of S&OP or Demand/Supply Integration Everyone involved in an S&OP process, from Demand Planners, to Sales, to Product Managers, to Supply Chain people, to Senior Executives, needs education on the goals, strategies, and tactics of the S&OP process.
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Webinar July 21, 2011

An Example of How One Company has Invested in Sharpening the Saw

Level 4

Level 4

Level 3

Level 3

Level 2 - Practitioners

Level 2 - Practitioners

Level 1 - Foundation Level

Level 1 - Foundation Level

Demand Demand Planning Planning

Supply Supply Planning Planning

Webinar July 21, 2011

In Summary

Dr. Covey and his 7 Habits have helped millions of people move from dependence, to independence, to interdependence. There is wisdom there that can help you to think clearly about your S&OP or DSI processes, and to achieve the goals of Integrated Business Planning
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Webinar July 21, 2011

Our Next Webinar

Improving Your Forecasting Process by Focusing on What Matters Most October 20, 2011 1:30 p.m. EDT Presented by James Berry, Forecast Pro Senior Consultant Visit www.forecastpro.com to sign up!

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Webinar July 21, 2011

Final Questions or Comments?

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